<PAGE>
As filed with the Securities and Exchange Commission on September 8, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
METRIS COMPANIES INC.
(Exact name of registrant as specified in its charter)
Delaware 6141 41-1849591
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code)
organization)
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
(612) 525-5020
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Z. Jill Barclift, Esq.
Executive Vice President, Secretary and General Counsel
Metris Companies Inc.
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
(612) 525-5020
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Kathleen L. Prudhomme, Esq.
Dorsey & Whitney LLP
220 South Sixth Street
Minneapolis, Minnesota 55402
(612) 343-7973
Facsimile: (612) 340-8738
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earliest effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of Amount to be Proposed Maximum Proposed Maximum Amount of
Securities to be Registered Offering Price Aggregate Offering Price(1) Registration Fee
Registered ------------ ---------------- -------------------------- ----------------
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<S> <C> <C> <C> <C>
10 1/8 % Senior Notes
due 2006............... $150,000,000 100% $150,000,000 $41,700
Guarantee of Senior
Notes.................. -- -- -- None (2)
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(f).
(2) No filing fee is required based on Rule 457(h).
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See Table of Additional Registrants Below
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
ADDITIONAL REGISTRANTS
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<TABLE>
<CAPTION>
Address, Including Zip
Code and Telephone
Exact Name of State or Other Primary Standard Number, Including Area
Registrant as Jurisdiction of Industrial I.R.S. Employer Code, of Registrant's
Specified in its Incorporation or Classification Identification Principal Executive Registration
Charter Organization Code Number Number Office No.
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<S> <C> <C> <C> <C> <C>
Metris Direct, Inc. Minnesota 6159 41-1111974 600 South Highway 169,
Suite 1800,
St. Louis Park, MN
55426
(612) 555-5020
</TABLE>
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 1999
PROSPECTUS
Exchange Offer For
$150,000,000
10 1/8% Senior Notes due 2006
. We are offering to exchange all of our outstanding unregistered 10 1/8%
Senior Notes due 2006 for new registered 10 1/8% Senior Notes due 2006.
. The exchange offer expires at 5:00 p.m., New York City time, on , 1999,
unless we extend it.
. The exchange will not be a taxable event for U.S. federal income tax
purposes.
. The terms of the new notes are substantially identical to those of the
old notes, except for the transfer restrictions and registration rights
relating to the old notes.
. The old notes are, and the new notes will be, unconditionally guaranteed
on a senior unsecured basis by our subsidiary, Metris Direct, Inc.
. The new notes will not trade on any national securities exchange and,
therefore, we do not anticipate that an active public market in the new
notes will develop.
See "Risk Factors" beginning on page 7 for a discussion of risk factors that
you should consider before deciding to tender your old notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
The date of this prospectus is September , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............ 3
Risk Factors.................. 7
Forward-Looking Statements.... 14
Use of Proceeds............... 15
Capitalization................ 16
The Exchange Offer............ 17
Description of the New Notes.. 24
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Provisions Applicable to
the New Notes...................... 50
United States Federal Income Tax
Considerations..................... 52
Plan of Distribution................ 56
Legal Matters....................... 56
Experts............................. 56
Where you Can Find More
Information........................ 57
</TABLE>
----------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized any other person to provide
you with different information. This document may only be used where it is
legal to sell these securities. You should assume that the information in this
document is accurate as of the date on the front cover of this prospectus only.
Our business, financial condition, results of operations and prospects may have
changed since that date.
2
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PROSPECTUS SUMMARY
This summary highlights selected information and may not contain all the
information that is important to you. We encourage you to read the entire
prospectus, the documents incorporated by reference in this prospectus and the
other documents to which this prospectus refers.
THE EXCHANGE OFFER
Exchange offer...................... We are offering to exchange up to $150
million in aggregate principal amount of
our 10 1/8% Senior Notes due 2006 which
have been registered under the Securities
Act of 1933 for a like principal amount
of our outstanding 10 1/8% Senior Notes
due 2006 which were issued in a private
offering. The new notes may be exchanged
only in multiples of $1,000 principal
amount. We will issue the new notes as
soon as possible after the expiration of
the exchange offer. For procedures for
tendering, see "The Exchange Offer--
Procedures for Tendering Old Notes."
Expiration date..................... The exchange offer will expire at 5:00
p.m., New York City time, on , 1999,
unless we extend it.
Withdrawal rights................... You may withdraw your tender of old notes
at any time before the exchange offer
expires.
Federal income tax consequences..... Your exchange of old notes for new notes
should not result in any income, gain or
loss to you for U.S. federal income tax
purposes.
Exchange agent...................... The Bank of New York is serving as the
exchange agent in connection with the
exchange offer.
Resale without further We believe that you may resell or
registration........................ otherwise transfer the new notes without
complying with the registration and
prospectus delivery provisions of the
Securities Act so long as you meet the
following conditions:
. you are not our "affiliate" within the
meaning of Rule 405 under the
Securities Act;
. you acquire the new notes issued in
the exchange offer in the ordinary
course of business; and
. you are not participating, do not
intend to participate, and have no
arrangement or understanding with any
person to participate, in the
distribution of the new notes.
By signing the letter of transmittal and
tendering your old notes, you will be
making representations to this
3
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effect. You may incur liability under the
Securities Act if:
. any of the representations listed
above are not true; and
. you transfer any new note issued to
you in the exchange offer without
delivering a prospectus meeting the
requirements of the Securities Act or
an exemption from the registration
requirements under the Securities Act.
We do not assume or indemnify you against
liability under these circumstances,
which means that we will not protect you
against any loss incurred as a result of
this liability under the Securities Act.
Restrictions on resale by broker- Each broker-dealer that has received new
dealers............................. notes for its own account in exchange for
old notes that were acquired as a result
of market-making or other trading
activities must acknowledge that it will
deliver a prospectus meeting the
requirements of the Securities Act in
connection with any resale of the new
notes. A broker-dealer may use this
prospectus in connection with any resale
for a period of 90 days after the end of
the exchange offer.
Consequence of failure to If you are eligible to participate in the
exchange............................ exchange offer and you do not tender your
old notes, you will not have further
registration rights and you will continue
to hold notes subject to restrictions on
transfer.
TERMS OF NEW NOTES
Issuer.............................. Metris Companies Inc.
Securities offered.................. $150,000,000 principal amount of 10 1/8%
Senior Notes due 2006.
Maturity............................ July 15, 2006.
Interest payment dates.............. Interest on the new notes will accrue at
a rate of 10 1/8% per annum and will be
payable in cash, semi-annually in
arrears, on January 15 and July 15,
commencing on January 15, 2000.
Optional redemption................. On or after July 15, 2003, we may redeem
the new notes, in whole or in part, at
the redemption prices listed in this
prospectus, together with accrued and
unpaid interest, if any, to the date of
redemption. Before July 15, 2002, we may
redeem up to 35% of the new notes with
proceeds of certain public equity
offerings at the price set forth in this
prospectus. See "Description of the New
Notes"--"Optional Redemption."
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Guarantees.......................... The new notes will be guaranteed on a
senior basis by one of our subsidiaries,
Metris Direct, Inc., which has also
guaranteed all of our obligations under
our credit facility. The guarantee will
be a general unsecured obligation of the
guarantor. Other restrictive subsidiaries
will also be required to guarantee the
new notes if they guarantee any of our
other debt. Direct Merchants Credit Card
Bank, National Association is not, and is
not expected to become, a guarantor of
the new notes.
Ranking............................. The new notes will be our unsecured,
unsubordinated obligations and will rank
equally with all of our other existing
and future unsecured and unsubordinated
debt. They will effectively rank junior
to all of our secured debt and the
secured debt of our subsidiaries that are
guarantors, to the extent of the value of
the assets securing the debt. In
addition, they will effectively rank
junior to all existing and future debt of
any of our subsidiaries that are not
guarantors, including certificates of
deposit issued by Direct Merchants Bank
($448.1 million as of August 18, 1999).
As of June 30, 1999, after giving effect
to the sale of the old notes and the
application of the net proceeds from that
sale, we had outstanding debt of
approximately $660.0 million, of which
approximately $100.0 million is secured
debt under our credit facility. All
borrowings under the credit facility are
secured by liens on the capital stock of
substantially all of our subsidiaries
(including Direct Merchants Bank) and
certain of our accounts receivable and
interests held in those receivables.
Change of control................... If an event treated as a change of
control occurs, we must offer to
repurchase all outstanding new notes at
101% of their principal amount plus
accrued and unpaid interest to the date
of the purchase. We may not have
sufficient funds or the financial
resources necessary to satisfy our
obligations to repurchase the notes and
other debt that may become repayable upon
a change of control triggering event.
Basic covenants..................... The indenture governing the new notes
contains covenants that, among other
things, will limit our ability and the
ability of some of our subsidiaries to:
. pay dividends on, redeem or repurchase
our capital stock;
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. make investments;
. incur additional debt;
. create liens on our assets;
. sell assets
. enter into agreements that restrict
certain of our subsidiaries from
making distributions;
. consolidate, merge or transfer all or
substantially all of our assets and
the assets of our subsidiaries on a
consolidated basis; and
. engage in transactions with related
persons.
The covenants are subject to important
exceptions and qualifications. For more
details, see "Description of the New
Notes--Covenants".
OUR BUSINESS
We are an information-based direct marketer of consumer credit products and
fee-based services primarily to moderate income consumers. Our primary consumer
credit products are unsecured credit cards issued by our subsidiary, Direct
Merchants Bank. Our customers and prospects include individuals for whom credit
bureau information is available and customers of a former affiliate, Fingerhut
Corporation. We market our fee-based services, including debt waiver programs,
membership clubs, third-party insurance as well as extended service plans
offered through third-party retailers, to our credit card customers and
customers of third parties.
Our principle executive offices are located at 600 South Highway 169, Suite
1800, St. Louis Park, MN 55426, and our main telephone number is (612) 525-
5020.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
The following table shows our ratios of earnings to fixed charges and
preferred dividends for the periods indicated. Because we did not have any
preferred stock outstanding before December 9, 1998, our ratios of earnings to
fixed charges and preferred dividends before that date are the same as our
ratios of earnings to fixed charges.
<TABLE>
<CAPTION>
Six
Months
Ended
June 30, Years Ended December 31,
--------- -------------------------
1999 1998 1998 1997 1996 1995 1994
---- ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
preferred dividends...................... 2.8 3.8 3.7 5.7 8.3 6.9 134.2
Ratio of earnings to fixed charges........ 4.9 3.8 3.9 5.7 8.3 6.9 134.2
</TABLE>
For purposes of these ratios, earnings and fixed charges include applicable
amounts for us and our subsidiaries on a consolidated basis. Earnings consist
of earnings from continuing operations before income taxes, plus fixed charges.
Fixed charges consist of interest on indebtedness and a portion of rental
expense we believe to be representative of the interest factor. Our ratios of
earnings to fixed charges and preferred dividends have been calculated on an
owned basis (i.e., excluding securitized assets).
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RISK FACTORS
You should consider carefully all of the information in this prospectus and
incorporated by reference in this prospectus. See "Where You Can Find More
Information." In particular, you should carefully evaluate the following risks
before tendering your old notes in the exchange offer.
There may be adverse consequences for holders of the old notes who fail to
exchange them for new notes
If you do not exchange your old notes for new notes in this exchange offer,
you will continue to be subject to the restrictions on transfer of your old
notes set forth in the legend on the old notes because the old notes have not
been registered under the Securities Act or applicable state securities laws.
In general, you may offer or sell the old notes only if they are registered
under the Securities Act and applicable state securities laws, unless you sell
them under an exemption from the Securities Act and state securities laws. We
do not intend to register the old notes under the Securities Act.
If your tender of old notes in this exchange offer is for the purpose of
participating in a distribution of new notes, the new notes that you receive
will be restricted securities, and you will be required to comply with the
registration and prospectus delivery requirements of the Securities Act if you
resell any of the new notes. To the extent old notes are tendered and accepted
in the exchange offer, the trading market, if any, for the old notes which are
not tendered, and the price at which the old notes may be sold, could be
adversely affected. See "Exchange Offer."
There is no established trading market for the new notes, and even if one
develops, you may have difficulty selling them
There has not been any public market for the old notes, and we cannot assure
you that an active or liquid trading market will develop for the new notes. If
a trading market does not develop or is not maintained, you may experience
difficulty in reselling new notes, or you may be unable to sell them at all.
We do not intend to list the new notes on any securities exchange or seek
their admission to trading on any automated quotation system. The initial
purchasers of the old notes have advised us that they intend to make a market
in the new notes. However, the initial purchasers are not obligated to do so
and may discontinue their market-making activities at any time without notice.
In addition, any market-making activity will be subject to the limits imposed
by the securities laws, and may be limited during the exchange offer and at
other times.
If a public trading market develops for the new notes, it may not be liquid
and it may be discontinued at any time. Moreover, future trading prices of the
new notes would depend on many factors, including, among others, prevailing
interest rates, our operating results and the market for similar securities.
Depending on prevailing interest rates, the market for similar securities and
other factors, including our financial condition, the new notes could trade at
a discount from their principal amount.
We must receive dividends and distributions from our subsidiaries to make
payments on the notes
We are a holding company with no significant assets other than our equity
interests in our subsidiaries. We depend on the earnings and cash flow of our
subsidiaries and on our ability to receive funds from our subsidiaries through
dividends and other payments to make payments on our debt, including the new
notes. In addition, various regulations applicable to our subsidiaries restrict
the ability of our subsidiaries to pay dividends to us. In particular,
applicable banking regulations limit the ability of Direct Merchants Bank to
declare dividends to us. As a result, earnings of Direct Merchants Bank
(currently principally comprised of fee income from sales of fee-based products
and services, servicing fees and interchange fees) may not be available to us.
7
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The notes are effectively subordinated to secured senior debt and debt of
subsidiaries that are not guarantors
The new notes effectively will be subordinated to our secured debt and the
secured debt of the subsidiary guarantors to the extent of the value of the
assets securing such debt. In the event of a default on such secured debt,
holders of the secured debt would receive payments from the assets used as
security before the holders of the new notes receive payments. Further, the new
notes effectively will be subordinated to any debt of our subsidiaries that are
not guarantors, including certificates of deposit issued by Direct Merchants
Bank ($448.1 million as of August 18, 1999). Following the liquidation or
reorganization of a subsidiary that is not a guarantor of the new notes, the
creditors of that subsidiary will generally be entitled to be paid in full
before we are entitled to a distribution of any assets in the liquidation or
reorganization.
As of June 30, 1999, after giving effect to the sale of the old notes and
our use of the net proceeds, our total indebtedness was approximately $660.0
million (excluding unused commitments of $200.0 million under our credit
facility), $100.0 million of which is secured debt outstanding under our credit
facility. The debt incurred under our credit facility is secured by a pledge of
the capital stock of substantially all of our subsidiaries (including Direct
Merchants Bank) and by a lien against certain receivables and general
intangibles. Metris Direct, Inc., the guarantor of the new notes, is also a
guarantor of our credit facility. The new notes will not be secured by any of
our assets or the assets of our subsidiaries.
Direct Merchants Bank is not, and is not expected to become, a guarantor of
the new notes. In addition, it is our policy to maintain the capitalization of
Direct Merchants Bank at a level that will allow it to be categorized as a
"well capitalized" bank under applicable banking regulations. As a result, we
may make contributions to the capital of Direct Merchants Bank from time to
time. For example, in anticipation of the acquisition of a portion of the
consumer bank card portfolio of GE Capital, we contributed approximately $80
million to the capital of Direct Merchants Bank to maintain its "well
capitalized" status.
We may be unable to purchase your notes upon a change of control offer
Upon certain change of control events, we are required to offer to
repurchase all of the notes. We may not have sufficient funds at the time of
the change of control to make the required repurchase. These change of control
events would also require the repurchase of our currently outstanding 10%
senior notes due 2004. Our credit facility prohibits such repurchases and
provides that certain change of control events would violate our credit
facility. If our debt under our credit facility became due as a result of such
a violation, the lenders would have a priority claim on our assets securing our
debt to them.
Guarantees may be unenforceable due to fraudulent conveyance statutes
The guarantees may be unenforceable under certain circumstances. Although
laws differ among various jurisdictions, in general, under fraudulent
conveyance laws, a court could subordinate or void a guarantee if it found
that:
. the guarantee was incurred with actual intent to hinder, delay or
defraud creditors, or
. the guarantor did not receive fair consideration or reasonably
equivalent value for the guarantee and the guarantor:
-- was insolvent or was rendered insolvent because of the guarantee,
-- was engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital, or
-- intended to incur, or believed that it would incur, debts beyond its
ability to pay at maturity.
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If a court determines to void a guarantee as a result of fraudulent
conveyance, or hold it unenforceable for any other reason, noteholders would
cease to have a claim against the guarantor and would be creditors solely of
Metris and any remaining guarantors.
The measures of insolvency for these purposes will vary depending upon the
law applied in any proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, a guarantor would be considered insolvent if, at
the time it issued the guarantee:
. the fair market value or fair saleable value of all of its assets was
less than the amount required to pay its total debts and liabilities,
including contingent liabilities, as they become absolute and matured;
or
. it could not pay its debt, including contingent liabilities, as they
became due.
We believe that the guarantees are being incurred for proper purposes and in
good faith, that the guarantors received fair consideration for the issuance of
their guarantees, and that each guarantor is and will be solvent, will have
sufficient capital for the business in which it is engaged and is and will be
able to pay its debts as they mature. However, we cannot assure you that a
court would agree with our conclusions in this regard.
Our profitability and ability to grow is dependent on our funding sources
Securitization Markets. We depend heavily upon the securitization of our
credit card loans to fund our operations and growth. As recently as the fourth
quarter of 1998, these markets have undergone disruptions which adversely
affected the ability of companies like us to raise money from these sources.
Furthermore, our ability to securitize our assets depends on the continued
availability of credit enhancement on acceptable terms and the continued
favorable legal, regulatory and tax environment for such transactions.
In addition, even if we are able to securitize our assets consistent with
past practice, poor performance of our securitized assets, including increased
delinquencies and credit losses, could result in a downgrade or withdrawal of
the ratings on the outstanding securities issued in our securitization
transactions, cause early amortization of such securities or result in higher
required credit enhancement levels. As a result, poor performance of our
securitized assets could divert significant amounts of cash that would
otherwise be available to us. This could jeopardize our ability to complete
other securitization transactions on acceptable terms, decrease our liquidity
and force us to rely on other potentially more expensive funding sources, to
the extent available. We cannot assure you that the securitization market will
continue to offer suitable funding alternatives.
Credit Facility. We rely on our credit facility to fund our operations and
growth. If we breach any of our covenants under our credit facility, including
various financial covenants, the lenders may terminate the facility.
Disruptions in the securitization market could negatively affect our ability to
comply with these covenants, and therefore our ability to borrow or replace
this facility could be adversely affected.
Other Funding Sources. We also expect to obtain financing by selling debt
and equity securities. Our ability to obtain such financing is dependent upon
many factors, including general market conditions. We cannot assure you that we
will be able to obtain this financing on favorable terms or at all. In
addition, restrictions contained in our debt agreements may adversely affect
our ability to finance future operations or capital needs or to engage in other
business activities.
Jumbo CD Program. Beginning in the first quarter 1999, Direct Merchants Bank
began issuing jumbo certificates of deposit. We expect to use the proceeds of
these deposits to fund our operations and growth. To maintain our current level
of access to the jumbo certificate of deposit market, Direct Merchants Bank
must maintain a "well capitalized" rating, as that rating is defined by the
Office of the Comptroller of the Currency.
9
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If it does not do so, we may be required to modify the program and may not be
able to accept additional deposits.
Our ability to obtain financing from the various sources available to us is
dependent upon many factors, including those outside of our control. In
addition, disruptions or unfavorable conditions related to one financing source
may negatively affect our ability to access other financing sources, or may
increase our financing costs.
We require a high degree of liquidity to operate our business
We depend on cash flow from operations, asset securitization, our credit
facility, our jumbo CD program and the issuance of debt and equity to fund our
operations and growth. The loss or interruption of any of these sources of
funding could adversely affect our ability to operate.
Key elements of our strategy are dependent upon us having adequate available
cash. These cash needs include:
. funding receivable growth through marketing campaigns;
. additional credit enhancement in the case of poor performance of our
securitized assets;
. interest and principal payments under our securitizations, our credit
agreement, our existing senior notes and other indebtedness;
. ongoing operating expenses;
. maintenance of the "well capitalized" status of our subsidiary, Direct
Merchants Bank, which is necessary to maintain the jumbo CD program;
. portfolio acquisitions;
. fees and expenses incurred in connection with the securitization of
receivables and the servicing of them; and
. tax payments due on receipt of excess cash flow from securitization
trusts.
Given these cash needs, we anticipate that we will need to enter into
financing transactions on a regular basis. We cannot assure you that we will be
able to secure funds to support our cash needs on terms as favorable as past
transactions. Any adverse change in the funding sources we use could force us
to rely on other potentially more expensive funding sources, to the extent
available, and could have other adverse consequences.
Our target market for consumer credit products may lead to higher default and
bankruptcy rates
The primary risk associated with unsecured lending to moderate income
consumers is higher default or bankruptcy rates than other income classes of
consumers, resulting in more accounts being charged-off as uncollectible. In
addition, general economic factors, such as the rate of inflation, unemployment
levels and interest rates, may result in greater delinquencies and credit
losses among moderate income consumers than among other income classes of
consumers. We may be unable to successfully identify and evaluate the
creditworthiness of our target customers to minimize the expected higher
delinquencies and losses. We also cannot assure you that our risk-based pricing
system can offset the negative impact on profitability that the expected
greater delinquencies and losses may have.
The lack of seasoning of our credit card portfolio creates a risk of increasing
loss levels
Our growth strategy is likely to produce a continued flow of unseasoned
accounts into our portfolio. The average age of a credit card issuer's
portfolio of accounts generally affects the level and stability of
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delinquency and loss rates of that portfolio. For example, a portfolio
containing mostly older accounts generally behaves more predictably than a
newly originated portfolio. At June 30, 1999, 63% of our credit card accounts
were less than 36 months old. The delinquency and charge-off ratios for the
following periods do not reflect the favorable impact of purchase accounting
related to the portfolio acquisitions. At June 30, 1999, 7.6% of our managed
credit card loans were 30 days or more delinquent, compared to 7.4% at December
31, 1998, 7.1% at December 31, 1997 and 5.5% at December 31, 1996. For the six
months ended June 30, 1999, we had annualized net charge-offs of 10.8% compared
to 10.8%, 9.3% and 6.2% for the years ended December 31, 1998, 1997 and 1996,
respectively. As a result, until the accounts become more seasoned, we expect
the delinquency and loss levels of our portfolio to continue to increase. Any
material increases in delinquencies and losses beyond our expectations could
have a material adverse impact on us and the value of our net retained
interests in loans securitized, which are subordinated to the interests sold in
such securitizations.
Our limited operating history as a stand-alone entity makes predicting future
performance difficult
In connection with our spin off from Fingerhut Companies Inc. ("FCI") in
September 1998, we significantly changed our funding sources to stand-alone
financing without guarantees from FCI. We have incurred and expect to incur
higher borrowing expenses under our current credit facility because of our
lower independent credit rating. Our relatively short existence as a stand-
alone company makes it difficult to apply historical operating results and
trends to assess our future performance.
We may not be able to sustain and manage growth
In order to meet our strategic objectives, we plan to continue to expand our
credit card loan portfolio. Continued growth in this area depends largely on:
. our ability to attract new cardholders;
. growth in both existing and new account balances;
. the degree to which we lose accounts and account balances to competing
card issuers;
. levels of delinquencies and losses;
. the availability of funding, including securitizations, on favorable
terms;
. general economic and other factors such as the rate of inflation,
unemployment levels and interest rates, which are beyond our control;
. our ability to acquire and integrate portfolios; and
. stability and growth in management.
Our continued growth also depends on our ability to manage this growth
effectively. Factors that affect our ability to successfully manage growth
include: retaining and recruiting experienced management personnel, finding and
adequately training new employees, cost-effectively expanding our facilities,
growing and updating our management systems and obtaining capital when needed.
We may not be able to successfully integrate portfolio acquisitions
As previously mentioned, our growth depends in part on our ability to
acquire and successfully integrate new portfolios of credit card customers.
Since our risk-based pricing system depends on information regarding customers,
limited or unreliable historical information on customers within an acquired
portfolio may have an impact on our ability to successfully and profitably
integrate that portfolio. Our success also depends on whether the desirable
customers of an acquired portfolio close their accounts after transfer of the
portfolio. A large attrition rate would result in a lower borrowing base upon
which to assess fees, higher costs relating to closing accounts and less
potential for marketing fee-based services. In addition, if customers reduce
their borrowings after the transfer of accounts, the acquired portfolio may be
less profitable than originally expected.
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We may not be able to successfully market our fee-based services or sign
additional marketing alliances
We target our fee-based services to our credit card customers and customers
of third parties. Because of the variety of offers provided and the diversity
of the customers targeted, we are uncertain about how many customers will
respond to our offers for these fee-based services. We may experience higher
than anticipated costs in connection with the internal administration and
underwriting of these fee-based services and lower than anticipated response or
retention rates.
Furthermore, we may be unable to expand the fee-based services business or
maintain historical growth and stability levels if:
. we cannot successfully market credit cards to new customers;
. existing credit card customers close accounts voluntarily or
involuntarily;
. existing fee-based services customers cancel their services;
. we cannot form marketing alliances with other third parties; or
. new or restrictive state regulations limit our ability to market or sell
fee-based services.
Interest rate fluctuations impact the yield on our assets and funding expense
An increase or decrease in market interest rates could have a negative
impact on the net interest spread between the yield on our assets and our cost
of funding. A rise in market interest rates may indirectly impact the payment
performance of our customers. We try to minimize the impact of changes in
market interest rates on our cash flow, asset value and net income primarily by
funding variable rate assets with variable rate funding sources and by using
interest rate derivatives to match asset and liability repricings. However,
changes in market interest rates may have a negative impact on us.
Current and proposed regulation and legislation limit our business activities,
product offerings and fees charged
Various federal and state laws and regulations significantly limit the
activities in which we and Direct Merchants Bank are permitted to engage. Such
laws and regulations, among other things, limit the fees and other charges that
we are allowed to charge, limit or prescribe certain other terms of our
products and services, require specified disclosures to consumers, govern the
sale and terms of products and services we offer and require that we maintain
certain licenses, qualifications, or capital requirements. In some cases, the
precise application of these statutes and regulations is not clear. In
addition, the regulatory framework at the state and federal level regarding
some of our fee-based products is evolving. The regulatory framework affects
the design or profitability of such products and our ability to sell certain
products. In addition, numerous legislative and regulatory proposals are
advanced each year which, if adopted, could adversely affect our profitability
or further restrict the manner in which we conduct our activities. The failure
to comply with, or adverse changes in, the laws or regulations to which our
business is subject, or adverse changes in the interpretation thereof, could
adversely affect our ability to collect our receivables and generate fees on
the receivables which could have a material adverse effect on our business.
Other industry risks related to consumer credit products and fee-based services
could negatively impact us
We face a number of risks associated with unsecured lending. These include
the risk that delinquencies and credit losses will increase because of future
economic downturns; the risk that an increasing number of customers will
default on the payment of their outstanding balances or seek protection under
bankruptcy laws; and the risk that fraud by cardholders and third parties will
increase. We also face the risk that increased criticism from consumer
advocates and the media could hurt consumer acceptance of our products, as well
as
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the risk of litigation, including class action litigation, challenging our
product terms, rates, disclosures, collections or other practices, under state
and federal consumer protection statutes and other laws.
Due to intense competition in our consumer credit products and fee-based
services businesses, we may not be able to compete successfully
We face intense and increasing competition from numerous financial services
providers, many of which have greater resources than we do. In particular, our
credit card business competes with national, regional and local bank card
issuers, as well as other general purpose and private label credit card
issuers. There has been a recent increase in solicitations to moderate income
consumers, as competitors have increasingly focused on this market. Customers
are attracted to credit card issuers largely on the basis of price, credit
limit and other product features; as a result, customer loyalty is often
limited. According to published reports, as of December 1998, the 20 largest
issuers accounted for approximately 90% (based on receivables outstanding) of
the market for general purpose credit cards. Many of these issuers are
substantially larger, have more seasoned credit card portfolios and often
compete for customers by offering lower interest rates and/or fee levels than
we do. We cannot assure you that we will be able to compete successfully in
this environment.
We also face competition from numerous fee-based services providers,
including insurance companies, financial services institutions and other
membership-based or consumer services providers, many of which are larger,
better capitalized and more experienced than us. As we continue to expand our
extended service plan business to the customers of third-party retailers, we
compete with manufacturers, financial institutions, insurance companies and a
number of independent administrators, many of which have greater operating
experience and financial resources than we do.
Changes in the relationship with FCI could materially impact our business
Upon a change of control of our company, Fingerhut can terminate our access
to their database and may repurchase credit cards bearing the Fingerhut name
and logo
We have entered into a number of agreements with FCI or Fingerhut for the
purpose of defining the ongoing relationship between us, some of which are
material to our business. We rely on our access to the Fingerhut database,
including the Fingerhut suppression and bad debt file, to market financial
services products. As of June 30, 1999, Fingerhut customers in the Fingerhut
database represented 27% of our credit card accounts and all of the purchasers
of our extended service plans. Until we develop our own significant database
and extended service plan marketing relationships with other companies, our
success will depend largely on our rights to the Fingerhut database to market
such service plans and our right to be the provider of certain financial
services products to Fingerhut customers. Fingerhut can terminate our
contractual rights to this access in the event a third party acquires control
of our company and, upon termination of the agreement, Fingerhut has the right
to repurchase any then outstanding general purpose credit cards bearing the
Fingerhut name and logo. Any denial or delay of this access or any such
repurchase could have a significant economic impact on us.
Recent acquisition of Fingerhut could negatively affect us
On February 11, 1999, FCI announced that it had agreed to be acquired by
Federated Department Stores, Inc. This transaction was completed on March 18,
1999. Although our agreements with FCI and Fingerhut were not terminated by
this transaction, we cannot predict how this change in status for FCI may
affect our relationship with FCI and Fingerhut.
The failure to be Year 2000 compliant could negatively impact us
The "Year 2000 Problem" is a result of computer systems using two digits
rather than four digits to define the applicable year. We, like all database
marketing companies and financial services institutions, depend
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heavily upon computer systems for all phases of our operations. We process data
through our own systems and obtain data and processing services from various
vendors. We must concern ourselves not only with our own systems, but also with
the status of Year 2000 compliance with respect to those vendors that provide
data and processing services to us.
Most of our existing information systems are less than three years old and
were originally designed for Year 2000 compliance, but as a cautionary measure,
we have begun testing such internal systems for Year 2000 compliance. We also
depend on databases maintained by FCI and card and statement generation, among
other services, provided by First Data Resources. We have created a Year 2000
Project team to identify, address and monitor internal systems and vendor
issues related to Year 2000 problems. The project team meets monthly with
systems experts at FCI and works closely with our identified material vendors,
including First Data Resources, to determine the impact of our and the vendors'
plans for becoming Year 2000 compliant. As of June 30, 1999, the project is on
schedule. The project team has developed high-level contingency plans to
address non-compliance by our material vendors, which may include replacing
vendors. We may have difficulty identifying acceptable alternative vendors,
many of which may be overburdened with requests from similarly situated
companies. If we are unable to identify acceptable and available alternative
vendors, the transition of services to such vendors may be time consuming and
costly.
Although we cannot ensure compliance by all of our vendors on a timely
basis, we believe that we are taking appropriate steps to identify exposure to
Year 2000 problems and to address them on a timely basis. In addition, we
believe that we have adequate resources to achieve Year 2000 compliance for our
systems which currently may not be compliant and that the costs of Year 2000
compliance will not be material to us. If, however, compliance with Year 2000
issues is not completed on a timely basis or is not fully effective, the most
reasonably likely worst case scenario that may impact our results of
operations, financial condition and prospects is the failure of First Data
Resources, Visa and MasterCard to provide services. Our cardholders would be
unable to use their credit cards or otherwise access their accounts. Due to
several unknown contributing factors, and the scope of the Year 2000 issue, the
impact this worst case scenario would have on our results of operations,
financial condition and prospects is an uncertainty. The scenarios will be
analyzed and addressed in our contingency plans.
FORWARD-LOOKING STATEMENTS
This prospectus includes or incorporates by reference forward-looking
statements. You will recognize these statements because they do not strictly
relate to historical or current facts. Forward-looking statements generally may
use words such as "anticipate," "estimate," "expect," "project," "intend,"
"plan," "think," "believe" and other similar words or phrases. Similarly,
statements relating to our objectives and strategies, future performance of
current or anticipated products, solicitation efforts, expenses, the outcome of
contingencies and the impact of the capital markets on our liquidity also are
forward-looking statements.
Any or all of our forward-looking statements may turn out to be wrong. They
can be affected by inaccurate assumptions or by known or unknown risks and
uncertainties. Important assumptions and factors that could cause actual
results to differ materially from those expressed or implied by forward-looking
statements include those described in the risk factor section of this
prospectus. Additional factors not presently known to us or that we currently
think are immaterial may also adversely affect our business. We can provide no
assurance that we will achieve anticipated results.
We assume no obligation to publicly update any forward-looking statement,
whether as a result of new information, subsequent events, changes in
assumptions or otherwise.
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USE OF PROCEEDS
The exchange offer is intended to satisfy obligations we have under the
registration rights agreement entered into in connection with the July 1999
offering of the old notes. We will not receive any cash proceeds from the
issuance of the new notes in the exchange offer.
The net proceeds from the sale of the old notes were approximately $139.4
million, after original issue discount of $6.3 million and deduction of
offering expenses. We used approximately $39.0 million of the net proceeds to
reduce outstanding borrowings under our revolving credit facility. We expect to
use the approximately $100.4 million balance for working capital and general
corporate purposes.
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CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999, and
on a pro forma basis as adjusted to give effect to the issuance of the old
notes in July 1999 and application of the net proceeds from the offering of the
old notes.
<TABLE>
<CAPTION>
June 30, 1999
---------------------
As
Actual adjusted
---------- ----------
(Dollars in
thousands)
<S> <C> <C>
Debt:
Deposits (1)............................................. $ 315,373 $ 315,373
Credit facility (2)...................................... 139,000 100,000
10 1/8% Senior Notes due 2006, net (3)................... -- 143,700
10% Senior Notes due 2004................................ 100,000 100,000
Other debt............................................... 893 893
---------- ----------
Total debt............................................. 555,266 659,966
---------- ----------
Stockholders' Equity:
Convertible preferred stock-- Series C-- $.01 per share;
10,000,000
shares authorized; issued and outstanding 846,650(4).... 315,377 315,377
Common Stock--$.01 per share; 100,000,000 shares
authorized,
issued and outstanding 38,574,272 shares................ 386 386
Paid-in capital.......................................... 129,544 129,544
Retained earnings........................................ 112,887 112,887
---------- ----------
Total stockholders' equity............................. 558,194 558,194
---------- ----------
Total capitalization................................... $1,113,460 $1,218,160
========== ==========
</TABLE>
- --------
(1) Consists of $311.8 million in jumbo certificates of deposit and $3.6
million in other loans. As of August 18, 1999, the amount of jumbo
certificates of deposit was $448.1 million.
(2) Represents the amount outstanding under the $300.0 million credit
facility. As of June 30, 1999, as adjusted to give effect to the offering
of the old notes and the use of the proceeds therefrom, we would have had
$200.0 million of availability under the credit facility.
(3) The notes are presented net of debt discount of $6.3 million, which
represents original issue discount.
(4) The amount shown for the Series C Preferred represents the original $300.0
million investment by the Lee Company plus accrued paid-in-kind dividends
since December 9, 1998 accruing at 9% per annum, compounded quarterly.
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THE EXCHANGE OFFER
Purpose and Effect
We issued the old notes on July 8, 1999 in a private placement. The initial
purchasers then resold the old notes to qualified buyers. In connection with
this issuance, we entered into a registration rights agreement with the
initial purchasers under which we agreed to file an exchange offer
registration statement under the Securities Act and, upon effectiveness of the
registration statement, offer to you the opportunity to exchange your notes
for a like principal amount of registered notes.
Based on interpretations by the staff of the SEC found in no-action letters
issued to third parties, if you are not our "affiliate" within the meaning of
Rule 405 under the Securities Act, we believe that you may resell or otherwise
transfer the new notes that we are issuing to you in the exchange offer
without compliance with the registration and prospectus delivery provisions of
the Securities Act. However, the new notes must be acquired in the ordinary
course of your business. In addition, you must not engage in, intend to engage
in or have any arrangement or understanding with any person to participate in,
a distribution of the new notes.
If you tender in the exchange offer for the purpose of participating in a
distribution of the new notes, you cannot rely on the interpretations by the
staff of the SEC stated in no-action letters. Instead, you must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction, unless an exemption from registration
is otherwise available.
Further, each broker-dealer that receives new notes for its own account in
exchange for the old notes, where the broker-dealer acquired the old notes as
a result of market-making or other trading activities, must acknowledge in a
letter of transmittal that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of those new
notes. The letter of transmittal states that by making this acknowledgment and
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. We have agreed
that this prospectus may be used by a broker-dealer for resales of new notes
issued to it in the exchange offer for a period of 90 days after the
expiration date of the exchange offer. See "Plan of Distribution."
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal which accompanies this prospectus, we will
accept all old notes validly tendered and not withdrawn before 5:00 p.m., New
York City time, on the expiration date of the exchange offer. We will issue
$1,000 principal amount of new notes in exchange for each $1,000 principal
amount of outstanding old notes we accept in the exchange offer. You may
tender some or all of your old notes under the exchange offer. However, old
notes may be tendered only in integral multiples of $1000 in principal amount.
The form and terms of the new notes will be the same as the form and terms
of the old notes, except that:
(1) the new notes will bear a different cusip number from the old notes;
(2) the new notes will be registered under the Securities Act and,
therefore, will not bear legends restricting their transfer;
(3) the new notes will not contain terms providing for payments of
liquidated damages under circumstances relating to the timing of the
exchange offer; and
(4) holders of the new notes will not be entitled to rights under the
registration rights agreement, which will terminate upon completion of the
exchange offer.
The new notes will evidence the same debt as the old notes and will be
issued under, and be entitled to the benefits of, the indenture governing the
old notes.
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<PAGE>
The exchange offer is not conditioned upon any minimum amount of old notes
being tendered. As of the date of this prospectus, $150.0 million aggregate
principal amount of old notes is outstanding.
In connection with the exchange offer, you do not have any appraisal or
dissenters' rights under the General Corporation Law of the State of Delaware
or the indenture. We intend to conduct the exchange offer in accordance with
the registration rights agreement and the applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations of the SEC.
We will be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice of our acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the new notes from us.
If we do not accept any tendered notes because of an invalid tender or for
any other reason, we will return certificates for any unaccepted old notes
without expense to the tendering holder as promptly as practicable after the
expiration date.
Expiration Date; Amendments
The exchange offer will expire at 5:00 p.m., New York City time, on ,
1999, unless we, in our sole discretion, extend the exchange offer.
If we determine to extend the exchange offer, we will notify the exchange
agent of any extension by oral or written notice and give each registered
holder notice of the extension by means of a press release or other public
announcement before 9:00 a.m., New York City time, on the next business day
after the previously scheduled expiration date.
We reserve the right, in our sole discretion, to delay accepting any old
notes, to extend the exchange offer or to amend or terminate the exchange offer
if any of the conditions described below under "--Conditions" have not been
satisfied or waived by giving oral or written notice to the exchange agent of
the delay, extension or termination. Further, we reserve the right, in our sole
discretion, to amend the terms of the exchange offer in any manner. We will
notify you as promptly as practicable of any extension, amendment or
termination.
Procedures for Tendering Old Notes
Any tender of old notes that is not withdrawn prior to the expiration date
will constitute a binding agreement between the tendering holder and us upon
the terms and subject to the conditions set forth in this prospectus and in the
accompanying letter of transmittal. A holder who wishes to tender old notes in
the exchange offer must do either of the following:
. properly complete, sign and date the letter of transmittal, including
all other documents required by such letter of transmittal; have the
signature on the letter of transmittal guaranteed if the letter of
transmittal so requires; and mail or deliver such letter of transmittal
and other required documents to the exchange agent at the address listed
below under "--Exchange Agent" on or before the expiration date; or
. if the old notes are tendered under the book-entry transfer procedures
described below, transmit to the exchange agent on or before the
expiration date an agent's message.
In addition, one of the following must occur:
. the exchange agent must receive certificates representing your old
notes, along with the letter of transmittal, on or before the expiration
date; or
. the exchange agent must receive a timely confirmation of book-entry
transfer of the old notes into the exchange agent's account at DTC under
the procedure for book-entry transfers described below, along
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<PAGE>
with the letter of transmittal or a properly transmitted agent's
message, on or before the expiration date; or
. the holder must comply with the guaranteed delivery procedures described
below.
The term "agent's message" means a message, transmitted by the book-entry
transfer facility to and received by the exchange agent and forming a part of
the book-entry confirmation, which states that the book-entry transfer
facility has received an express acknowledgment from the tendering participant
stating that the participant has received and agrees to be bound by the letter
of transmittal and that we may enforce the letter of transmittal against the
participant.
The method of delivery of old notes, the letter of transmittal and all
other required documents to the exchange agent is at your election and risk.
Rather than mail these items, we recommend that you use an overnight or hand
delivery service. In all cases, you should allow sufficient time to assure
timely delivery to the exchange agent before the expiration date. Do not send
letters of transmittal or old notes to us.
Generally, an eligible institution must guarantee signatures on a letter of
transmittal or a notice of withdrawal unless the old notes are tendered:
. by a registered holder of the old notes who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the letter of transmittal; or
. for the account of an eligible institution.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a firm which is:
. a member of a registered national securities exchange,
. a member of the National Association of Securities Dealers, Inc.,
. a commercial bank or trust company having an office or correspondent in
the United States, or
. another "eligible institution" within the meaning of Rule 17Ad-15 under
the Exchange Act.
If the letter of transmittal is signed by a person other than the
registered holder of any outstanding old notes, such old notes must be
endorsed or accompanied by appropriate powers of attorney. The power of
attorney must be signed by the registered holder exactly as the registered
holder(s) name appear(s) on the old notes and an eligible institution must
guarantee the signature on the power of attorney.
If the letter of transmittal or any old notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, these persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to so
act.
If you wish to tender old notes that are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee, you should
promptly instruct the registered holder to tender on your behalf. If you wish
to tender on your behalf, you must, before completing the procedures for
tendering old notes, either register ownership of the old notes in your name
or obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time.
We will determine in our sole discretion all questions as to the validity,
form, eligibility, including time of receipt, and acceptance of old notes
tendered for exchange. Our determination will be final and binding. We reserve
the absolute right to reject any and all tenders of old notes not properly
tendered or old notes our acceptance of which might, in the judgment of our
counsel, be unlawful. We also reserve the absolute right to waive any defects,
irregularities or conditions of tender as to any particular old notes. Our
interpretation of the terms and conditions of the exchange offer, including
the instructions in the letter of transmittal, will be final
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<PAGE>
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old notes must be cured within the time period we
determine. Neither we, the exchange agent nor any other person will incur any
liability for failure to give you notification of defects or irregularities
with respect to tenders of your old notes.
By tendering, you will represent to us that, among other things:
. the new notes acquired in the exchange offer are being acquired in the
ordinary course of business of the person receiving the new notes;
. neither you nor any other person receiving the new notes is
participating, intends to participate, or has any arrangement or
understanding with any person to participate, in the distribution of the
new notes; and
. neither you nor any other person receiving the new notes is our
"affiliate," as defined under Rule 405 of the Securities Act.
If you or the person receiving the new note is our "affiliate," as defined
under Rule 405 of the Securities Act, is participating in the exchange offer
for the purpose of distributing the new notes, you or that other person (1)
cannot rely on the applicable interpretations of the staff of the SEC and (2)
must comply with the registration and prospectus delivery requirements of the
Securities Act in any resale transaction.
If you are a broker-dealer and you will receive new notes for your own
account in exchange for old notes, where such old notes were acquired as a
result of market-making activities or other trading activities, you must
acknowledge that you will deliver a prospectus in connection with any resale of
the new notes.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction of all conditions to the exchange offer, we will accept,
promptly after the expiration date, all old notes properly tendered and will
issue the new notes promptly after acceptance of the old notes.
For purposes of the exchange offer, we shall be deemed to have accepted
properly tendered old notes for exchange when, as and if we have given oral or
written notice of that acceptance to the exchange agent. For each old note
accepted for exchange, you will receive a new note having a principal amount at
maturity equal to that of the surrendered old note.
In all cases, we will issue new notes for old notes that we have accepted
for exchange under the exchange offer only after the exchange agent timely
receives (1) certificates for your old notes or a timely book-entry
confirmation of your old notes into the exchange agent's account at DTC and (2)
a properly completed and duly executed letter of transmittal and all other
required documents or a properly transmitted agent's message. If we do not
accept any tendered old notes for any reason set forth in the terms of the
exchange offer or if you submit old notes for a greater principal amount than
you desire to exchange, we will return the unaccepted or non-exchanged old
notes without expense to you. In the case of old notes tendered by book-entry
transfer into the exchange agent's account at DTC under the book-entry
procedures described below, we will credit the non-exchanged old notes to your
account maintained with DTC.
Book-Entry Transfer
We understand that the exchange agent will make a request to establish an
account for the old notes at DTC for purposes of the exchange offer within two
business days after the date of this prospectus, and any financial institution
that is a participant in DTC's system may make book-entry delivery of old notes
by causing DTC to transfer the old notes into the exchange agent's account at
DTC in accordance with DTC's procedures for transfer. Although delivery of old
notes may be effected through book-entry transfer at DTC, the exchange agent
must receive a properly completed letter of transmittal, with any required
signature guarantees, or an agent's message instead of a letter of transmittal,
and all other required documents at its address listed below
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<PAGE>
under "--Exchange Agent" on or before the expiration date, or if you comply
with the guaranteed delivery procedures described below, within the time
period provided under those procedures.
Guaranteed Delivery Procedures
If you wish to tender your old notes and your old notes are not immediately
available, or you cannot deliver your old notes, the letter of transmittal or
any other required documents or comply with DTC's procedures for transfer
before the expiration date, then you may participate in the exchange offer if:
(1) the tender is made through an eligible institution;
(2) before the expiration date, the exchange agent receives from the
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form provided by us, by
facsimile transmission, mail or hand delivery, containing (a) the name
and address of the holder and the principal amount of old notes
tendered, (b) a statement that the tender is being made thereby and (c)
a guarantee that within three New York Stock Exchange trading days
after the expiration date, the certificates representing the old notes
in proper form for transfer or a book-entry confirmation and any other
documents required by the letter of transmittal will be deposited by
the eligible institution with the exchange agent; and
(3) the exchange agent receives the properly completed and executed letter
of transmittal as well as certificates representing all tendered old
notes in proper form for transfer, or a book-entry confirmation, and
all other documents required by the letter of transmittal within three
NYSE trading days after the date of execution of the notice of
guaranteed delivery.
Withdrawal Rights
You may withdraw your tender of old notes at any time before the expiration
date of the exchange offer.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at its address listed below under "--Exchange Agent." The
notice of withdrawal must:
. specify the name of the person who tendered the old notes to be
withdrawn,
. identify the old notes to be withdrawn, including the principal amount
of such old notes, or, in the case old notes tendered by book-entry
transfer, the name and number of the DTC account to be credited and
otherwise comply with the procedures of the DTC, and
. if certificates for old notes have been transmitted, specify the name in
which such old notes are registered if different from that of the
withdrawing holder.
If you have delivered or otherwise identified to the exchange agent the
certificates for old notes, then, before the release of such certificates, you
must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
eligible institution, unless the holder is an eligible institution.
We will determine in our sole discretion all questions as to the validity,
form and eligibility, including time of receipt, of such notices. Our
determination will be final and binding on all parties. Any old notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer. We will return any old notes that have been tendered but that
are not exchanged for any reason to the holder, without cost, as soon as
practicable after withdrawal, rejection of tender or termination of the
exchange offer. In the case of old notes tendered by book-entry transfer into
the exchange agent's account at DTC, the old notes will be credited to an
account maintained with DTC for the old notes. You may retender properly
withdrawn old notes by following one of the procedures described under "--
Procedures for Tendering Old Notes" at any time on or before the expiration
date.
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Conditions
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange new notes for, any old notes and
we may terminate or amend the exchange offer before the acceptance of any old
notes, if:
(1) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the exchange offer
which, in our reasonable judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us; or
(2) any law, rule or regulation is proposed, adopted or enacted, or the
staff of the SEC interprets any existing law, rule or regulation in a
manner which, in our reasonable judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us.
The conditions listed above are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any condition. We may waive
these conditions in our discretion in whole or in part at any time and from
time to time. If we fail at any time to exercise any of the above rights, the
failure will not be deemed a waiver of those rights, and those rights will be
deemed ongoing rights which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered, and no
new notes will be issued in exchange for any such old notes, if at the time the
notes are tendered any stop order is threatened by the SEC or in effect with
respect to the registration statement of which this prospectus is a part or the
qualification of the indenture under the Trust Indenture Act of 1939.
Exchange Agent
The Bank of New York is the exchange agent for the exchange offer. You
should direct any questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery to the exchange agent addressed as
follows:
By Registered or Certified Mail:
By Hand, or Overnight Courier:
By Facsimile:
(Eligible
The Bank of New York The Bank of New York Institutions Only)
101 Barclay Street, 7E 101 Barclay Street (212) 815-6339
New York, New York 10286 Corporate Trust Services Window
Attn: Gertrude Jean Pirre Ground Level Confirm by telephone:
New York, New York 10286 (212) 815-5920
Attn: Gertrude Jean Pirre
Delivery of the letter of transmittal to an address other than as listed
above or transmission via facsimile other than as listed above will not
constitute a valid delivery of the letter of transmittal.
Fees and Expenses
We will pay the expenses of the exchange offer. We will not make any
payments to brokers, dealers, or others soliciting acceptances of the exchange
offer. We are making the principal solicitation by mail; however, our officers
and employees may make additional solicitations by facsimile transmission, e-
mail, telephone or in person. You will not be charged a service fee for the
exchange of your notes, but we may require you to pay any transfer or similar
government taxes in certain circumstances.
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<PAGE>
Transfer Taxes
You will not be obligated to pay any transfer taxes, unless you instruct us
to register new notes in the name of, or request that old notes not tendered or
not accepted in the exchange offer be returned to, a person other than the
registered tendering holder.
Consequences of Failure to Exchange Old Notes
If you are eligible to participate in the exchange offer but do not tender
your old notes, you will not have any further registration rights. Your old
notes will continue to be subject to restrictions on transfer. Accordingly, you
may resell the old notes that are not exchanged only:
. to us, upon redemption of the notes;
. so long as the old notes are eligible for resale under Rule 144A under
the Securities Act, to a person whom the seller reasonably believes is a
"qualified institutional buyer" within the meaning of Rule 144A
purchasing for its own account or for the account of a qualified
institutional buyer in a transaction meeting the requirements of Rule
144A;
. in accordance with Rule 144 under the Securities Act or another
exemption from the registration requirements of the Securities Acts;
. outside the United States to a foreign person in accordance with the
requirements of Regulation S under the Securities Act; or
. under any effective registration statement under the Securities Act,
in each case in accordance with all other applicable securities laws. We do not
intend to register the old notes under the Securities Act.
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DESCRIPTION OF THE NEW NOTES
You can find the definitions of some terms used in this description under
the caption "Defined Terms." In this section, the words "we," "our" and "us"
refer only to Metris Companies Inc., as a separate entity, and do not include
any of our subsidiaries.
We will issue the new notes under the indenture we entered into with The
Bank of New York, as trustee, in connection with the issuance of the old notes.
A copy of the indenture has been filed as an exhibit to the registration
statement which includes this prospectus. The terms of the new notes include
those stated in the indenture and those made part of the indenture by reference
to the Trust Indenture Act of 1939.
The following description of the material provisions of the indenture is
only a summary. We urge you to read the indenture because that document, and
not this description, defines your rights as holders of the new notes.
References in this section to "notes" are references to both old notes and new
notes.
Brief Description of the Notes and the Guarantees
The notes:
. are our senior unsecured obligations;
. rank equally in right of payment with all of our existing and future
senior unsecured debt;
. rank senior in right of payment to all existing and future subordinated
debt that we issue;
. are effectively subordinated to all of our secured obligations,
including indebtedness under our credit facility, and the secured
obligations of our subsidiaries that are guarantors, to the extent of
the value of the assets securing those obligations;
. are effectively subordinated to the obligations of our subsidiaries that
are not guarantors, including certificates of deposit issued by our
subsidiary, Direct Merchants Bank ($448.1 million as of August 18,
1999); and
. are unconditionally guaranteed on a senior unsecured basis by one of our
subsidiaries, Metris Direct, Inc.
The new notes currently are guaranteed by one of our existing subsidiaries.
Additional subsidiaries will be required to guarantee the new notes under the
circumstances described below under the caption "--Covenants--Additional
Subsidiary Guarantees." We will be permitted to designate certain of our
subsidiaries as "Unrestricted Subsidiaries." Our Unrestricted Subsidiaries will
not be subject to many of the restrictive covenants in the indenture and will
not guarantee the new notes. In the event of a bankruptcy, liquidation or
reorganization of any subsidiary that is not a guarantor of the new notes, that
subsidiary will pay the holders of its obligations before it will be able to
distribute any of its assets to us.
We and certain of our subsidiaries are parties to a credit agreement, which
provides for a $200 million three-year revolving credit facility and a $100
million five-year term loan. All borrowings under the credit facility are
secured by a first priority lien on certain assets of our company and certain
of our subsidiaries. As of June 30, 1999, after giving effect to the sale of
the old notes and the application of the net proceeds from that sale, we had
total outstanding debt of approximately $660.0 million (excluding unused
commitments of $200.0 million under the credit facility), $100.0 million of
which is secured debt under the credit facility. The indenture permits us and
our subsidiaries to incur additional indebtedness in the future, subject to
certain limitations, including, without limitation, under the credit facility.
See "--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock"
and "Risk Factors."
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Maturity, Interest and Principal of the Notes
The new notes will be limited in aggregate principal amount to $150.0
million and will mature on July 15, 2006. We will issue the new notes in
denominations of $1,000 and integral multiples of $1,000. Interest on the new
notes will accrue at a rate of 10 1/8% per annum and will be payable semi-
annually in arrears on January 15 and July 15, commencing January 15, 2000, to
holders of record of the new notes on the immediately preceding January 1 and
July 1. Interest on the new notes will accrue from the most recent interest
payment date to which interest has been paid or, if no interest has been paid,
from the date of original issuance of the old notes. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
We are permitted by the indenture to issue additional notes in one or more
series, from time to time. However, the maximum aggregate principal amount of
these additional notes may not exceed $100.0 million. Any additional issuance
will be subject to the covenant described below under the caption "Covenants--
Incurrence of Indebtedness and Issuance of Preferred Stock."
Optional Redemption
At any time on or before July 15, 2002, we may redeem up to 35% of the notes
issued under the indenture at a redemption price of 110.125% of the aggregate
principal amount of the notes, plus accrued and unpaid interest to the
redemption date, with the net cash proceeds of one or more Public Equity
Offerings. However, at least 65% of the aggregate principal amount of the notes
issued under the indenture must remain outstanding immediately after the
occurrence of each redemption, excluding notes held by us and our subsidiaries.
We must mail a notice of redemption no later than 30 days after the Public
Equity Offering and the redemption must occur within 90 days of the date of
closing of the Public Equity Offering.
On or after July 15, 2003, we may redeem all or any portion of the notes at
the following redemption prices (expressed as a percentage of principal
amount), plus accrued and unpaid interest, if any, to the redemption date
(subject to the right of holders of record on the relevant record date to
receive interest due on the relevant interest payment date), if redeemed during
the 12-month period beginning on July 15 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2003............ 105.062%
2004............ 102.531%
2005............ 100.000%
</TABLE>
Selection and Notice of Redemption
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
. if the notes are listed on a principal national securities exchange, in
compliance with the requirements of that exchange; or
. if the notes are not so listed, on a pro rata basis, by lot or by any
other method that the trustee deems fair and appropriate, provided that
no notes of a principal amount of $1,000 or less will be redeemed in
part.
We will send notices of redemption by first-class mail at least 30 but not
more than 60 days before the redemption date to each holder of notes to be
redeemed at the holder's registered address. If we redeem only a portion of the
principal amount of a note, the notice of redemption that relates to the note
will state the portion of the principal amount to be redeemed. We will issue a
new note in principal amount equal to the unredeemed portion of the original
note in the name of the holder upon cancellation of the original note. On and
after the redemption date, interest will cease to accrue on notes or portions
of them called for redemption as long as we have deposited with the paying
agent funds in satisfaction of the applicable redemption price.
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Subsidiary Guarantees
The Guarantors will jointly and severally guarantee our payment obligations
under the notes on a senior unsecured basis. The obligations of each Guarantor
under its Subsidiary Guarantee will be limited so as to prevent that Subsidiary
Guarantee from constituting a fraudulent conveyance under applicable law. For
information with respect to the meaning and consequences of a fraudulent
conveyance, we refer you to the discussion under the caption "Guarantees may be
unenforceable due to fraudulent conveyance statutes" in the risk factors
section of this prospectus.
A Guarantor may not consolidate with or merge with or into (whether or not
the Guarantor is the surviving), another Person whether or not affiliated with
the Guarantor unless: (1) the Person formed by or surviving the consolidation
or merger (if other than that Guarantor) assumes all the obligations of that
Guarantor under its Subsidiary Guarantee pursuant to a supplemental indenture
satisfactory to the trustee; (2) immediately after giving effect to that
transaction, no default or event of default exists; (3) the Guarantor, or any
Person formed by or surviving the 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 (4) immediately after giving effect
to such transaction, we 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 the covenant described below under the caption
"--Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock."
Notwithstanding the above, any Wholly-Owned Restricted Subsidiary may
consolidate with or merge into any Guarantor, if the Guarantor is the surviving
corporation, and any Guarantor may consolidate with or merge into our company.
The Subsidiary Guarantee of a Guarantor will be released in connection with
any sale or other disposition of all of the assets of that Guarantor, or a sale
or other disposition of all of the capital stock of a Guarantor, if we apply
the Net Cash Proceeds of that sale or other disposition in accordance with the
"Asset Sale" provisions of the indenture. See "--Covenants--Asset Sales."
Change of Control
Within 30 days following any Change of Control, we are required to make an
Offer to Purchase all notes then outstanding at a purchase price in cash equal
to 101% of the aggregate principal amount, plus accrued and unpaid interest, if
any, to the date of purchase. If a Change of Control occurs, we will notify
each holder of the occurrence of a Change of Control in the manner required by
the indenture.
If a Change of Control occurs which also constitutes an event of default
under our credit facility, the lenders under the credit facility would be
entitled to exercise the remedies available to a secured lender under
applicable law and pursuant to the terms of the credit facility. Accordingly,
any claims of these lenders with respect to our assets will be prior to the
claims of the holders of the notes to the extent of the security interest
therein.
We may not have sufficient funds to pay for all of the notes that holders
may tender to us upon a Change of Control. If we fail to repurchase all of the
notes tendered for purchase, that failure will constitute an Event of Default
under the indenture. See "--Events of Default and Remedies."
We will comply with the requirements of Section 14(e) and Rule 14e-1 under
the Exchange Act and any other securities laws and regulations to the extent
these laws and regulations are applicable in connection with the repurchase of
the notes as a result of a Change of Control. Any violation of the provisions
of the indenture relating to an Offer to Purchase occurring as a result of such
compliance will not be deemed an Event of Default or an event that, with the
passing of time or giving of notice, or both, would constitute an Event of
Default under the indenture.
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<PAGE>
Except as described above with respect to a Change of Control, the indenture
does not contain provisions that permit the holders of the notes to require us
to redeem the notes in the event of a takeover, recapitalization or similar
transaction.
Covenants
Termination of Certain Covenants in Event of Investment Grade Rating. For so
long as no Default or Event of Default has occurred and is continuing, after
either of the Rating Agencies assigns to the notes an Investment Grade Rating,
and notwithstanding that the notes may later cease to have an Investment Grade
Rating, our company and our Restricted Subsidiaries will not be subject to the
provisions of the indenture described under "--Restricted Payments," "--
Incurrence of Indebtedness and Issuance of Preferred Stock," "--Asset Sales,"
"--Transactions with Affiliates," "--Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" and clause (4) of "--Merger, Consolidation
or Sale of Assets."
Restricted Payments. We will not, and will not permit any of our Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of our or any of our Restricted Subsidiaries'
Equity Interests, including, without limitation, any payment in connection
with any merger or consolidation involving us, or to the direct or indirect
holders of our company's or any of our 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 our company and (b) dividends, payments or distributions payable
solely to us or our Wholly-Owned Restricted Subsidiaries;
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving our company) any Equity Interests of our company or
any direct or indirect parent of our company or other Affiliate of our
company (other than any such Equity Interests owned by us or any Wholly-
Owned Restricted Subsidiary of our company); or
(3) make any Restricted Investment.
We refer to the payments and other actions set forth above in clauses (1)
through (3) as "Restricted Payments". We may make, and permit our Restricted
Subsidiaries to make, Restricted Payments if, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default under the indenture has occurred and
is continuing or would occur as a consequence of making the Restricted
Payment;
(b) at the time of the Restricted Payment and after giving pro forma
effect thereto, we would 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 the covenant described below under the
caption "--Incurrence of Indebtedness and Issuance of Preferred Stock;" and
(c) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by us and our Restricted Subsidiaries after
the Issue Date (excluding Restricted Payments permitted by clause (2) of
the next succeeding paragraph), is less than the sum of
(i) 25% of our aggregate cumulative Consolidated Net Income of our
company for the period (taken as one accounting period) from and after
July 1, 1999 to the end of our most recently ended fiscal quarter for
which internal financial statements are available at the time of that
Restricted Payment (or, if the Consolidated Net Income for such period
is a deficit, less 100% of the deficit), plus
(ii) 100% of the aggregate net cash proceeds received by us from the
issue or sale since the date of the indenture of Equity Interests of
our company (other than Disqualified Stock) or from the issue
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<PAGE>
or sale of Disqualified Stock or debt securities of our company that
have been converted into those Equity Interests (other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of our company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified
Stock), plus
(iii) if any Restricted Investment that was made after the date of
the indenture is sold for cash or otherwise liquidated or repaid for
cash, the lesser of (A) the cash return of capital with respect to that
Restricted Investment (less the cost of disposition, if any) and (B)
the initial amount of that Restricted Investment, plus
(iv) $150 million.
The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration the payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement or other acquisition of any
Equity Interests of our company in exchange for, or out of the net cash
proceeds of the substantially concurrent sale (other than to a Subsidiary
of our company) of, other Equity Interests of our company (other than
Disqualified Stock); provided that the amount of any net cash proceeds that
are utilized for any redemption, repurchase, retirement or other
acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph;
(3) the payment of any dividend by a Restricted Subsidiary of our
company to the holders of its common Equity Interests on a pro rata basis;
(4) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of our company or any Restricted Subsidiary
of our company held by any member of our company's (or any of our
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 does not exceed
$1.0 million in any twelve-month period and no Default or Event of Default
has occurred and is continuing immediately after such transaction;
(5) payments of withholding taxes due or payments of exercise prices in
connection with exercises of options for our common stock by any employee
or former employee of our company (or any Affiliate of our company) by the
tender of common stock owned by such employee or the withholding of shares
of our common stock in connection with such option exercise as
consideration therefor in connection with compensation arrangements;
(6) any purchase, redemption or other acquisition or retirement for a
nominal amount of Equity Interests issued pursuant to any shareholder
rights plan of our company;
(7) payment of cash in lieu of fractional shares of common stock that
otherwise would be issuable; and
(8) if no Default or Event of Default has occurred and is 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.
Our Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. For
purposes of making that determination, all outstanding Investments by us and
our Restricted Subsidiaries (except to the extent repaid in cash) in the newly
designated Unrestricted Subsidiary will be deemed to be Restricted Payments at
the time of that designation and will reduce the amount available for
Restricted Payments under the first paragraph of this covenant. All outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greater of (y) the net book value of the Investments at the time of such
designation or (z) the fair market value of the Investments at the time of such
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<PAGE>
designation. The designation will only be permitted if the Restricted Payment
would be permitted at that time and if the Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary.
The amount of all non-cash Restricted Payments will be the fair market
value on the date of the Restricted Payment of the assets or securities
proposed to be transferred or issued by us or the applicable Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment will be determined by our
Board of Directors and will be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
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, we will 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 covenant were computed, together with
a copy of any opinion or appraisal required by the indenture.
Incurrence of Indebtedness and Issuance of Preferred Stock. We will not,
and will not permit any of our 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. In
addition, we and the Guarantors will not issue any Disqualified Stock, and we
will not permit any of our Restricted Subsidiaries (that are not Guarantors)
to issue any shares of preferred stock. However, we and the Guarantors may
incur Indebtedness, including Acquired Debt, or issue shares of Disqualified
Stock or our Restricted Subsidiaries (that are not Guarantors) may issue
shares of preferred stock if the Consolidated Leverage Ratio of our 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. Direct Merchants Bank may incur Indebtedness or issue
shares of Disqualified Stock if the Consolidated Leverage Ratio of our
company, calculated on a pro forma basis after giving effect to the incurrence
of the additional Indebtedness to be incurred or the Disqualified Stock to be
issued and the application of the proceeds therefrom, would have been less
than 1.5 to 1.
The foregoing provisions will not prohibit any of the following:
(1) the incurrence by us of Indebtedness under the Credit Agreement and
Guarantees thereof by the Guarantors in an aggregate amount not to exceed
$300.0 million at any time outstanding;
(2) the incurrence by us and our Restricted Subsidiaries of Indebtedness
existing on the Issue Date;
(3) the incurrence by any Restricted Subsidiary of our company of
Indebtedness represented by a Subsidiary Guarantee;
(4) the incurrence of 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 by the indenture to be incurred or that was outstanding
on the Issue Date;
(5) the incurrence of intercompany Indebtedness between or among our
company and any of our Restricted Subsidiaries; provided, however, that (a)
if our company or any Guarantor is the obligor on such Indebtedness to a
Restricted Subsidiary of our company that is not a Wholly-Owned Restricted
Subsidiary, the Indebtedness must be expressly subordinated to the prior
payment in full in cash of all Obligations with respect to the notes or the
Subsidiary Guarantee, as the case may be, and (b)(i) any subsequent
issuance or transfer of Equity Interests that results in that Indebtedness
being held by a Person other than our company or a Restricted Subsidiary of
our company and (ii) any sale or other transfer of that Indebtedness to a
Person that is not either our company or a Restricted Subsidiary shall be
deemed, in each case, to constitute an incurrence of that Indebtedness by
us or our Restricted Subsidiary, as the case may be, that was not permitted
by this clause (5);
(6) the issuance by our Restricted Subsidiary of preferred stock to us
or to any of the Guarantors; provided, however, that any subsequent event
or issuance or transfer of any Capital Stock that results in
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the owner of such preferred stock, in the case of a Guarantor, ceasing to
be a Restricted Subsidiary of our company or any subsequent transfer of
such preferred stock to a Person other than us or any of our Guarantors,
shall be deemed to be an issuance of preferred stock by the Restricted
Subsidiary that was not permitted by this clause (6);
(7) the incurrence of Hedging Obligations in the ordinary course of
business;
(8) the incurrence by us or a Restricted Subsidiary of our company of
Capital Lease Obligations and/or Purchase Money Indebtedness in the
ordinary course of business not to exceed $30.0 million at any time
outstanding;
(9) the Guarantee by us or any of the Guarantors of Indebtedness of our
company or a Restricted Subsidiary of our company that was permitted to be
incurred by another provision of this covenant; and
(10) the incurrence by us and the Guarantors of additional Indebtedness
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 (10), not to exceed $10.0 million at any time outstanding.
Notwithstanding anything in the indenture to the contrary, consummation of a
Securitization will not constitute an incurrence of Indebtedness or the
issuance of Disqualified Stock or preferred stock by us or a Restricted
Subsidiary of our company.
The indenture also provides that we will not, and will not permit any
Restricted Subsidiary of our company to, incur any Indebtedness that is
contractually subordinated to any Indebtedness of our company or any such
Restricted Subsidiary unless that Indebtedness is also contractually
subordinated to the notes, or the Subsidiary Guarantee of the Restricted
Subsidiary (as applicable), on substantially identical terms; provided,
however, that no Indebtedness will be deemed to be contractually subordinated
to any other Indebtedness solely by virtue of being unsecured or not guaranteed
by any Restricted Subsidiary of our company.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Debt described in clauses (1) through (10) above or is entitled to
be incurred pursuant to the first paragraph of this covenant, we will, in our
sole discretion, classify that item of Indebtedness in any manner that complies
with this covenant and that item of Indebtedness will be treated as having been
incurred pursuant to only one of those clauses or pursuant to the first
paragraph of this covenant.
Liens. We will not, and will not permit any of our Restricted Subsidiaries
to, create, incur, assume or otherwise cause or suffer to exist or become
effective any Lien of any kind (other than Permitted Liens) upon any of our
current or future property or assets, unless all payments due under the
indenture and the notes and, in the case of a Guarantor, its Subsidiary
Guarantee are secured on an equal and ratable basis (or on a senior basis in
the case of subordinated Indebtedness) with the obligations so secured until
such time as those obligations are no longer secured by the Lien.
Asset Sales. We will not, and will not cause or permit any of our Restricted
Subsidiaries to, directly or indirectly, make any Asset Sale, unless:
(1) we or our Restricted Subsidiary, as the case may be, receive
consideration at the time of the Asset Sale at least equal to the fair
market value of the assets sold or otherwise disposed of; and
(2) at least 85% of the consideration consists of cash or Cash
Equivalents, properties and assets to be used in the business our company
and our Restricted Subsidiaries and/or Equity Interests in any Person which
thereby becomes a Wholly-Owned Restricted Subsidiary of our company.
For purposes of clause (2), each of the following will be deemed to be cash:
(1) any Indebtedness (other than any subordinated Indebtedness) of our
company or any Restricted Subsidiary of our company that is actually
assumed by the transferee in the Asset Sale and from which we and our
Restricted Subsidiaries are fully released; and
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(2) notes or other similar obligations received by our company or any of
our Restricted Subsidiaries from the transferee that are immediately
converted, sold or exchanged (or are converted, sold or exchanged within
thirty days of the related Asset Sale) by us or any of our Restricted
Subsidiaries into cash, in an amount equal to the net cash proceeds
realized upon that conversion, sale or exchange.
We, or the Restricted Subsidiary, as applicable, may:
(1) apply the Net Cash Proceeds of any Asset Sale within 365 days after
receipt to repay Specified Senior Indebtedness of our company or the
Restricted Subsidiary and permanently reduce any related commitment, or
(2) commit in writing to, or, acquire, construct or improve properties
and assets to be used in the business of our company and our Restricted
Subsidiaries and so apply the Net Cash Proceeds within 365 days after the
receipt thereof.
Any Net Cash Proceeds from any Asset Sale that are not applied within 365
days of the Asset Sale as provided above will constitute "Unutilized Net Cash
Proceeds." Within 20 days after such 365th day, we must make an Offer to
Purchase all outstanding notes up to a maximum principal amount (expressed as a
multiple of $1,000) equal to the Unutilized Net Cash Proceeds, at a purchase
price in cash equal to 100% of the principal amount of the notes, plus accrued
and unpaid interest thereon, if any, to the date of purchase; 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 the Unutilized Net Cash Proceeds, and not just the
amount in excess of $10.0 million, must be applied as required pursuant to this
paragraph.
If the aggregate principal amount of notes tendered pursuant to an Offer to
Purchase exceeds the Unutilized Net Cash Proceeds to be applied to the
repurchase of those notes, the notes will be purchased pro rata based on the
aggregate principal amount of the notes tendered by each holder. If the
Unutilized Net Cash Proceeds exceed the aggregate amount of notes tendered by
the holders of the notes pursuant to an Offer to Purchase, we may retain and
utilize any portion of the Unutilized Net Cash Proceeds not applied to
repurchase the notes for any purpose consistent with the other terms of the
indenture.
We will comply with any applicable securities laws and regulations,
including any applicable requirements of Section 14(e) and Rule 14e-1 under the
Exchange Act, in connection with an Offer to Purchase the notes. Any violation
of the provisions of the indenture relating to the Offer to Purchase as a
result of compliance with applicable securities laws and regulations will not
be deemed a Default or an Event of Default.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.
We will not, and will not permit any of our 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 our company to:
(1) pay dividends or make any other distributions to us or any of our
Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits, or pay any
Indebtedness owed to us or any of our Restricted Subsidiaries;
(2) make loans or advances to us or any of our Restricted Subsidiaries;
or
(3) transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.
However, the foregoing provisions will not apply to encumbrances or
restrictions existing under or by reason of:
(a) the indenture;
(b) applicable law;
(c) any instrument governing Indebtedness or Capital Stock of a Person
acquired by us or any of our Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness
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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 the indenture
to be incurred;
(d) 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 (3) above on the property so acquired;
(f) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing that 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 (3) 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
those Liens were otherwise permitted to be incurred under the indenture.
Merger, Consolidation or Sale of Assets. The indenture provides that we may
not (1) consolidate or merge with or into another corporation, Person or
entity, whether or not we are the surviving corporation; or (2) sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
our properties or assets in one or more related transactions, to another
corporation, Person or entity, unless:
(a) we are the surviving corporation or the entity or the Person formed
by or surviving that consolidation or merger, if other than our company, or
to which that sale, assignment, transfer, lease, conveyance or other
disposition is made is a corporation organized or existing under the laws
of the United States, any state thereof or the District of Columbia;
(b) the entity or Person formed by or surviving that consolidation or
merger, if other than our company, or the entity or Person to which that
sale, assignment, transfer, lease, conveyance or other disposition is made
assumes all the obligations of our company under the notes and the
indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the trustee;
(c) immediately before and after the transaction, no Default or Event of
Default exists; and
(d) we or the entity or Person formed by or surviving that consolidation
or merger, if other than our company, or to which that sale, assignment,
transfer, lease, conveyance or other disposition is made will have
Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of our company immediately
preceding the transaction and will, at the time of the 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 the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant.
Notwithstanding the foregoing, any Wholly-Owned Restricted Subsidiary of
our company may consolidate with or merge into our company if we are the
surviving corporation. Notwithstanding anything in the indenture to the
contrary, consummation of one or more Securitizations will not constitute the
sale of all or substantially all of our properties or assets.
Transactions with Affiliates. We will not, and will not permit any of our
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of their 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:
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(1) the Affiliate Transaction is on terms that are no less favorable to
us or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by us or that Restricted Subsidiary
with an unrelated Person; and
(2) we deliver 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 resolution of our Board of Directors that the Affiliate
Transaction has been approved by a majority of the disinterested
members of our Board of Directors; 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 that
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items will not be subject to the provisions of the prior
paragraph:
(1) 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;
(2) any compensation arrangements entered into by our company or any of
our Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice of our company or the Restricted
Subsidiary;
(3) transactions between or among us and/or our Restricted Subsidiaries;
(4) any transaction in connection with a Securitization; and
(5) Restricted Payments that are permitted by the "Restricted Payments"
covenant.
Additional Subsidiary Guarantees. We will cause each Restricted Subsidiary
which Guarantees any Indebtedness of our company to execute and deliver to the
trustee a Subsidiary Guarantee under which the Restricted Subsidiary will
guarantee our payment obligations under the notes on a senior unsecured basis,
jointly and severally, with any other Guarantors; provided, that this covenant
will not apply to Subsidiaries that have been properly designated as
Unrestricted Subsidiaries in accordance with the indenture for so long as they
continue to constitute Unrestricted Subsidiaries or qualify as Securitization
Entities for so long as they continue to constitute Securitization Entities.
Payments For Consent. Neither we nor any of our 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 notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
indenture or the notes unless the consideration is offered to be paid or is
paid to all holders of the notes that consent, waive or agree to amend in the
time frame set forth in the solicitation documents relating to the consent,
waiver or agreement.
Reports. So long as any notes are outstanding, we will furnish to the
trustee:
(1) 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
we were required to file those forms, including a "Management's Discussion
and Analysis of Financial Condition and Results of Operations that
describes the financial condition and results of operaitons of our company
and our 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 our
company and its Restricted Subsidiaries separate from the financial
condition and results of operations of our Unrestricted Subsidiaries and,
with respect to the
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annual information only, a report on the annual financial statements by our
certified independent accountants; and
(2) all current reports that would be required to be filed with the SEC
on Form 8-K if we were required to file such reports.
In addition, we will file a copy of all information and reports referred in
clauses (1) and (2) above with the SEC for public availability (unless the SEC
will not accept such a filing) and make that information available to
securities analysts and prospective investors upon request.
Investment Company Status. The indenture provides that we and our
Subsidiaries will not take any action, or otherwise permit to exist any
circumstance, that would require us to register as an "investment company"
under the Investment Company Act of 1940.
Events of Default and Remedies
Each of the following constitutes an Event of Default under the indenture:
(1) default for 30 days in the payment when due of interest on, or
liquidated damages with respect to, the notes;
(2) default in payment when due of the principal of or premium, if any,
on the notes;
(3) we or any of our Restricted Subsidiaries fail to comply with the
provisions described under the captions "--Change of Control," and "--
Covenants--Asset Sales," "--Incurrence of Indebtedness and Issuance of
Preferred Stock," and "--Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries;"
(4) we or any of our Restricted Subsidiaries fail for 30 days after
notice from the trustee or the holders of at least 25% in aggregate
principal amount of the notes then outstanding to comply with any of the
other covenants or agreements in the indenture;
(5) 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 us or any of our Restricted
Subsidiaries, or the payment of which is guaranteed by us or any of our
Restricted Subsidiaries, whether the Indebtedness now exists, or is created
after the Issue Date, if either: (a) the default is caused by a failure to
pay principal of or premium, if any, or interest on that Indebtedness prior
to the expiration of the grace period provided in that Indebtedness on the
date of that default (a "Payment Default") or (b) the default results in
the acceleration of the Indebtedness prior to its express maturity and, in
each case, the principal amount of the Indebtedness, together with the
principal amount of any other Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated,
aggregates $5.0 million or more;
(6) failure by us or any of our 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;
(7) except as permitted by the 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; and
(8) specified events of bankruptcy or insolvency with respect to our
company or any of our Significant Subsidiaries.
If any Event of Default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the then outstanding notes may declare
all the notes to be due and payable immediately. In the case of an Event of
Default arising from certain events of bankruptcy or insolvency, with respect
to our company,
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any Significant Subsidiary or any group of Subsidiaries that, taken together,
would constitute a Significant Subsidiary, all outstanding notes will become
due and payable without further action or notice.
Holders of the notes may not enforce the indenture or the notes except as
provided in the indenture. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
holders of the notes notice of any continuing Default or Event of Default,
except a Default or Event of Default relating to the payment of principal or
interest, if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding may, on behalf of the holders of all of the notes, by notice to the
trustee, waive any existing Default or Event of Default and its consequences
under the indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture. Upon becoming aware of any Default or Event of
Default, we are required to deliver to the trustee a statement specifying that
Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of our company
or any Guarantor, as such, shall have any liability for any obligations of our
company or the Guarantors under the notes, the indenture or the Subsidiary
Guarantees or for any claim based on, in respect of, or by reason of, those
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes.
Legal Defeasance and Covenant Defeasance
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding notes except for certain
obligations. This is known as "legal defeasance." We may not exercise our legal
defeasance option with respect to:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest and liquidated
damages on those notes when such payments are due from the trust referred
to below;
(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and our obligations in connection therewith; and
(4) the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have the
obligations of our company released with respect to certain covenants that are
described in the indenture. This is known as "covenant defeasance." If we
exercise our covenant defeasance option, our failure to comply with those
obligations will not constitute a Default or Event of Default with respect to
the notes. In the event covenant defeasance occurs, certain events, but not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events, described under "Events of Default" will no longer constitute an Event
of Default with respect to the notes.
In order to exercise either legal defeasance or covenant defeasance:
(1) we must irrevocably deposit with the trustee, in trust, for the
benefit of the holders of the notes, cash in U.S. Dollars, non-callable
Government Securities, or a combination thereof, in amounts that will
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be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest and liquidated damages on the outstanding notes on the stated
maturity or on the applicable redemption date, as the case may be, and we
must specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of legal defeasance, we must deliver to the trustee an
opinion of counsel reasonably acceptable to the trustee confirming that (a)
we have received from, or there has been published by, the Internal Revenue
Service a ruling or (b) since the Issue Date, 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 outstanding notes 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 legal defeasance had
not occurred;
(3) in the case of covenant defeasance, we must deliver to the trustee
an opinion of counsel reasonably acceptable to the trustee confirming that
the holders of the outstanding notes will not recognize income, gain or
loss for federal income tax purposes as a result of 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 covenant
defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of the deposit, other than a Default or Event of Default
resulting from the borrowing of funds to be applied to the deposit, or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) the legal defeasance or covenant defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the indenture, to which we or any of
our Restricted Subsidiaries is a party or by which we or any of our
Restricted Subsidiaries is bound;
(6) we must deliver to the trustee an opinion of counsel to the effect
that, assuming no intervening bankruptcy of our company and that no holder
is an insider of our 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 laws affecting creditors' rights
generally;
(7) we must deliver to the trustee an Officers' Certificate stating that
the deposit was not made by us with the intent of preferring the holders of
notes over our other creditors with the intent of defeating, hindering,
delaying or defrauding creditors of our company or others; and
(8) we must deliver to the trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent provided for
relating to the legal defeasance or the covenant defeasance have been
complied with.
Paying Agent and Registrar
The trustee will initially act as paying agent and registrar.
Transfer and Exchange
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents. We may require a
holder to pay any taxes and fees required by law or permitted by the indenture.
We are not required to transfer or exchange any note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.
The registered holder of a note will be treated as the owner of it for all
purposes.
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Amendment, Supplement and Waiver
The indenture or the notes may be amended or supplemented with the consent
of the holders of at least a majority in principal amount of the notes then
outstanding, including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, notes, and any
existing default or compliance with any provision of the indenture or the notes
may be waived with the consent of the holders of a majority in principal amount
of the then outstanding notes, including consents obtained in connection with a
tender offer or exchange offer for notes.
However, without the consent of each holder affected, an amendment or waiver
may not (with respect to any notes held by a non-consenting holder):
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the repurchase or redemption of the
notes, other than provisions relating to the covenants described under the
caption "--Change of Control" or "--Covenants--Asset Sales;"
(3) reduce the rate of or change the time for payment of interest on any
note,
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes, except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from that acceleration;
(5) make any note payable in money other than that stated in the notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, if any, or interest on the notes;
(7) waive a repurchase or redemption payment with respect to any note,
other than a payment required by one of the covenants described under the
caption "--Change of Control" or "--Covenants --Asset Sales"; or
(8) make any change in the foregoing amendment and waiver provisions.
We and the trustee, however, may amend or supplement the indenture or the
notes without the consent of any holder of notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of our obligations to holders of notes
in the case of a merger or consolidation;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any such holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
Concerning the Trustee
If the trustee becomes a creditor of our company, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any claim as security or otherwise. The trustee
will be permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate that conflict within 90 days, apply to
the SEC for permission to continue or resign. We and our
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subsidiaries maintain deposit accounts and conduct other banking transactions
with the trustee in the ordinary course of business.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The indenture provides that in case an Event of Default
shall occur, which shall not be cured, the trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to these provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of notes, unless such holder shall have offered to
the trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Defined Terms
Some of the defined terms used in the indenture are set forth below.
Reference is made to the indenture for a full disclosure of those terms, as
well as any other capitalized terms used in this section for which no
definition is provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time that other
Person is merged with or into or became a Restricted Subsidiary of the
specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, that other Person merging with or
into or becoming a Restricted Subsidiary of the specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by the
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 the 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 that Person, whether through the
ownership of voting securities, by agreement or otherwise.
"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 to us or a Wholly-Owned Restricted Subsidiary of our company,
in one transaction or a series of related transactions, of
(1) any Equity Interest of any Restricted Subsidiary of our company;
(2) any material license, franchise or other authorization of our
company or any Restricted Subsidiary of our company;
(3) any assets of our company or any Restricted Subsidiary of our
company which constitute substantially all of an operating unit or line of
business of our company or any Restricted Subsidiary of our company; or
(4) any other property or asset of our company or any Restricted
Subsidiary of our 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 purposes of this definition, the term "Asset Sale" shall not include:
(1) any transaction consummated in compliance with "--Covenants--Merger,
Consolidation or Sale of Assets" and the creation of any Lien not
prohibited by "--Covenants--Liens;" provided, however, that
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any transaction consummated in compliance with "--Covenants--Merger,
Consolidation or Sale of Assets" involving a sale, conveyance, assignment,
transfer, lease or other disposal of less than all of our properties or
assets shall be deemed to be an Asset Sale with respect to the properties
or assets of our company and the Restricted Subsidiary of our company that
are not so sold, conveyed, assigned, transferred, leased or otherwise
disposed of in such transaction;
(2) sales of property or equipment that has become worn out, obsolete or
damaged or otherwise unsuitable for use in connection with the business of
our company or any Restricted Subsidiary of our company, as the case may
be;
(3) any transaction consummated in compliance with "--Covenants--
Restricted Payments;"
(4) a pledge, or transfer pursuant to a pledge of assets, which pledge
is a Permitted Lien; and
(5) 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 "--Covenants--Asset Sales," 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.
"Capital Lease Obligation" means, at the time any determination is to be
made, the amount of the liability in respect of a capital lease that would at
that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) 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:
(1) U.S. dollars;
(2) 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;
(3) 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;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) 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
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(6) money market funds, the portfolios of which are limited to
investments described in clauses (1) through (3) above.
"Change of Control" means the occurrence of any of the following events,
whether or not approved by our Board of Directors:
(1) any Person (as that 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 our 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 our 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 our Board of Directors;
(2) we consolidate with, or merge with or into, another Person (other
than us or a Wholly-Owned Restricted Subsidiary of our company) or we or
our Restricted Subsidiaries sell, assign, convey, transfer, lease or
otherwise dispose of all or substantially all of the assets of our company
and our Restricted Subsidiaries (determined on a consolidated basis) to any
Person (other than us or a Wholly-Owned Restricted Subsidiary of our
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, the then outstanding Voting Stock of our 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 transferee Person;
(3) during any period of two consecutive years, individuals who at the
beginning of such period constituted our Board of Directors (together with
any new directors whose election by the Board of Directors or whose
nomination for election by the shareholders of our company was approved by
a vote of a majority of our directors 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 our Board of Directors then in office; or
(4) we are required by the holders of our Series C Preferred to redeem
the Series C Preferred upon the occurrence of a Change in Control (as
defined in the Certificate of Designation relating to the Series C
Preferred).
"Consolidated Indebtedness" means, with respect to any Person as of any
date, the sum, without duplication, of
(1) the total amount of Indebtedness of that Person and its Restricted
Subsidiaries, plus
(2) 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
(3) the aggregate liquidation value of all Disqualified Stock of that
Person and all preferred stock of Restricted Subsidiaries of that Person
(other than, in the case of our company, preferred stock of a Restricted
Subsidiary of our company held by us 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, the ratio of
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(1) the Consolidated Indebtedness of that Person as of that date
excluding, however, all Hedging Obligations that constitute Permitted Debt
to
(2) the Consolidated Net Worth of that Person as of that date.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of that Person and its Restricted Subsidiaries
for that period, on a consolidated basis, determined in accordance with GAAP;
provided that:
(1) the Net Income (but not loss) of any Person that is not a Restricted
Subsidiary of that 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 of that Person;
(2) the Net Income of any Restricted Subsidiary of that 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;
(3) 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
(4) 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 (1) the consolidated equity of the common stockholders of that
Person and its consolidated Subsidiaries as of that date plus (2) the
respective amounts reported on the Person's balance sheet as of that 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 (other than dividends
paid solely in Equity Interests (other than Disqualified Stock)) unless those
dividends may be declared and paid only out of net earnings in respect of the
year of that declaration and payment, but only to the extent of any cash
received by that Person upon issuance of that 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 that Person or a consolidated Restricted
Subsidiary of that Person, (y) all investments as of that 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 that date, all of the foregoing determined in
accordance with GAAP.
"Credit Agreement" means the Credit Facility, together with the related
documents thereto (including, without limitation, any guarantee agreements and
security documents), in each case as 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 the "Incurrence of Indebtedness and
Issuance of Preferred Stock" covenant), or adding Restricted Subsidiaries of
our company as additional borrowers or guarantors thereunder to the extent
permitted by the 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.
"Credit Facility" means the Amended and Restated Credit Agreement dated as
of June 30, 1998 among our 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-
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Agent, Bank of America National Trust and Savings Association, as Co-Agent, and
The Chase Manhattan Bank, as Administrative Agent.
"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.
"Disqualified Stock" means any Capital Stock that, either (1) by its terms
(or by the terms of any security into which it is convertible or for which it
is exchangeable), or upon the happening of any event (other than under
circumstances that would constitute a Change of Control), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is 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 notes mature or
(2) is designated by our company (in a resolution of our Board of Directors
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).
"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.
"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 Metris Direct, Inc. and any other Restricted
Subsidiary that executes a Subsidiary Guarantee in accordance with the
provisions of the indenture, and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the obligations of
that Person under (1) interest rate or currency swap agreements, interest rate
cap agreements and interest rate or currency collar agreements and related
agreements and (2) other agreements or arrangements designed to protect that
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 that
Person, whether or not contingent, in respect of (1) borrowed money; (2)
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof); (3) banker's
acceptances; (4) representing Capital Lease Obligations; (5) the balance
deferred and unpaid of the purchase price of any property; or (6) 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. In addition, the term "Indebtedness" includes 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 that Person (whether or not
such indebtedness is assumed by that 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 that Person of any indebtedness of any other Person.
Notwithstanding the foregoing, the term "Indebtedness" shall not include (1)
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, (2) deposit liabilities of any Restricted
Subsidiary
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of our company, the deposits of which are insured by the Federal Deposit
Insurance Corporation or any successor thereto or (3) guarantees related to the
fulfillment of our obligations to bank card associations in the ordinary course
of business.
The amount of any Indebtedness outstanding as of any date shall be (1) the
accreted value thereof, in the case of any Indebtedness that does not require
current payments of interest, and (2) the principal amount thereof, together
with any interest thereon that is more than 30 days past due, in the case of
any other Indebtedness.
"Investment Grade Rating" means (1) with respect to Standard & Poor's, any
of the categories from and including AAA to and including BBB- (or equivalent
successor categories) and (2) with respect to Moody's, any of the categories
from and including Aaa to and including Baa3 (or equivalent successor
categories).
"Investments" means, with respect to any Person, all investments by that
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 we or any Restricted Subsidiary of our company sell or otherwise dispose of
any Equity Interests of any direct or indirect Restricted Subsidiary of our
company such that, after giving effect to that sale or disposition, that Person
is no longer a Restricted Subsidiary of our company, we shall be deemed to have
made an Investment on the date of that sale or disposition equal to the book
value of the Equity Interests of that Restricted Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of the
"Restricted Payments" covenant.
"Issue Date" means the date of original issuance of the notes.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of that 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).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received by us or any
of our 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 that 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 that Asset Sale, a defeasance of a Securitization and any
reserve for adjustment in respect of the sale price of that asset or assets
established in accordance with GAAP.
"Net Income means, with respect to any Person, the net income (loss) of that
Person, determined in accordance with GAAP and before any reduction in respect
of preferred stock dividends, excluding, however:
(1) any gain (but not loss), together with any related provision for
taxes on the gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions) or
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(b) the disposition of any securities by that Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of
that Person or any of its Restricted Subsidiaries; and
(2) any extraordinary or nonrecurring gain (but not loss), together with
any related provision for taxes on that extraordinary or nonrecurring gain
(but not loss).
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offer to Purchase" means a written offer (the "Offer") sent by or on
behalf our company by first-class mail, postage prepaid, to each holder at his
address appearing in the register for the notes on the date of the Offer
offering to purchase up to the principal amount of notes specified in that
Offer at the purchase price specified in that Offer (as determined pursuant to
the 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 the Offer, and a settlement date (the "Purchase Date") for purchase of
notes to occur no later than five Business Days after the Expiration Date. We
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 our
obligation to make an Offer to Purchase, and the Offer shall be mailed by us
or, at our request, by the trustee in the name and at the expense of our
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 our company and our Subsidiaries which we in good
faith believe will enable the holders to make an informed decision with
respect to the Offer to Purchase and at a minimum will include:
(1) 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 the indenture (which requirements may be satisfied by
delivery of such documents together with the Offer);
(2) a description of material developments in our business subsequent to
the date of the latest of the financial statements referred to in clause
(1), including a description of the events requiring us to make the Offer
to Purchase;
(3) if applicable, appropriate pro forma financial information
concerning the Offer to Purchase and the events requiring us to make the
Offer to Purchase; and
(4) any other information required by applicable law to be included
therein.
The Offer shall contain all instructions and materials necessary to enable
the holders to tender notes pursuant to the Offer to Purchase. The Offer shall
also state:
(1) the section of the 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 notes offered to
be purchased by our company pursuant to the Offer to Purchase (including,
if less than 100%, the manner by which such amount has been determined
pursuant to the section of the indenture requiring the Offer to Purchase)
(the "Purchase Amount");
(4) the purchase price to be paid by our company for each $1,000
aggregate principal amount of notes accepted for payment (as specified
pursuant to the indenture) (the "Purchase Price");
(5) that the holder may tender all or any portion of the notes
registered in the name of the holder and that any portion of a note
tendered must be tendered in an integral multiple of $1,000 principal
amount;
(6) the place or places where notes are to be surrendered for tender
pursuant to the Offer to Purchase;
(7) that interest on any note not tendered or tendered but not purchased
by our company pursuant to the Offer to Purchase will continue to accrue;
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(8) that on the Purchase Date the Purchase Price will become due and
payable upon each note 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 note
pursuant to the Offer to Purchase will be required to surrender that note
at the place or places specified in the Offer prior to the close of
business on the Expiration Date (such note being, if we or the trustee so
requires, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to us and the trustee duly executed by, the
holder thereof or his attorney duly authorized in writing);
(10) that holders will be entitled to withdraw all or any portion of
notes tendered if we (or the 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 the holder, the principal amount of the note the holder tendered,
the certificate number of the note the holder tendered and a statement that
such holder is withdrawing all or a portion of his tender;
(11) that (a) if notes 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, we shall purchase all such notes and (b) if notes
in an aggregate principal amount in excess of the Purchase Amount are
tendered and not withdrawn pursuant to the Offer to Purchase, we shall
purchase notes 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 notes in denominations of $1,000 principal amount
or integral multiples thereof shall be purchased); and
(12) that in the case of any holder whose note is purchased only in
part, we shall execute and the trustee shall authenticate and deliver to
the holder of the note without service charge, a new note or notes, of any
authorized denomination as requested by the holder, in an aggregate
principal amount equal to and in exchange for the unpurchased portion of
the note so tendered.
An Offer to Purchase shall be governed by and effected in accordance with
the provisions above pertaining to any Offer.
"Permitted Holder" means the Thomas H. Lee Company and any of its
Affiliates.
"Permitted Investments" means:
(1) any Investment in our company or in a Wholly-Owned Restricted
Subsidiary of our company;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any Restricted Subsidiary of our company in
a Person, if as a result of that Investment (a) that Person becomes our
Wholly-Owned Restricted Subsidiary or (b) that Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, our company or a
Wholly-Owned Restricted Subsidiary of our company;
(4) 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 the covenant described above under the caption "--
Covenants--Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of our company;
(6) Investments by us or any of our Restricted Subsidiaries in the
ordinary course of business in connection with or arising out of
Securitizations;
(7) Hedging Obligations of our company and our Restricted Subsidiaries
entered into in the ordinary course of business; and
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(8) other Investments by us or any of our Restricted Subsidiaries in any
Person (other than an Affiliate of our company that is not also a
Restricted Subsidiary) 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:
(1) Liens existing on the Issue Date;
(2) Liens to secure borrowings under the Credit Agreement;
(3) 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;
(4) Liens on property of a Person existing at the time that Person is
merged into or consolidated with us or any of our Restricted Subsidiaries;
provided that those Liens were in existence prior to the contemplation of
the merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with us or the Restricted
Subsidiary;
(5) Liens on property existing at the time of acquisition thereof by our
company or any Restricted Subsidiary of our company; provided that those
Liens were in existence prior to the contemplation of the acquisition;
(6) Liens securing Purchase Money Indebtedness permitted to be incurred
under the indenture and incurred in the ordinary course of business;
provided, however, that any such Lien may not extend to any other property
owned by our company or any of our 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 does not
exceed the fair market value of the property purchased or constructed with
the proceeds of such Indebtedness;
(7) Liens to secure any Permitted Refinancing Indebtedness incurred to
refinance any Indebtedness secured by any Lien referred to in the foregoing
clauses (1) through (6); 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 (1) through
(6), as the case may be, at the time the original Lien became a Permitted
Lien;
(8) Liens in favor of our company or a Guarantor;
(9) Liens incurred in the ordinary course of business of our company or
any Restricted Subsidiary of our company with respect to obligations that
do not exceed $10.0 million in the aggregate at any one time outstanding;
(10) 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);
(11) Liens securing Capital Lease Obligations permitted to be incurred
under the indenture and incurred in the ordinary course of business;
(12) 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
(13) certain Liens consisting of restrictions on the use of real
property which do not materially interfere with the property's use.
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"Permitted Refinancing Indebtedness" means any Indebtedness or Disqualified
Stock of our company or any of our 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
our company or any of our Restricted Subsidiaries (other than intercompany
Indebtedness); provided that:
(1) 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);
(2) 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;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, 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
notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness or Disqualified Stock is incurred or issued, as
the case may be, either by our 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.
"Public Equity Offering" means an underwritten offering of common stock of
our company pursuant to a registration statement that has been declared
effective by the SEC pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of our company).
"Purchase Money Indebtedness" means Indebtedness of our company and any of
our 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.
"Rating Agencies" means Standard & Poor's and Moody's.
"Receivables" means credit card, consumer or commercial loans that are
purchased or originated in the ordinary course of business by our company or
any Subsidiary of our company.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Securitization" means any transaction or series of transactions that have
been or may be entered into by our company or any of our Subsidiaries in
connection with or reasonably related to a transaction or series of
transactions in which our company or any of our Subsidiaries may sell, convey
or otherwise transfer, directly or indirectly, to a Securitization Entity or
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
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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 our
company) established and maintained exclusively for one or more of the
following purposes:
(1) purchasing or otherwise acquiring Receivables (together with any
assets related to those Receivables, including, without limitation, all
collateral securing such Receivables, all contracts and all Guarantees or
other obligations in respect of these 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;
(2) selling those Receivables (and related assets) to a special purpose
owner trust or other Person in connection with a Securitization;
(3) issuing asset-backed securities, or beneficial interests in
Receivables;
(4) serving as a corporate general partner (or managing member of a
limited liability company) of another Securitization Entity;
(5) investing in and holding Investments in Securitization Entities
issuing securities backed by Receivables; or
(6) 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 our company and any Restricted Subsidiary of our
company other than such Securitization Entity.
For purposes of this definition, "without recourse" shall mean that the
Indebtedness of the Securitization Entity and none of the other obligations
(contingent or otherwise) of a Securitization Entity
(1) is guaranteed by our company or any other Restricted Subsidiary of
our company;
(2) obligates our company or any other Restricted Subsidiary of our
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
(3) subjects any property or asset of our company or any Restricted
Subsidiary of our 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 Fingerhut 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 our company that
would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Act, as such Regulation is in
effect on the date hereof.
"Specified Senior Indebtedness" means (1) the Indebtedness of any Person,
whether outstanding on the Issue Date or thereafter incurred and (2) 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 that Person for money borrowed and (b) Indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which that Person is responsible or liable unless, in the case of either clause
(1) or (2), in the instrument creating or
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evidencing the same pursuant to which the same is outstanding, it is provided
that such obligations are subordinate in right of payment to the notes.
However, the term "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 the indenture.
"Standard & Poor's" means Standard & Poor's Rating Services, a division of
The McGraw-Hill Companies, Inc., and its successors.
"Stated Maturity" means with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the 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:
(1) 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 that Person or one or more of the
other Subsidiaries of that Person (or a combination thereof) and
(2) any partnership (a) the sole general partner or the managing general
partner of which is that Person or a Subsidiary of that Person or (b) the
only general partners of which are that Person or one or more Subsidiaries
of that Person (or any combination thereof).
"Unrestricted Subsidiary" means any Subsidiary of our company that is
designated by our Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution, but only to the extent that such Subsidiary:
(1) 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 our company or any of our Restricted
Subsidiaries;
(2) is not party to any agreement, contract, arrangement or
understanding with our company or any Restricted Subsidiary of our company
unless the terms of any that agreement, contract, arrangement or
understanding are no less favorable to our company or its Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of our company;
(3) is a Person with respect to which neither our company nor any of our
Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or preserve
that Person's financial condition or to cause that Person to achieve any
specified levels of operating results; and
(4) has not otherwise directly or indirectly provided credit support for
any Indebtedness of our company or any of our Restricted Subsidiaries.
Any designation by our Board of Directors 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 the
"Restricted Payments" covenant 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 the
indenture
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and any Indebtedness of that Subsidiary shall be deemed to be incurred by a
Restricted Subsidiary of our company as of such date (and, if such Indebtedness
is not permitted to be incurred as of such date under the covenant described
under the caption "--Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock," we shall be in default of that covenant).
Our Board of Directors may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that the designation shall be deemed to
be an incurrence of Indebtedness by a Restricted Subsidiary of our company of
any outstanding Indebtedness of that Unrestricted Subsidiary and that
designation shall only be permitted if (1) that Indebtedness is permitted under
the Consolidated Leverage Ratio test set forth in the first paragraph of the
covenant described under the caption "--Covenants--Incurrence of Indebtedness
and Issuance of Preferred Stock," and (2) no Default or Event of Default would
be in existence following that designation.
"Voting Stock" of any Person as of any date means the Capital Stock of that
Person that is at the time entitled to vote in the election of the Board of
Directors of that Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(1) 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
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of that 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 that Person or by one or more Wholly-Owned Restricted
Subsidiaries of that Person.
ADDITIONAL PROVISIONS APPLICABLE TO THE NEW NOTES
Book-Entry, Delivery and Form
The new notes initially will be issued in the form of one or more global
notes. The new notes will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York, and registered in the name of DTC or its
nominee. Holders of the new notes will own book-entry interests in the global
note evidenced by records maintained by DTC. A global note may be transferred,
in whole and not in part, only to another nominee of DTC or to a successor of
DTC or its nominee.
DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of the New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "clearing agency" registered under the provisions of Section 17A of
the Exchange Act. DTC was created to hold securities for its participants and
facilitate the clearance and settlement of securities transactions between
participants through electronic book-entry changes in the accounts of
participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks, trust
companies and clearing corporations. Access to the DTC system is also available
to other entities such as banks, brokers, dealers and trust companies, which we
refer to as indirect participants, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly. Investors who
are not participants may beneficially own securities held by or on behalf of
DTC only through participants or indirect participants of DTC.
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We expect that pursuant to procedures established by DTC, upon deposit of
the global note, DTC will credit the accounts of participants with an interest
in the global note. Ownership of the new notes will be shown on, and the
transfer of ownership will be effected only through, records maintained by DTC,
with respect to interests of participants, and the records of participants and
indirect participants with respect to interests of persons other than
participants. Ownership of beneficial interests in the global notes will be
limited to persons who have accounts with DTC or persons who hold interests
through participants.
So long as DTC or its nominee is the registered owner or holder of a global
note, DTC or its nominee will be considered the sole owner or holder of the new
notes represented by the global note for all purposes under the indenture,
including for the purpose of giving any directions, instructions or approvals
to the trustee. No beneficial owner of an interest in the global note will be
able to transfer that interest except in accordance with DTC's procedures. We
understand that if we request any action of the holders of new notes, or a
holder of a beneficial interest in a global note desires to take any action
that DTC, as holder of the global note, is entitled to take, DTC would
authorize the participants to take that action and the participants would
authorize holders owning through participants to take that action or would
otherwise act upon the instruction of those holders.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a global note to those persons may be limited
to that extent. In addition, because DTC can act only on behalf of its
participants, who in turn act on behalf of persons who hold interests through
participants, the ability of a person having beneficial interests in a global
note to pledge those interests to persons or entities that do not participate
in DTC's system, or otherwise take actions in respect of those interests, may
be affected by the lack of a physical certificate evidencing those interests.
Neither we nor the trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the global note or for maintaining, supervising or
reviewing records relating to these beneficial interests.
Payments of interest, principal and other amounts due on any new notes
registered in the name of DTC or its nominee on the applicable record date will
be payable by the trustee to or at the direction of DTC or its nominee in its
capacity as the registered holder under the indenture. Under the indenture, we
and the trustee may treat the persons in whose names the new notes, including
the global notes, are registered as the owners of the new notes for the purpose
of receiving payments and for any other purposes whatsoever. Consequently,
neither we nor the trustee has or will have any responsibility or liability for
payments to owners of beneficial interests in the global note, including
principal, premium, if any, Liquidated Damages, if any, and interest.
We expect that DTC or its nominee, upon receipt of any payment of interest,
principal or other amounts due on the global note, will credit participants'
accounts with payments proportionate to their respective beneficial interests
in the global note as shown on the records of DTC or its nominee. We also
expect that payments by participants and indirect participants to owners of
beneficial interests in the global note held through those participants will be
governed by standing instructions and customary practice. These payments will
be the responsibility of the participants or the indirect participants.
Transfers between participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between DTC participants and Euroclear or Cedel
participants will be effected through DTC in accordance with DTC's rules on
behalf of Euroclear or Cedel, as the case may be, by its respective depositary.
These cross-market transactions, however, will require delivery of instructions
to Euroclear or Cedel, as the case may be, by the counterparty in that system
in accordance with the rules and procedures and within the established
deadlines (Brussels time) of that system. Euroclear or Cedel will, if the
transaction meets its settlement requirements, deliver instructions to its
respective depositary to take action to
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effect final settlement on its behalf by delivering or receiving interests in
the relevant global note in DTC, and making or receiving payment in accordance
with normal procedures for same-day funds settlement applicable to DTC.
Participants may not delivery instructions directly to the depositaries for
Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a global note from a DTC
participant will be credited during the securities settlement processing day,
which must be a business day for Euroclear or Cedel, immediately following
DTC's settlement date. Cash received in Euroclear or Cedel as a result of sales
of interests in a global note by or through a Euroclear or Cedel participant to
a DTC participant will be received with value on DTC's settlement date but will
be available in the relevant Euroclear or Cedel cash account only as of the
business day for Euroclear or Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the global note among participants of DTC,
Eurocolear or Cedel, they are under no obligation to perform those procedures,
and those procedures may be discontinued at any time. Neither we nor the
trustee will have any responsibility for the performance by DTC, Eurocolear or
Cedel or their respective participants or indirect participants of their
respective obligations, under the rules and regulations governing their
operations.
Certificated Notes
We will issue certificated notes in exchange for book-entry interests in the
global note if:
(1) DTC notifies us that it is unwilling or unable to continue as
depositary for the global notes or DTC at any time ceases to be a clearing
agency registered under the Exchange Act and we have not appointed a
successor depositary within 90 days;
(2) we elect to issue .the new notes in definitive form under the
indenture and we deliver to the trustee instructions to that effect; or
(3) certain other events occur as provided in the indenture.
Upon surrender by DTC of the global note, certificated notes will be issued
to each person that DTC identifies as the beneficial owner of the related new
notes, and the trustee will register the certificated notes in the name of
those persons (or their nominees) and cause delivery of the certificated notes
to them.
Neither we nor the trustee will be liable for any delay by DTC or any
participant or indirect participant in identifying the beneficial owners of the
related new notes and each such person may conclusively rely on, and will be
protected in relying on, instructions from DTC for all purposes, including with
respect to the registration and delivery, and the respective principal amounts,
of the new notes to be issued.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of an exchange of old notes for new notes and the ownership and
disposition of the new notes. It deals only with notes held as capital assets
by the initial holders of the old notes, and does not address the federal
income tax consequences to holders subject to special treatment, such as
partnerships and other pass-through entities, dealers in securities, financial
institutions, insurance companies, and tax-exempt organizations. The discussion
below is based on current laws, regulations and administrative and judicial
decisions. These authorities may be repealed, revoked or modified, possibly
retroactively, in which case the federal income tax consequences could differ
from those discussed below.
For purposes of the following summary, the term United States holders refers
to a holder of notes that is, for United States federal income tax purposes:
. citizen or resident of the United States;
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. corporation created or organized under the laws of the United States or
any State, including the District of Columbia;
. estate whose income is includable in gross income for United States
federal income tax purposes regardless of its source; or
. trust, if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more United States persons have
the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, trusts in existence on August
20, 1996, which are treated as United States persons prior to that date
and elect to continue to be treated as United States persons, are also
United States holders for purposes of this discussion.
The term non-United States holder refers to a holder of notes that is not a
United States holder.
We urge you to consult your tax advisor regarding the specific tax
consequences to you of the exchange of old notes for new notes and the
ownership and disposition of the new notes, as well as any tax consequences
arising under any state, local or foreign laws.
Exchange of Notes
There will be no federal income tax consequences to United States or non-
United States holders exchanging old notes for new notes under the exchange
offer because the exchange offer will occur by operation of the original terms
of the old notes and will not result in any material alteration in the terms of
the old notes. Each exchanging holder will have the same adjusted tax basis and
holding period in the new notes as it had in the old notes immediately before
the exchange.
United States Federal Income Tax Consequences to United States Holders
Interest
Interest paid on the Notes generally will be taxable as ordinary income to a
United States holder at the time the interest is received or accrued, in
accordance with the United States holder's method of accounting for federal
income tax purposes.
Original Issue Discount
The old notes were issued with and the new notes will have original issue
discount for United States federal income tax purposes. A United States holder
must include original issue discount in gross income as it accrues in advance
of the receipt of any cash attributable to the income, regardless of whether
the holder is a cash or accrual basis taxpayer. Original issue discount will
accrue on a daily basis under a constant yield to maturity method that takes
into account the compounding of interest. One effect of this method is that a
relatively smaller portion of the original issue discount will be included in
income in the earlier years and a relatively larger portion in later years.
The amount of original issue discount that will accrue in the aggregate with
respect to a new note will be the excess of the stated redemption price at
maturity of the note over its issue price. The stated redemption price at
maturity of a note generally will equal the sum of the principal amount of the
note plus all amounts which the terms of the note require to be paid, other
than payments of qualified stated interest. For tax purposes, qualified stated
interest is stated interest that is unconditionally payable at least annually
at a single fixed rate that appropriately takes into account the length of
intervals between payments. Stated interest payable on the notes will
constitute qualified stated interest. The issue price of a note generally will
equal the first price at which a substantial amount of the old notes were sold.
A United States holder's adjusted tax basis in a note will be increased by
the amount of any original issue discount which the holder includes in gross
income.
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Effect of Optional Redemption
At our option, we may redeem part or all of the notes at the times and for
the amounts described in "Description of the New Notes--Optional Redemption."
Based on existing regulations, we intend to take the position that the option
to redeem will be presumed not to be exercised and, accordingly, the premium
payable upon optional redemption and the optional redemption dates will not
affect the yield to maturity or the maturity date of the notes. If, contrary to
our current expectations, we redeem the notes, it may be necessary to
redetermine the amount and timing of interest income and original issue
discount that a holder must include in taxable income.
Sale, Exchange or Retirement of Notes
A United States holder of a note generally will recognize gain or loss upon
the sale, exchange, redemption or other taxable disposition of a note equal to
the difference between the amount of cash and the fair market value of any
property received for the note and the holder's adjusted tax basis in the note.
This gain or loss will be capital gain or loss, and will be long-term capital
gain or loss if the note has been held for more than one year. However, any
cash or property received on disposition of a note which is attributable to or
taxable as accrued and unpaid interest on the note will be taxable as ordinary
income.
Backup Withholding and Information Reporting
In general, information reporting requirements will apply to interest paid
and original issue discount accrued on notes owned by United States holders,
other than exempt holders such as corporations, and to proceeds realized by
United States holders on dispositions of notes. A 31% backup withholding tax
will apply to these amounts only if the United States holder: (a) fails to
furnish its Social Security or taxpayer identification number (TIN) within a
reasonable time after request; (b) furnishes an incorrect TIN; (c) fails to
report properly interest or dividend income; or (d) fails, under certain
circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that it is not subject
to backup withholding. Any amount withheld under the backup withholding rules
may be refunded or credited against the United States holder's United States
federal income tax liability, if the holder furnishes the required information
to the Internal Revenue Service.
United States Federal Income Tax Consequences to Non-United States Holders
Interest
Interest, including original issue discount, which we pay on a note to a
non-United States holder will not be subject to United States federal income or
withholding tax if the interest is not effectively connected with the conduct
of a trade or business within the United States by the non-United States holder
and the non-United States holder: (a) does not actually or constructively own
10% or more of the total combined voting power of all classes of our stock; (b)
is not a controlled foreign corporation to which we are directly or indirectly
related for United States tax purposes; and (c) certifies, under penalties of
perjury, that the holder is not a United States person and provides the
holder's name and address.
A non-United States holder that does not qualify for exemption from
withholding under the preceding paragraph generally will be subject to a 30%
United States federal withholding tax, or lower applicable treaty rate, on
payments of interest or accrual of original issue discount on the notes.
If a non-United States holder is engaged in a trade or business in the
United States and interest and original issue discount on the note is
effectively connected with the conduct of this trade or business, the non-
United States holder, although exempt from the withholding tax discussed above,
may be subject to United States federal income tax on the interest in the same
manner as if it were a United States holder. In addition, if the non-United
States holder is a foreign corporation, it may be subject to a branch profits
tax of 30%, or a
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lower applicable treaty rate, of its effectively connected earnings and profits
for the taxable year, subject to adjustments. For this purpose, the foreign
corporation's earnings and profits will include interest on a note.
Recently finalized regulations, which, subject to transition rules, are
effective for payments made after December 31, 2000, provide alternative
procedures which a non-United States holder must follow to establish
eligibility for a withholding tax reduction or exemption.
Purchasers of notes that are non-United States holders should consult their
own tax advisors regarding the possible applicability of United States
withholding and other taxes upon interest income realized and original issue
discount accrued in connection with the notes.
Sale, Exchange or Retirement of Notes
A non-United States holder will generally not be subject to United States
federal income tax on gain recognized on a sale, exchange, retirement
(including redemption) or other disposition of a note unless: (a) the gain is
effectively connected with the conduct of a trade or business within the United
States by the non-United States holder; or (b) in the case of a non-United
States holder who is a nonresident alien individual and holds the note as a
capital asset, the holder is present in the United States for 183 or more days
in the taxable year and the holder meets other requirements.
Federal Estate Taxes
If interest on the notes is exempt from withholding of United States federal
income tax under the rules described above, the notes will not be included in
the estate of a deceased non-United States holder for United States federal
estate tax purposes.
Information Reporting and Backup Withholding
We will, where required, report to the non-United States holders of notes
and the Internal Revenue Service the amount of any interest, including original
issue discount, paid on the notes in each calendar year and the amounts of tax
withheld, if any, with respect to these payments.
Temporary regulations provide that the 31% backup withholding tax and
information reporting requirements will not apply to payments of interest and
original issue discount to non-United States holders, if the holder has given
us the required certification, as described above, or has otherwise established
an exemption, provided that neither we nor our paying agent has actual
knowledge that the holder is a United States person or that the conditions of
any other exemption are not in fact satisfied. Under temporary regulations,
these information reporting and backup withholding requirements will apply,
however, to the gross proceeds paid to a non-United States holder on the
disposition of the notes by or through a United States office of a United
States or foreign broker, unless the holder certifies to the broker under
penalties of perjury as to its name, address and status as a foreign person or
the holder otherwise establishes an exemption. Information reporting
requirements, but not backup withholding, will also apply to a payment of the
proceeds of a disposition of the notes by or through a foreign office of a
United States broker or foreign brokers with certain types of relationships to
the United States, unless the broker has documentary evidence in its files that
the holder of the notes is not a United States person, and the broker has no
actual knowledge to the contrary, or the holder establishes an exception.
Neither information reporting nor backup withholding generally will apply to a
payment of the proceeds of a disposition of the notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
Final regulations, which, subject to transition rules, are effective for
payments made after December 31, 2000, alter these regulations in some
respects. Among other things, the final regulations provide presumptions under
which a non-United States holder will be subject to information reporting and
backup withholding at the rate of 31% unless we or our paying agent receive
certification from the holder of non-U.S. status. Depending
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on the circumstances, this certification must be provided: (a) directly by the
non-United States holder; (b) in the case of a non-United States holder that is
treated as a partnership or other fiscally transparent entity, by the partners,
shareholders or other beneficiaries of the entity; or (c) by qualified
financial institutions or other qualified entities on behalf of the non-United
States holder.
Backup withholding is not an additional tax. Any amounts which we or our
paying agent withhold under the backup withholding rules may be refunded or
credited against the non-United States holder's United States federal income
tax liability, provided the holder furnishes the required information to the
Internal Revenue Service.
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account under the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of those notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer for resales of
new notes received in exchange for old notes that had been acquired as a result
of market-making or other trading activities. We have agreed that, for a period
of 90 days after the expiration date of the exchange offer, we will make this
prospectus, as it may be amended or supplemented, available to any broker-
dealer for use in connection with any such resale.
We will not receive any proceeds from any sale of new notes by broker-
dealers. New notes received by broker-dealers for their own account under the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on those notes or a combination of those methods, at market prices
prevailing at the time of resale, at prices related to prevailing market prices
or at negotiated prices. Any resales may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from the selling broker-dealer or the purchasers of
the new notes. Any broker-dealer that resells new notes received by it for its
own account under the exchange offer and any broker or dealer that participates
in a distribution of the new notes may be deemed to be an "underwriter" within
the meaning of the Securities Act and any profit on any resale of new notes and
any commissions or concessions received by these persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the expiration date of the exchange offer, we
will send additional copies of this prospectus and any amendment or supplement
to this prospectus to any broker-dealer that requests these documents in the
letter of transmittal.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any broker or dealer and will indemnify
holders of the notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the new notes offered in this exchange offer will be passed
upon for us by Dorsey & Whitney LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from our Annual Report on Form 10-K for the year ended December 31,
1998 have been audited by KPMG LLP, independent auditors, and have been so
incorporated in reliance upon the report of that firm given upon their
authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We are currently subject to the informational requirements of the
Securities Exchange Act of 1934. We file annual, quarterly and current
reports, proxy statements and other documents with the SEC. You may read and
copy any document we file with the SEC at the SEC's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Please call the SEC at 1-800-SEC-0330 for further information about its
public reference facilities. In addition, our filings are available at the
SEC's Web site at "http://www.sec.gov." Our common stock is listed on the New
York Stock Exchange under the symbol "MXT."
We have filed with the SEC a registration statement on Form S-4 to register
this exchange offer. This prospectus, which forms a part of the registration
statement, does not contain all of the information included or incorporated in
the registration statement. The full registration statement can be obtained
from the SEC as indicated above.
The SEC allows us to incorporate by reference the information we file with
them. This allows us to disclose important information to you by referencing
those filed documents. We have previously filed the following documents with
the SEC and are incorporating them by reference into this prospectus:
. our Annual Report on Form 10-K for the year ended December 31, 1998;
. our Quarterly Report on Form 10-Q for the quarter ended March 31, 1999;
. our Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
. our current Report on Form 8-K dated June 22,1999;
. our Proxy Statement for the Special Meeting of Stockholders held on
March 12, 1999, filed with the SEC on February 1, 1999; and
. our Proxy Statement for the Annual Meeting of Stockholders held on May
11, 1999, filed with the SEC on March 30, 1999.
We also are incorporating by reference any future filings made by us with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act until the
completion of the exchange offer. The most recent information that we file
with the SEC automatically updates and supersedes more dated information.
You may request a copy of any documents which are incorporated by reference
in this prospectus, except for exhibits which are specifically incorporated by
reference into those documents, at no cost, by writing or telephoning us at:
Metris Companies Inc.
600 South Highway 169
Suite 1800
St. Louis Park, MN 55426
(612) 593-4820
Attention: Investor Relations
To ensure timely delivery of the documents, you should make your request by
, 1999.
57
<PAGE>
Each broker-dealer who receives new notes for its own account in exchange
for old notes under the exchange offer, where such old notes were acquired as a
result of market-making or other trading activities, must deliver a copy of
this prospectus in connection with any resale of such new notes.
----------------
LOGO
Offer to Exchange
$150,000,000
10 1/8% Senior Notes due 2006
for all outstanding unregistered
10 1/8% Senior Notes due 2006
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Officers and Directors
Section 145 of the DGCL empowers a Delaware corporation to indemnify any
persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person was an officer or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another corporation or
enterprise. The indemnity may include expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding,
provided that such officer or director acted in good faith and in a manner he
reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his conduct was illegal. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation
in the performance of his duty. Where an officer or director is successful on
the merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with the DGCL, the Certificate of the Company contains a
provision to limit the personal liability of the directors of the Company for
violations of their fiduciary duty. This provision eliminates each director's
liability to the Company or its stockholders for monetary damages except to the
extent provided by the DGCL:
. for any breach of the director's duty of loyalty to the Company or its
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under section 174 of the DGCL providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or
redemptions; or
. for any transaction from which a director derived an improper benefit.
The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their
fiduciary duty of care, including any such actions involving gross negligence.
The Certificate and the By-Laws of the Company provide for indemnification
of the Company's officers and directors to the fullest extent permitted by
applicable law. In addition, the Company maintains insurance policies which
provide coverage for its officers and directors in certain situations where the
Company cannot directly indemnify such officers or directors.
II-1
<PAGE>
Item 21. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company. (1)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation. (2)
3.3 Amended Certificate of Designation of Series C Perpetual Convertible
Preferred Stock.(2)
3.4 Certificate of Designation of Series D Junior Participating
Convertible Preferred Stock.(3)
3.5 Amended and Restated By-Laws of the Company. (6)
4.1* Indenture, dated as of July 13, 1999, by and among the Company, Metris
Direct, Inc. and The Bank of New York, including Form of 10 1/8%
Senior Notes due 2006 and Form of Guarantee.
4.2* Exchange and Registration Rights Agreement, dated as of July 13, 1999,
by and among the Company, Bear, Stearns & Co. Inc., Chase Securities
Inc., Salomon Smith Barney Inc. and Barclays Capital Inc., relating to
the new notes.
4.3 Indenture, dated as of November 7, 1997, among the Company, Metris
Direct Inc. and The First National Bank of Chicago, including Form of
10% Senior Note due 2004 and Form of Guarantee. (5)
4.4* First Supplemental Indenture, dated as of June 25, 1999, among the
Company, the Guarantors named therein and The First National Bank of
Chicago.
5.1* Opinion of Dorsey & Whitney LLP.
10.1 Registration Rights Agreement dated as of December 9, 1998 between the
Company and the investors named therein. (4)
10.2 Registration Rights Agreement dated as of April 23, 1999 between the
Company and Rakesh Kaul. (2)
12.1* Computation of Ratio of Earnings to Fixed Charges.
12.2* Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends.
23.1 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1 hereto).
23.2* Consent of KPMG LLP with respect to the financial statements of the
Company.
24.1* Powers of Attorney of Company.
25.1* Statement of Eligibility of Trustee on Form T-1 of The Bank of New
York.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Letter to Registered Holder and/or DTC Participant.
99.4* Form of Exchange Agent Agreement.
</TABLE>
- --------
* Filed herewith.
(1) Incorporated by reference to Exhibit 3.a. from the Company's Registration
Statement on Form S-1 (File No. 333-10831).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-3 (File No. 333-82007).
(3) Incorporated by reference to Exhibit 4.3 from the Company's Form 8-K, filed
on December 22, 1998.
(4) Incorporated by reference to Exhibit 10.3 from the Company's Form 8-K,
filed on December 22, 1998.
(5) Incorporated by reference to Exhibit 4.1 from the Company's Registration
Statement on Form S-4 (File No. 333-43771).
(6) Incorporated by reference to Exhibit 3.1 from the Company's Form 10-Q,
filed on August 13, 1999.
II-2
<PAGE>
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) under the Securities Act
if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
Registration Statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
above do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that (1) for purposes of
determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this Registration Statement
II-3
<PAGE>
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of this registration statement through
the date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein that was not subject of and included in the
registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Louis Park, State of
Minnesota, on September 8, 1999.
METRIS COMPANIES INC.
/s/ Ronald N. Zebeck
By___________________________________
Ronald N. Zebeck
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ---------------------------------- -----------------
<S> <C> <C>
/s/ Ronald N. Zebeck September 8, 1999
- ------------------------------------
Ronald N. Zebeck President, Chief Executive
Officer and Director (Principal
Executive Officer)
/s/ David D. Wesselink September 8, 1999
- ------------------------------------
David D. Wesselink Executive Vice President, Chief
Financial Officer (Principal
Financial Officer)
/s/ Jean C. Benson September 8, 1999
- ------------------------------------
Jean C. Benson Senior Vice President, Finance,
Corporate Controller
(Principal Accounting Officer)
- ------------------------------------
Theodore Deikel Chairman of the Board of Directors
* September 8, 1999
- ------------------------------------
Dudley C. Mecum Director
* September 8, 1999
- ------------------------------------
Frank D. Trestman Director
* September 8, 1999
- ------------------------------------
Derek V. Smith Director
* September 8, 1999
- ------------------------------------
Lee R. Anderson, Sr. Director
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- -------- -----------------
<S> <C> <C>
* September 8, 1999
- ------------------------------------
John A. Cleary Director
- ------------------------------------
Thomas H. Lee Director
- ------------------------------------
David V. Harkins Director
- ------------------------------------
C. Hunter Boll Director
- ------------------------------------
Thomas M. Hagerty Director
</TABLE>
/s/ Z. Jill Barclift
*By:___________________________
Z. Jill Barclift
Attorney-in-fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of St. Louis Park, State of
Minnesota, on September 8, 1999.
METRIS DIRECT, INC.
/s/ Ronald N. Zebeck
By___________________________________
Ronald N. Zebeck
President, Chief Executive
Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- -------------------------------- -----------------
<S> <C> <C>
/s/ Ronald N. Zebeck September 8, 1999
- ------------------------------------
Ronald N. Zebeck President, Chief Executive
Officer and Director (Principal
Executive Officer)
/s/ David D. Wesselink September 8, 1999
- ------------------------------------
David D. Wesselink Executive Vice President, Chief
Financial Officer (Principal
Financial Officer)
/s/ Jean C. Benson September 8, 1999
- ------------------------------------
Jean C. Benson Senior Vice President, Finance,
Corporate Controller
(Principal Accounting Officer)
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
3.1 Amended and Restated Certificate of Incorporation of the Company. (1)
3.2 Certificate of Amendment to the Amended and Restated Certificate of
Incorporation. (2)
3.3 Amended Certificate of Designation of Series C Perpetual Convertible
Preferred Stock.(2)
3.4 Certificate of Designation of Series D Junior Participating
Convertible Preferred Stock.(3)
3.5 Amended and Restated By-Laws of the Company. (6)
4.1* Indenture, dated as of July 13, 1999, by and among the Company, Metris
Direct, Inc. and The Bank of New York, including Form of 10 1/8%
Senior Notes due 2006 and Form of Guarantee.
4.2* Exchange and Registration Rights Agreement, dated as of July 13, 1999,
by and among the Company, Bear, Stearns & Co. Inc., Chase Securities
Inc., Salomon Smith Barney Inc. and Barclays Capital Inc., relating to
the new notes.
4.3 Indenture, dated as of November 7, 1997, among the Company, Metris
Direct Inc. and The First National Bank of Chicago, including Form of
10% Senior Note due 2004 and Form of Guarantee. (5)
4.4* First Supplemental Indenture, dated as of June 25, 1999, among the
Company, the Guarantors named therein and The First National Bank of
Chicago.
5.1* Opinion of Dorsey & Whitney LLP.
10.1 Registration Rights Agreement dated as of December 9, 1998 between the
Company and the investors named therein. (4)
10.2 Registration Rights Agreement dated as of April 23, 1999 between the
Company and Rakesh Kaul. (2)
12.1* Computation of Ratio of Earnings to Fixed Charges.
12.2* Computation of Ratio of Earnings to Fixed Charges and Preferred
Dividends.
23.1 Consent of Dorsey & Whitney LLP (included in Exhibit 5.1 hereto).
23.2* Consent of KPMG LLP with respect to the financial statements of the
Company.
24.1* Powers of Attorney of Company.
25.1* Statement of Eligibility of Trustee on Form T-1 of The Bank of New
York.
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of Letter to Registered Holder and/or DTC Participant.
99.4* Form of Exchange Agent Agreement.
</TABLE>
- --------
* Filed herewith.
(1) Incorporated by reference to Exhibit 3.a. from the Company's Registration
Statement on Form S-1 (File No. 333-10831).
(2) Incorporated by reference from the Company's Registration Statement on Form
S-3 (File No. 333-82007).
(3) Incorporated by reference to Exhibit 4.3 from the Company's Form 8-K, filed
on December 22, 1998.
(4) Incorporated by reference to Exhibit 10.3 from the Company's Form 8-K,
filed on December 22, 1998.
(5) Incorporated by reference to Exhibit 4.1 from the Company's Registration
Statement on Form S-4 (File No. 333-43771).
(6) Incorporated by reference to Exhibit 3.1 from the Company's Form 10-Q,
filed on August 13, 1999.
<PAGE>
EXHIBIT 4.1
================================================================================
INDENTURE
Dated as of July 13, 1999
Among
METRIS COMPANIES INC., as Issuer,
the GUARANTORS named herein
and
THE BANK OF NEW YORK, as Trustee
__________________
up to $250,000,000
10 1/8% Senior Notes due 2006, Series A
10 1/8% Senior Notes due 2006, Series B
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
Trust Indenture Indenture
Act Section Section
- ---------------- ---------
<S> <C>
(S) 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.
(S) 311(a)........................................................................... 7.11
(b)........................................................................... 7.11
(c)........................................................................... N.A.
(S) 312(a)........................................................................... 2.05
(b)........................................................................... 11.03
(c)........................................................................... 11.03
(S) 313(a)........................................................................... 7.06
(b)(1)........................................................................ N.A.
(b)(2)........................................................................ 7.06
(c)........................................................................... 7.06; 11.02
(d)........................................................................... 7.06
(S) 314(a)........................................................................... 4.10; 4.12; 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.
(S) 315(a)........................................................................... 7.01(b)
(b)........................................................................... 7.05; 11.02
(c)........................................................................... 7.01(a)
(d)........................................................................... 7.01(c)
(e)........................................................................... 6.11
(S) 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
(S) 317(a)(1)........................................................................ 6.08
(a)(2)........................................................................ 6.09
(b)........................................................................... 2.04
(S) 318(a)........................................................................... 11.01
</TABLE>
________________
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................................... 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.............................. 16
SECTION 1.03. Rules of Construction.......................................................... 17
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating................................................................ 17
SECTION 2.02. Execution and Authentication................................................... 18
SECTION 2.03. Registrar and Paying Agent..................................................... 19
SECTION 2.04. Paying Agent To Hold Assets in Trust........................................... 19
SECTION 2.05. Holder Lists................................................................... 19
SECTION 2.06. Transfer and Exchange.......................................................... 20
SECTION 2.07. Replacement Securities......................................................... 20
SECTION 2.08. Outstanding Securities......................................................... 20
SECTION 2.09. Treasury Securities............................................................ 21
SECTION 2.10. Temporary Securities........................................................... 21
SECTION 2.11. Cancellation................................................................... 21
SECTION 2.12. Defaulted Interest............................................................. 22
SECTION 2.13. CUSIP Number................................................................... 22
SECTION 2.14. Deposit of Moneys.............................................................. 22
SECTION 2.15. Book-Entry Provisions for Global Securities.................................... 22
SECTION 2.16. Registration of Transfers and Exchanges........................................ 23
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee............................................................. 27
SECTION 3.02. Selection of Securities To Be Redeemed......................................... 27
SECTION 3.03. Notice of Redemption........................................................... 27
SECTION 3.04. Effect of Notice of Redemption................................................. 28
SECTION 3.05. Deposit of Redemption Price.................................................... 28
SECTION 3.06. Securities Redeemed in Part.................................................... 29
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE FOUR
COVENANTS
SECTION 4.01. Termination of Certain Covenants in Event of Investment Grade Rating..................... 29
SECTION 4.02. Payment of Securities.................................................................... 29
SECTION 4.03. Maintenance of Office or Agency.......................................................... 29
SECTION 4.04. Limitations on Transactions with Affiliates.............................................. 29
SECTION 4.05. Limitation on Indebtedness............................................................... 30
SECTION 4.06. Payments for Consent..................................................................... 32
SECTION 4.07. Limitation on Investment Company Status.................................................. 32
SECTION 4.08. Limitation on Asset Sales................................................................ 32
SECTION 4.09. Limitation on Restricted Payments........................................................ 33
SECTION 4.10. Notice of Defaults....................................................................... 35
SECTION 4.11. Limitation on Liens...................................................................... 35
SECTION 4.12. Reports.................................................................................. 36
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.. 36
SECTION 4.14. Additional Subsidiary Guarantees......................................................... 37
SECTION 4.15. Offer to Purchase upon Change of Control................................................. 37
SECTION 4.16. Compliance Certificate................................................................... 38
SECTION 4.17. Corporate Existence...................................................................... 38
ARTICLE FIVE
MERGERS; SUCCESSOR CORPORATION
SECTION 5.01. Mergers, Sale of Assets, etc............................................................. 38
SECTION 5.02. Successor Corporation Substituted........................................................ 39
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default........................................................................ 40
SECTION 6.02. Acceleration............................................................................. 41
SECTION 6.03. Other Remedies........................................................................... 41
SECTION 6.04. Waiver of Past Default................................................................... 42
SECTION 6.05. Control by Majority...................................................................... 42
SECTION 6.06. Limitation on Suits...................................................................... 42
SECTION 6.07. Rights of Holders To Receive Payment..................................................... 43
SECTION 6.08. Collection Suit by Trustee............................................................... 43
SECTION 6.09. Trustee May File Proofs of Claim......................................................... 43
SECTION 6.10. Priorities............................................................................... 43
SECTION 6.11. Undertaking for Costs.................................................................... 44
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Duties of Trustee.................................................. 44
SECTION 7.02. Rights of Trustee.................................................. 45
SECTION 7.03. Individual Rights of Trustee....................................... 46
SECTION 7.04. Trustee's Disclaimer............................................... 46
SECTION 7.05. Notice of Defaults................................................. 47
SECTION 7.06. Reports by Trustee to Holders...................................... 47
SECTION 7.07. Compensation and Indemnity......................................... 47
SECTION 7.08. Replacement of Trustee............................................. 49
SECTION 7.09. Successor Trustee by Merger, etc................................... 49
SECTION 7.10. Eligibility; Disqualification...................................... 49
SECTION 7.11. Preferential Collection of Claims Against the Company.............. 49
SECTION 7.12. Trustee's Application for Instructions from the Company............ 49
ARTICLE EIGHT
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.01. Termination of the Company's Obligations........................... 50
SECTION 8.02. Legal Defeasance and Covenant Defeasance........................... 50
SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance.............. 51
SECTION 8.04. Application of Trust Money; Trustee Acknowledgment and Indemnity... 52
SECTION 8.05. Repayment to Company............................................... 53
SECTION 8.06. Reinstatement...................................................... 53
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders......................................... 53
SECTION 9.02. With Consent of Holders............................................ 54
SECTION 9.03. Compliance with Trust Indenture Act................................ 55
SECTION 9.04. Record Date for Consents and Effect of Consents.................... 55
SECTION 9.05. Notation on or Exchange of Securities.............................. 55
SECTION 9.06. Trustee To Sign Amendments, etc.................................... 56
ARTICLE TEN
GUARANTEE
SECTION 10.01. Unconditional Guarantee............................................ 56
SECTION 10.02. Severability....................................................... 57
SECTION 10.03. Release of a Guarantor............................................. 57
SECTION 10.04. Limitation of Guarantor's Liability................................ 57
SECTION 10.05. Contribution....................................................... 57
SECTION 10.06. Execution of Security Guarantee.................................... 58
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 10.07. Subordination of Subrogation and Other Rights........................................ 58
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act Controls......................................................... 58
SECTION 11.02. Notices.............................................................................. 59
SECTION 11.03. Communications by Holders with Other Holders......................................... 59
SECTION 11.04. Certificate and Opinion as to Conditions Precedent................................... 60
SECTION 11.05. Statements Required in Certificate................................................... 60
SECTION 11.06. Rules by Trustee, Paying Agent, Registrar............................................ 60
SECTION 11.07. Governing Law........................................................................ 60
SECTION 11.08. No Recourse Against Others........................................................... 60
SECTION 11.09. Successors........................................................................... 61
SECTION 11.10. Counterpart Originals................................................................ 61
SECTION 11.11. Severability......................................................................... 61
SECTION 11.12. No Adverse Interpretation of Other Agreements........................................ 61
SECTION 11.13. Legal Holidays....................................................................... 61
SIGNATURES............................................................................................ S-1
EXHIBIT A Form of Series A Security.............................................................. A-1
EXHIBIT B Form of Series B Security.............................................................. B-1
EXHIBIT C Form of Legend for Global Securities................................................... C-1
EXHIBIT D Form of Certificate To Be Delivered upon Exchange or Registration
of Transfer Securities................................................................. D-1
EXHIBIT E Form of Transferee Letter of Representations........................................... E-1
EXHIBIT F Form of Certificate To Be Delivered in Connection with Regulation S Transfers.......... F-1
</TABLE>
_________________
NOTE: This Table of Contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-iv-
<PAGE>
INDENTURE dated as of July 13, 1999, 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 4.04.
---------------------
"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 4.11;
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
<PAGE>
-2-
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 4.09; (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 4.08, 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 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 or Standard & Poor's, 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
<PAGE>
-3-
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, 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; (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; or (iv) the Company is
required by the holders of its Series C Preferred to redeem the Series C
Preferred upon the occurrence of a Change in Control (as defined in the
Certificate of Designation relating to the Series C Preferred).
"Change of Control Date" has the meaning provided in Section 4.15.
----------------------
"Common Stock" means the common stock, par value $0.01 per share, of
------------
the Company.
"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.
<PAGE>
-4-
"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 (other than dividends paid
solely in Equity Interests (other than Disqualified Stock)) 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 - 21W, New York, NY 10286,
Attention: Corporate Trust Administration.
"Credit Agreement" means the 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 4.05), 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.
<PAGE>
-5-
"Credit Facility" means 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.
"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 shall be a clearing agency
registered under the Exchange Act.
"Direct Merchants Bank" means Direct Merchants Credit Card Bank, N.A.
---------------------
a [national banking association], and a wholly-owned Subsidiary of the Company.
"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), or upon the happening of any event (other than under
circumstances that would constitute a Change of Control), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is 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.
"Exchange Securities" means the 10 1/8% Senior Notes due 2006, Series
-------------------
B, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"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 July 15, 2006.
-------------------
<PAGE>
-6-
"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 Global Securities,
-----------------
Regulation S Global Securities or IAI Global Securities.
"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 Global Security" means a permanent global security in registered
-------------------
form representing the aggregate principal amount of Securities transferred after
the Issue Date to Institutional Accredited Investors.
"incur" has the meaning set forth in Section 4.05.
-----
"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
<PAGE>
-7-
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 Bear, Stearns & Co. Inc., Chase Securities
------------------
Inc., Salomon Smith Barney Inc. and Barclays Capital Inc.
"Initial Securities" means the 10 1/8% Senior Notes due 2006, Series
------------------
A, of the Company.
"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 and any Liquidated Damages (as defined in the Registration Rights
Agreement) on the Securities.
"Interest Payment Date" means each semiannual interest payment date on
---------------------
January 15 and July 15 of each year, commencing on January 15, 2000.
"Interest Record Date" for the interest payable on any Interest
--------------------
Payment Date (except a date for payment of defaulted interest) means the January
1 or July 1 (whether or not a Business Day), as the case may be, immediately
preceding such Interest Payment Date.
"Investment Grade Rating" means (i) with respect to Standard & Poor's,
-----------------------
any of the categories from and including AAA to and including BBB- (or
equivalent successor categories) and (ii) with respect to Moody's, any of the
categories from and including Aaa to and including Baa3 (or equivalent successor
categories).
"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 4.09.
"Issue Date" means July 13, 1999.
----------
"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,
<PAGE>
-8-
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).
"Moody's" means Moody's Investors Service, Inc. and its successors.
-------
"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, penalties, fees,
-----------
indemnifications, reimbursements, 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
<PAGE>
-9-
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,
except in the case of the issuance of Initial Securities pursuant to Section
2.02, a certificate signed by one Officer, complying with Sections 11.04 and
11.05 and delivered to the Trustee.
<PAGE>
-10-
"144A Global Security" means a permanent global security in registered
--------------------
form representing the aggregate principal amount of Initial 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 the Thomas H. Lee Company 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 4.08; (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; (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 does 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
<PAGE>
-11-
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 Exchange Securities" has the meaning provided in the
---------------------------
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
------------------------
Initial Securities in the form set forth on Exhibit A hereto.
---------
"Public Equity Offering" means an underwritten offering of Common
----------------------
Stock pursuant to a registration statement that has been declared effective by
the Commission pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable under
any employee benefit plan of the Company).
<PAGE>
-12-
"Purchase Agreement" means the Purchase Agreement dated as of July 8,
------------------
1999 by and among the Company, the Guarantors 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.
"Rating Agencies" means (i) Standard & Poor's and (ii) Moody's.
---------------
"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 Exchange and Registration
-----------------------------
Rights Agreement dated as of the Issue Date by and among the Company, the
Guarantors and the Initial Purchasers or any similar agreement relating to any
additional Initial Securities issued after the Issue Date.
"Registration" means a registered exchange offer for the Securities by
------------
the Company or other registration of the Securities under the Securities Act
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
"Regulation S" means Regulation S under the Securities Act.
------------
"Regulation S Global Security" means a permanent global security in
----------------------------
registered form representing the aggregate principal amount of Securities sold
in reliance on Regulation S under the Securities Act.
"Restricted Investment" means any Investment other than a Permitted
---------------------
Investment.
"Restricted Payment" has the meaning provided in Section 4.09.
------------------
<PAGE>
-13-
"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.
"Rule 144A" means Rule 144A under the Securities Act.
---------
"SEC" or "Commission" means the Securities and Exchange Commission.
--- ----------
"Securities" means, collectively, the Initial Securities, the Private
----------
Exchange Securities and the Unrestricted Securities treated as a single class of
securities, 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 (in
---------
the case of an Initial Security) or Exhibit B (in the case of an Exchange
Security) 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
<PAGE>
-14-
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 Fingerhut 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.
"Series C Preferred" means the series C perpetual convertible
------------------
preferred stock, par value $.01 per share, of the Company.
"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.
"Standard & Poor's" means Standard & Poor's Rating Services, a
-----------------
division of the McGraw-Hill Companies, Inc. and its successors.
"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).
<PAGE>
-15-
"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 (S)(S)
---
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.
"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 Securities" means one or more Securities that do not and
-----------------------
are not required to bear the Private Placement Legend in the form set forth in
Exhibit A hereto, including, without limitation, the Exchange Securities and any
- ---------
Securities registered under the Securities Act pursuant to and in accordance
with the Registration Rights Agreement.
"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 4.09. 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
<PAGE>
-16-
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 4.05, the Company shall be in default under Section 4.05). 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
4.05, 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
----------------------------
4.08.
"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.
<PAGE>
-17-
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 Initial 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 Exchange
Securities and the Trustee's certificate of authentication thereof shall be
substantially in the form of Exhibit B 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,
which shall be 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 in the
form of one or more Global Securities, substantially in the form set forth in
Exhibit A hereto, deposited with the Trustee, as custodian for the Depository,
- ---------
duly executed by the Company and authenticated by the Trustee as hereinafter
provided and shall bear the legend set forth in Exhibit C hereto. The aggregate
---------
principal amount of the Global Securities may from time to time be increased or
<PAGE>
-18-
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 (i) Initial Securities for original
issue in an aggregate principal amount not to exceed $250,000,000 in one or more
series, (ii) Private Exchange Securities from time to time only in exchange for
a like principal amount of Initial Securities and (iii) Unrestricted Securities
from time to time only (x) in exchange for (A) a like principal amount of
Initial Securities or (B) a like principal amount of Private Exchange Securities
or (y) in an aggregate principal amount of not more than the excess of
$250,000,000 over the sum of the aggregate amount of (A) Initial Securities then
outstanding, (B) Private Exchange Securities then outstanding and (C)
Unrestricted Securities issued in accordance with (iii)(x) above, in each case
upon a written order of the Company in the form of an Officers' Certificate.
Each 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 Initial Securities, Private Exchange Securities
or Unrestricted Securities and whether the Securities are to be issued as
Physical Securities or Global Securities and such other information as the
Trustee may reasonably request. The aggregate principal amount of Securities
outstanding at any time may not exceed $250,000,000, except as provided in
Sections 2.07 and 2.08.
In the event that the Company shall issue and the Trustee shall
authenticate any Securities issued under this Indenture subsequent to the Issue
Date pursuant to clauses (i) and (iii)(y) of the first sentence of the
immediately preceding paragraph, the Company shall use its reasonable best
efforts to obtain the same "CUSIP" number for such Securities as is printed on
the Securities outstanding at such time; provided, however, that if any series
of Securities issued under this Indenture subsequent to the Issue Date is
determined, pursuant to evidence in form and substance reasonably satisfactory
to the Trustee to be a different class of security than the Securities
outstanding at such time for federal income tax purposes, the Company may obtain
a "CUSIP" number for such Securities that is different than the "CUSIP" number
printed on the Securities then outstanding. Notwithstanding the foregoing, all
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
<PAGE>
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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 writ-
<PAGE>
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ing 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, 4.08,
4.15, 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
<PAGE>
-21-
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 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.
<PAGE>
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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 default in a payment of interest on the Securities,
they 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 C.
---------
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 Com-
<PAGE>
-23-
pany 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
<PAGE>
-24-
(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, in form satisfactory to the Registrar or co-Registrar, together with:
(A) certification, substantially in the form of Exhibit D 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
<PAGE>
-25-
(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 books and
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 (sub-
<PAGE>
-26-
stantially 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.
<PAGE>
-27-
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 prior written notice to the Registrar.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Notices to Trustee.
If the Company wants to redeem Securities pursuant to paragraph 5 of
the Securities at the applicable redemption price set forth thereon, 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 the Trustee at
least 45 days before the Redemption Date (unless a shorter notice shall be
agreed to by the Trustee 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.
If less than all of the Securities are to be redeemed pursuant to
paragraph 5 of the Securities, the Trustee shall select the Securities to be
redeemed in compliance with the requirements of the national securities
exchange, if any, on which the Securities are listed or, if the Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or in such other manner as the Trustee shall deem fair and appropriate.
Selection of the Securities to be redeemed pursuant to paragraph 6 of the
Securities shall be made by the Trustee only on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of the Depository)
based on the aggregate principal amount of Securities held by each Holder. The
Trustee shall make the selection from the Securities then outstanding, subject
to redemption and not previously called for redemption.
The Trustee may select for redemption pursuant to paragraph 5 or 6 of
the Securities portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 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;
provided, however, that notice of a redemption pursuant to paragraph 6 of the
Securities shall be mailed to each Holder whose Securities are to be redeemed no
later than 30 days after the date of the closing of the related Public Equity
Offering of the Company and shall consummate the redemption within 90 days of
the closing of such Public Equity Offering.
Each notice of redemption shall identify the Securities to be redeemed
(including the CUSIP number thereon) and shall state:
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(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 redemption pursuant to paragraph 5 or 6 of
the Securities, if 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 4.02 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.
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ARTICLE FOUR
COVENANTS
SECTION 4.01. Termination of Certain Covenants in Event of Investment Grade
Rating.
For so long as no Default or Event of Default has occurred and is
continuing, after either of the Rating Agencies assigns to the Securities an
Investment Grade Rating, and notwithstanding that the Securities may later cease
to have an Investment Grade Rating, the Company and its Restricted Subsidiaries
will not be subject to Sections 4.04, 4.05, 4.08, 4.09, 4.13 and clause (d)(iv)
of Section 5.01.
SECTION 4.02. 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 4.03. 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 4.04. Limitations on Transactions with Affiliates.
The Company shall not, and shall 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 con-
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sideration 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 4.09.
SECTION 4.05. Limitation on Indebtedness.
The Company shall not, and shall 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 shall not issue any Disqualified
Stock, and the Company shall not permit any of its Restricted Subsidiaries (that
are not Guarantors) to issue any shares of preferred stock; provided, however,
that (x) 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 and
(y) Direct Merchants Bank may incur Indebtedness or issue shares of Disqualified
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 to be issued and the application of the
proceeds therefrom, would have been less than 1.5 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 4.05 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 In-
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debtedness 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 4.05; 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 shall not, and shall 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 4.05, 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 4.05,
the Company shall, in its sole discretion, classify such item of Indebtedness in
any manner that complies with this Section 4.05 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.
<PAGE>
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SECTION 4.06. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall, 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 4.07. 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 4.08. Limitation on Asset Sales.
The Company shall not, and shall 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 4.08, and shall comply with the provisions of this Section 4.08
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 4.08.
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, 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.
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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 4.08, 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 4.09. Limitation on Restricted Payments.
The Company shall not, and shall 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
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(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 4.05; 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 July 1, 1999
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, plus (iv) $150 million.
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
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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 4.09. 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
4.09 were computed, together with a copy of any opinion or appraisal required by
this paragraph.
SECTION 4.10. 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, and in any event within five Business Days, deliver an
Officers' Certificate to the Trustee specifying the Default or Event of Default
and setting forth the action the Company proposes to take with respect thereto.
SECTION 4.11. Limitation on Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind (other than Permitted Liens) upon any of
their property or assets, now owned or hereafter acquired, unless all payments
due under this Indenture and the Securities and, in the case of a Guarantor, its
Subsidiary Guarantee are secured on an equal and ratable basis (or on a senior
basis in the case of subordinated Indebtedness) with the obligations so secured
until such time as such obligations are no longer secured by a Lien.
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SECTION 4.12. Reports.
Whether or not required by the rules and regulations of the SEC, so
long as any Securities are outstanding, the Company shall 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 shall 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.
Delivery of such reports, information and documents to the Trustee is
for informational purposes only and the Trustee's receipt of such 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 hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Company shall not, and shall 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
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subject to the Liens created thereby, provided that such Liens were otherwise
permitted to be incurred under Section 4.11.
SECTION 4.14. Additional Subsidiary Guarantees.
The Company shall 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 4.15. 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 shall
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 applicable Federal or State securities laws and regulations and any
applicable requirements of any securities exchange on which the Securities are
listed. To the extent that the provisions of any securities laws, regulations
conflict with the provisions of this Section 4.15, the Company shall comply with
the applicable securities laws and regulations and shall not be deemed to have
breached its obligations under this Section 4.15.
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SECTION 4.16. 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, their status 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 4.16
shall be for the fiscal year ending December 31, 1999.
SECTION 4.17. 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 4.17 shall not
prohibit the Company from taking any other action otherwise permitted by, and
made in accordance with, the provisions of this Indenture.
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
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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 4.05.
(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 4.05.
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.
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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) default in the payment when due of principal of (or premium, if
any, on) any Security;
(b) default in the payment when due of any interest on, or liquidated
damages with respect to any Security, which default continues for 30 days
or more;
(c) failure by the Company or any of its Restricted Subsidiaries to
comply with its obligations under Section 4.05, Section 4.08, Section 4.13
or Section 4.15;
(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
involun-
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tary 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; or
(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.
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
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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 paragraph of this
Section 6.04 shall be in lieu of (S) 316(a)(1)(B) of the TIA and such (S)
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 or expense caused by taking such action or following such
direction. This Section 6.05 shall be in lieu of (S) 316(a)(1)(A) of the TIA,
and such (S) 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
or expense;
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(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, in the opinion of the Trustee, 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:
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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 substantially
conform to the requirements of this Indenture.
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(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, 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 conclusively 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.
(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
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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 reasonable security or indemnity 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 expense of the Company
and shall incur no liability or additional 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.
<PAGE>
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SECTION 7.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and any
Trust Officer 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 (S) 315(b) of the TIA and
such proviso to (S) 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 (S) 313(a), as amended, within 60 days after each
May 15 beginning with May 15, 2000 the Trustee shall mail to each Holder a
report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee
also shall comply with TIA (S) 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 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 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 of a claim of which a Trust
Officer has actual knowledge shall not relieve the Company of its obligations
hereunder unless the Company has been materially 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
<PAGE>
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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 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
<PAGE>
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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 (S)(S) 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 (S) 310(b), the
Trustee and the Company shall comply with the provisions of TIA (S) 310(b);
provided, however, that there shall be excluded from the operation of TIA (S)
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 (S)
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 resign
immediately in the manner and with the effect hereinbefore specified in this
Article Seven. The provisions of TIA (S) 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 (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
SECTION 7.12. Trustee's Application for Instructions from the Company.
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in
<PAGE>
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such application on or after the date specified in such application (which date
shall not be less than three Business Days after the date any officer of the
Company actually receives such application, unless any such officer shall have
consented in writing to any earlier date) unless prior to taking any such action
(or the effective date in the case of an omission), the Trustee shall have
received written instructions in response to such application specifying the
action to be taken or omitted.
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
<PAGE>
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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 and liquidated damages 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, 4.03 and 4.17, (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 4.04 through 4.16,
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 shall 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 and liquidated damages on the outstanding Securities on the
stated maturity date or on the applicable redemption date, as the case may
be, and the Company shall specify whether the Securities are being defeased
to maturity or to a particular redemption date;
(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 reasonably acceptable to the Trustee 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 outstanding 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;
<PAGE>
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(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 reasonably acceptable to the Trustee confirming that the Holders of
the outstanding 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 any material
agreement or instrument (other than this Indenture) 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
with the intent of defeating, hindering, delaying or defrauding 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 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 laws 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.
<PAGE>
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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 shall 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;
<PAGE>
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(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 legal
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 4.14 or otherwise;
or
(i) to secure the Securities pursuant to the requirements of Section
4.11 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 shall
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
4.08 or 4.15);
(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
waivers of past defaults, or 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);
<PAGE>
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(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 4.08 or 4.15); 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
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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.
<PAGE>
-57-
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 4.08 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 4.08 and within the time limits specified by
Section 4.08, 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 at the reasonable request of the Trustee 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
<PAGE>
-58-
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 (S)(S) 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.
<PAGE>
-59-
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 - 21W
New York, N.Y. 10286
Attention: Corporate Trust Administration
Facsimile: (212) 815-6285
Telephone: (212) 815-5917
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 (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 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 (S)
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 (S) 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 (S) 312(c).
<PAGE>
-60-
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
<PAGE>
-61-
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.
[Signature Pages Follow]
<PAGE>
S-1
SIGNATURES
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: _____________________________
Name:
Title:
METRIS DIRECT, INC., as a Guarantor
By: _____________________________
Name:
Title:
<PAGE>
S-2
THE BANK OF NEW YORK, as Trustee
By: _____________________________
Name:
Title:
<PAGE>
EXHIBIT A
---------
[FORM OF SERIES A SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY
AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO
LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS
ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF
THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR
FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUERS' AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE
(D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM AND, IN THE CASE OF THE
FOREGOING CLAUSE (D), A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
ISSUERS AND THE TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
A-1
<PAGE>
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 et. seq. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $958.00. THIS ISSUE
DATE OF THIS SECURITY IS AND THE YIELD TO MATURITY IS %
METRIS COMPANIES INC.
10 1/8% Senior Note due 2006, Series A
CUSIP No.:
No. $
METRIS COMPANIES INC., a Delaware corporation (the "Company", which
-------
term includes any successor corporation), for value received, promise to pay to
Cede & Co. or registered assigns the principal sum of Dollars,
on July 15, 2006.
Interest Payment Dates: January 15 and July 15, commencing on January
15, 2000.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
METRIS COMPANIES INC.
By: _____________________________
Name:
Title:
By: _____________________________
Name:
Title:
Dated:
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/8% Senior Notes due 2006, Series A, described
in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By: _____________________________
Authorized Signatory
A-3
<PAGE>
(REVERSE OF SECURITY)
METRIS COMPANIES INC.
10 1/8% Senior Note due 2006, Series A
1. Interest.
--------
METRIS COMPANIES INC. promises to pay interest on the principal amount
of this Security at the rate per annum shown above. Cash interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 13, 1999. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing on
January 15, 2000. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
-----------------
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, The Bank of New York (the "Trustee") will act as Paying
-------
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders. The Company may, subject to certain exceptions,
act as Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of July
13, 1999 (the "Indenture"), by and among the Company, the Guarantors named
---------
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 1/8% Senior
Notes due 2006, Series A (the "Initial Securities"), limited in aggregate
------------------
principal amount to $250,000,000, which may be issued under the Indenture. The
Securities include the Initial Securities, the Private Exchange Securities (as
defined in the Indenture) and the Unrestricted Securities (as defined in the
Indenture). All Securities issued under the Indenture are treated as a single
class of securities under the Indenture. The terms of the Securities include
those stated in the Indenture
A-4
<PAGE>
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of
---
the Indenture (except as otherwise indicated in the Indenture) until such time
as the Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such terms, and
holders of Securities are referred to the Indenture and the TIA for a statement
of them. The Securities are general unsecured obligations of the Company.
Payment on the Securities is guaranteed (each, a "Guarantee") on a
---------
senior basis, jointly and severally, by Metris Direct, Inc. and each Restricted
Subsidiary of the Company which guarantees the Securities (each, a "Guarantor")
---------
pursuant to Article Ten of the Indenture. In certain circumstances, the
Guarantees may be released.
5. Optional Redemption.
-------------------
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the Redemption 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) if redeemed during the 12-
month period commencing on July 15 of the years indicated below:
Year Percentage
---- ----------
2003 105.062%
2004 102.531%
2005 100.000%
6. Optional Redemption Upon Public Equity Offerings.
---------------------------------------------------
At any time on or prior to July 15, 2002, the Company may on any one
or more occasions redeem up to 35% of the Securities theretofore issued under
the Indenture at a redemption price of 110.125% of the aggregate principal
amount of the Securities, plus accrued and unpaid interest to the redemption
date, with the net cash proceeds (but only to the extent such proceeds consist
of cash or Cash Equivalents (as defined in the Indenture)) of one or more Public
Equity Offerings (as defined in the Indenture); provided that at least 65% of
the aggregate principal amount of the Securities theretofore issued remains
outstanding immediately after the occurrence of such redemption (excluding
Securities held by the Company and its Subsidiaries). The Company must mail a
notice of redemption no later than 30 days after the related Public Equity
Offering and consummate the redemption within 90 days after the closing of such
Public Equity Offering.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal
A-5
<PAGE>
amount equal to the unredeemed portion thereof will be issued in the name of the
Holder thereof upon cancellation of the original Security. On and after the
Redemption Date, interest will cease to accrue on Securities or portions thereof
called for redemption so long as the Company has deposited with the Paying Agent
for the Securities funds in satisfaction of the redemption price pursuant to the
Indenture and the Paying Agent is not prohibited from paying such funds to the
Holders pursuant to the terms of the Indenture.
8. Change of Control Offer.
-----------------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company 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).
9. Limitation on Disposition of Assets.
-----------------------------------
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the 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
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at their written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obli-
A-6
<PAGE>
gations to comply with certain covenants contained in the Indenture, the
Securities and the Guarantees, in each case upon satisfaction of certain
conditions specified in the Indenture.
14. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets and to engage in transactions with affiliates. The limitations are
subject to a number of important qualifications and exceptions. The Company
must report annually to the Trustee on compliance with such limitations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company and Guarantors.
--------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, the Guarantors, their respective Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. 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 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 Guarantees.
A-7
<PAGE>
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Registration Rights.
-------------------
Pursuant to the Registration Rights Agreement, the Company and the
Guarantors will be obligated to consummate an exchange offer pursuant to which
the Holder of this Security shall have the right to exchange this Security for a
10 1/8% Senior Subordinated Note due 2006, Series B, of the Company which has
been registered under the Securities Act, in like principal amount and having
terms identical in all material respects to the Initial Securities. The Holders
shall be entitled to receive certain liquidated damages payments in the event
such exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
23. Governing Law.
-------------
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof without regard to principles of conflicts of
laws to the extent that the application of the laws of another jurisdiction
would be required thereby.
A-8
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR GUARANTEE
For value received, the undersigned Guarantor (as defined in the
Indenture referred to in the Security upon which this notation is endorsed)
hereby unconditionally guarantees on a senior basis (such Guarantee by the
Guarantor being referred to herein as the "Guarantee") the due and punctual
---------
payment of the principal of, premium, if any, and interest on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal, premium and interest on the Securities,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee, all in accordance with the terms set forth in
Article Ten of the Indenture (as defined below). This Guarantee will become
effective in accordance with Article Ten of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not
be affected by the fact that it is not affixed to any particular Security.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of July 13, 1999, among Metris
Companies Inc., each of the Guarantors named therein and The Bank of New York,
as trustee, as amended or supplemented (the "Indenture").
---------
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Ten of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
METRIS DIRECT, INC.
By: ____________________________
Name:
Title:
A-9
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:___________________ Signed: ___________________________________
(Signed exactly as name appears
on the other side of this Security)
Signature Guarantee: __________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.08 or Section 4.15 of the Indenture, check the appropriate
box:
Section 4.08 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.08 or Section 4.15 of the Indenture, state the
amount: $_____________
Dated:______________ Your Signature: ________________________________
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT B
---------
[FORM OF SERIES B SECURITY]
THIS SECURITY IS ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF
SECTION 1271 et. seq. OF THE INTERNAL REVENUE CODE. FOR EACH $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THIS SECURITY, THE ISSUE PRICE IS $958.00. THIS ISSUE
DATE OF THIS SECURITY IS AND THE YIELD TO MATURITY IS %
METRIS COMPANIES INC.
10 1/8% Senior Note due 2006, Series B
CUSIP No.:
No. $
METRIS COMPANIES INC., a Delaware corporation (the "Company", which
-------
term includes any successor corporation), for value received, promise to pay to
Cede & Co. or registered assigns the principal sum of Dollars,
on July 15, 2006.
Interest Payment Dates: January 15 and July 15, commencing on January
15, 2000.
Interest Record Dates: January 1 and July 1.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
IN WITNESS WHEREOF, the Company has caused this Security to be signed
manually or by facsimile by its duly authorized officer.
METRIS COMPANIES INC.
By: ___________________________
Name:
Title:
By: ___________________________
Name:
Title:
Dated:
B-1
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 10 1/8% Senior Notes due 2006, Series B, described
in the within-mentioned Indenture.
Dated:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________
Authorized Signatory
B-2
<PAGE>
(REVERSE OF SECURITY)
METRIS COMPANIES INC.
10 1/8% Senior Note due 2006, Series B
1. Interest.
--------
METRIS COMPANIES INC. promises to pay interest on the principal amount
of this Security at the rate per annum shown above. Cash interest on the
Securities will accrue from the most recent date to which interest has been paid
or, if no interest has been paid, from July 13, 1999. The Company will pay
interest semi-annually in arrears on each Interest Payment Date, commencing on
January 15, 2000. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
The Company shall pay interest on overdue principal from time to time
on demand and on overdue installments of interest (without regard to any
applicable grace periods) to the extent lawful from time to time on demand, in
each case at the rate borne by the Securities
2. Method of Payment.
-----------------
The Company shall pay interest on the Securities (except defaulted
interest) to the persons who are the registered Holders at the close of business
on the Interest Record Date immediately preceding the Interest Payment Date even
if the Securities are canceled on registration of transfer or registration of
exchange after such Interest Record Date. Holders must surrender Securities to
a Paying Agent to collect principal payments. The Company shall pay principal
and interest in money of the United States that at the time of payment is legal
tender for payment of public and private debts ("U.S. Legal Tender"). However,
-----------------
the Company may pay principal and interest by wire transfer of Federal funds
(provided that the Paying Agent shall have received wire instructions on or
prior to the relevant Interest Record Date), or interest by check payable in
such U.S. Legal Tender. The Company may deliver any such interest payment to
the Paying Agent or to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
--------------------------
Initially, The Bank of New York (the "Trustee") will act as Paying
-------
Agent and Registrar. The Company may change any Paying Agent or Registrar
without notice to the Holders. The Company may, subject to certain exceptions,
act as Registrar.
4. Indenture.
---------
The Company issued the Securities under an Indenture, dated as of July
13, 1999 (the "Indenture"), by and among the Company, the Guarantors named
---------
therein and the Trustee. Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. This Security is one of a duly
authorized issue of Securities of the Company designated as its 10 1/8% Senior
Notes due 2006, Series B limited in aggregate principal amount to $250,000,000,
which may be issued under the Indenture. The Securities include the Initial
Securities (as defined in the Indenture), the Private Exchange Securities (as
defined in the Indenture) and the Unrestricted Securities (as defined in the
Indenture). All Securities issued under the Indenture are treated as a single
class of securities under the Indenture. The terms of the Securities include
those stated in the Indenture
B-3
<PAGE>
and those made part of the Indenture by reference to the Trust Indenture Act of
1939 (15 U.S.C. (S)(S) 77aaa-77bbbb) (the "TIA"), as in effect on the date of
---
the Indenture (except as otherwise indicated in the Indenture) until such time
as the Indenture is qualified under the TIA, and thereafter as in effect on the
date on which the Indenture is qualified under the TIA. Notwithstanding anything
to the contrary herein, the Securities are subject to all such terms, and
holders of Securities are referred to the Indenture and the TIA for a statement
of them. The Securities are general unsecured obligations of the Company.
Payment on the Securities is guaranteed (each, a "Guarantee") on a
---------
senior basis, jointly and severally, by Metris Direct, Inc. and each Restricted
Subsidiary of the Company which guarantees the Securities (each, a "Guarantor")
---------
pursuant to Article Ten of the Indenture. In certain circumstances, the
Guarantees may be released.
5. Optional Redemption.
-------------------
The Securities will be redeemable at the option of the Company, in
whole or in part, at any time on or after July 15, 2003, at the redemption
prices (expressed as a percentage of principal amount) set forth below, plus
accrued and unpaid interest thereon, if any, to the Redemption 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) if redeemed during the 12-
month period commencing on July 15 of the years indicated below:
Year Percentage
---- ----------
2003 105.062%
2004 102.531%
2005 100.000%
6. Optional Redemption Upon Public Equity Offerings.
---------------------------------------------------
At any time on or prior to July 15, 2002, the Company may on any one
or more occasions redeem up to 35% of the Securities theretofore issued under
the Indenture at a redemption price of 110.125% of the aggregate principal
amount of the Securities, plus accrued and unpaid interest to the redemption
date, with the net cash proceeds (but only to the extent such proceeds consist
of cash or Cash Equivalents (as defined in the Indenture)) of one or more Public
Equity Offerings (as defined in the Indenture); provided that at least 65% of
the aggregate principal amount of the Securities theretofore issued remains
outstanding immediately after the occurrence of such redemption (excluding
Securities held by the Company and its Subsidiaries). The Company must mail a
notice of redemption no later than 30 days after the related Public Equity
Offering and consummate the redemption within 90 days after the closing of such
Public Equity Offering.
7. Notice of Redemption.
--------------------
Notice of redemption will be mailed by first-class mail at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Securities to be redeemed at its registered address. The Trustee may select for
redemption portions of the principal amount of Securities that have
denominations equal to or larger than $1,000 principal amount. Securities and
portions of them the Trustee so selects shall be in amounts of $1,000 principal
amount or integral multiples thereof.
If any Security is to be redeemed in part only, the notice of
redemption that relates to such Security shall state the portion of the
principal amount thereof to be redeemed. A new Security in a principal amount
equal to the unredeemed portion thereof will be issued in the name of the Holder
thereof upon cancella-
B-4
<PAGE>
tion of the original Security. On and after the Redemption Date, interest will
cease to accrue on Securities or portions thereof called for redemption so long
as the Company has deposited with the Paying Agent for the Securities funds in
satisfaction of the redemption price pursuant to the Indenture and the Paying
Agent is not prohibited from paying such funds to the Holders pursuant to the
terms of the Indenture.
8. Change of Control Offer.
-----------------------
Following the occurrence of a Change of Control (the date of such
occurrence being the "Change of Control Date"), the Company 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).
9. Limitation on Disposition of Assets.
-----------------------------------
The Company is, subject to certain conditions and certain exceptions,
obligated to make an Offer to Purchase Securities at a purchase price equal to
100% of the 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
Interest Relevant Record Date to receive interest due on the relevant Interest
Payment Date) with the proceeds of certain asset dispositions.
10. Denominations; Transfer; Exchange.
---------------------------------
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder shall
register the transfer of or exchange Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay certain transfer
taxes or similar governmental charges payable in connection therewith as
permitted by the Indenture. The Registrar need not register the transfer of or
exchange any Securities or portions thereof selected for redemption, except the
unredeemed portion of any security being redeemed in part.
11. Persons Deemed Owners.
---------------------
The registered Holder of a Security shall be treated as the owner of
it for all purposes.
12. Unclaimed Funds.
---------------
If funds for the payment of principal or interest remain unclaimed for
two years, the Trustee and the Paying Agent will repay the funds to the Company
at their written request. After that, all liability of the Trustee and such
Paying Agent with respect to such funds shall cease.
13. Legal Defeasance and Covenant Defeasance.
----------------------------------------
The Company and the Guarantors may be discharged from their
obligations under the Indenture, the Securities and the Guarantees, except for
certain provisions thereof, and may be discharged from obligations to comply
with certain covenants contained in the Indenture, the Securities and the
Guarantees, in each case upon satisfaction of certain conditions specified in
the Indenture.
B-5
<PAGE>
14. Amendment; Supplement; Waiver.
-----------------------------
Subject to certain exceptions, the Indenture, the Securities and the
Guarantees may be amended or supplemented with the written consent of the
Holders of at least a majority in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default or compliance
with any provision may be waived with the consent of the Holders of a majority
in aggregate principal amount of the Securities then outstanding. Without
notice to or consent of any Holder, the parties thereto may amend or supplement
the Indenture, the Securities and the Guarantees to, among other things, cure
any ambiguity, defect or inconsistency, provide for uncertificated Securities in
addition to or in place of certificated Securities or comply with any
requirements of the SEC in connection with the qualification of the Indenture
under the TIA, or make any other change that does not materially adversely
affect the rights of any Holder of a Security.
15. Restrictive Covenants.
---------------------
The Indenture contains certain covenants that, among other things,
limit the ability of the Company and the Restricted Subsidiaries to make
restricted payments, to incur indebtedness, to create liens, to sell assets, to
permit restrictions on dividends and other payments by Restricted Subsidiaries
to the Company, to consolidate, merge or sell all or substantially all of its
assets and to engage in transactions with affiliates. The limitations are
subject to a number of important qualifications and exceptions. The Company
must report annually to the Trustee on compliance with such limitations.
16. Defaults and Remedies.
---------------------
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Securities then
outstanding may declare all the Securities to be due and payable immediately in
the manner and with the effect provided in the Indenture. Holders of Securities
may not enforce the Indenture, the Securities or the Guarantees except as
provided in the Indenture. The Trustee is not obligated to enforce the
Indenture, the Securities or the Guarantees unless it has received indemnity
satisfactory to it. The Indenture permits, subject to certain limitations
therein provided, Holders of a majority in aggregate principal amount of the
Securities then outstanding to direct the Trustee in its exercise of any trust
or power. The Trustee may withhold from Holders of Securities notice of certain
continuing Defaults or Events of Default if it determines that withholding
notice is in their interest.
17. Trustee Dealings with Company and Guarantors.
--------------------------------------------
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may otherwise deal
with the Company, the Guarantors, their respective Subsidiaries or their
respective Affiliates as if it were not the Trustee.
18. 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 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 Guarantees.
B-6
<PAGE>
19. Authentication.
--------------
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on this Security.
20. Abbreviations and Defined Terms.
-------------------------------
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
-------------
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Governing Law.
-------------
The laws of the State of New York shall govern the Indenture, this
Security and any Guarantee thereof without regard to principles of conflicts of
laws to the extent that the application of the laws of another jurisdiction
would be required thereby.
B-7
<PAGE>
[FORM OF SECURITY GUARANTEE]
SENIOR GUARANTEE
For value received, the undersigned Guarantor (as defined in the
Indenture referred to in the Security upon which this notation is endorsed)
hereby unconditionally guarantees on a senior basis (such Guarantee by the
Guarantor being referred to herein as the "Guarantee") the due and punctual
---------
payment of the principal of, premium, if any, and interest on the Securities,
whether at maturity, by acceleration or otherwise, the due and punctual payment
of interest on the overdue principal, premium and interest on the Securities,
and the due and punctual performance of all other obligations of the Company to
the Holders or the Trustee, all in accordance with the terms set forth in
Article Ten of the Indenture (as defined below). This Guarantee will become
effective in accordance with Article Ten of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not
be affected by the fact that it is not affixed to any particular Security.
Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of July 13, 1999, among Metris
Companies Inc., each of the Guarantors named therein and The Bank of New York,
as trustee, as amended or supplemented (the "Indenture").
---------
The obligations of the undersigned to the Holders of Securities and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Ten of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
This Security Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Securities upon which
this Security Guarantee is noted shall have been executed by the Trustee under
the Indenture by the manual signature of one of its authorized officers.
This Security Guarantee shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflicts of laws to the extent that the application of the laws of another
jurisdiction would be required thereby.
This Security Guarantee is subject to release upon the terms set forth
in the Indenture.
METRIS DIRECT, INC.
By: ____________________________
Name:
Title:
B-8
<PAGE>
ASSIGNMENT FORM
I or we assign and transfer this Security to
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee or transferee)
_______________________________________________________________________________
(Insert Social Security or other identifying number of assignee or transferee)
and irrevocably appoint _______________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Dated:______________ Signed: _______________________________________
(Signed exactly as name appears on the
other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.08 or Section 4.15 of the Indenture, check the appropriate
box:
Section 4.08 [ ] Section 4.15 [ ]
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.08 or Section 4.15 of the Indenture, state the
amount: $_____________
Dated:________________ Your Signature: __________________________________
(Signed exactly as name appears on
the other side of this Security)
Signature Guarantee: ___________________________________________________________
Participant in a recognized Signature Guarantee Medallion
Program (or other signature guarantor program reasonably
acceptable to the Trustee)
<PAGE>
EXHIBIT C
---------
FORM OF LEGEND FOR GLOBAL SECURITIES
Any Global Security authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS
SECURITY AS A WHOLE 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) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUERS
OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH
IN SECTION 2.16 OF THE INDENTURE.
C-1
<PAGE>
EXHIBIT D
---------
FORM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF SECURITIES
Re: 10 1/8% Senior Notes due 2006
(the "Securities") of Metris Companies Inc.
-------------------------------------------
This Certificate relates to $_______ principal amount of Securities
held in the form of* ___ a beneficial interest in a Global Security or* _______
Physical Securities by ______ (the "Transferor").
----------
The Transferor:*
[_] has requested by written order that the Registrar deliver in exchange
for its beneficial interest in the Global Security held by the Depositary a
Physical Security or Physical Securities in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Security (or the portion thereof indicated above); or
[_] has requested that the Registrar by written order exchange or register
the transfer of a Physical Security or Physical Securities.
In connection with such request and in respect of each such Security,
the Transferor does hereby certify that the Transferor is familiar with the
Indenture relating to the above captioned Securities and the restrictions on
transfers thereof as provided in Section 2.16 of such Indenture, and that the
transfer of the Securities does not require registration under the Securities
Act of 1933, as amended (the "Act"), because*:
---
[_] Such Security is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 2.16 of the Indenture).
[_] Such Security is being transferred to a "qualified institutional
buyer" (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[_] Such Security is being transferred to an institutional "accredited
investor" (within the meaning of subparagraph (a)(1), (2), (3) or (7) of Rule
501 under the Act) which delivers a certificate to the Trustee in the form of
Exhibit E to the Indenture.
- ---------
[_] Such Security is being transferred in reliance on Rule 144 under the
Act.
[_] Such Security is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act other than Rule
144A or Rule 144 under the Act to a person other than an institutional
"accredited investor." [An Opinion of Counsel to the effect that such transfer
does not require registration under the Securities Act accompanies this
certification.]
_______________________________________
[INSERT NAME OF TRANSFEROR]
By: ___________________________________
[Authorized Signatory]
Date: ______________________
*Check applicable box.
D-1
<PAGE>
EXHIBIT E
---------
Form of Transferee Letter of Representation
-------------------------------------------
Metris Companies Inc.
c/o The Bank of New York
101 Barclay Street -21W
New York, N. Y. 10286
Dear Sirs:
This certificate is delivered to request a transfer of $________
principal amount of the 10 1/8% Senior Notes due 2006 (the "Notes") of Metris
-----
Companies Inc. (the "Company"). Upon transfer, the Notes would be registered in
-------
the name of the new beneficial owner as follows:
Name: ___________________________
Address: ________________________
Taxpayer ID Number: _____________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933 (the "Securities
----------
Act")) purchasing for our own account or for the account of such an
- ---
institutional "accredited investor" at least $250,000 principal amount of the
Notes, and we are acquiring the Notes not with a view to, or for offer or sale
in connection with, any distribution in violation of the Securities Act. We
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risk of our investment in the Notes and we
invest in or purchase securities similar to the Notes in the normal course of
our business. We and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date which is two years after the later of the
date of original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Notes (or any predecessor thereto) (the
"Resale Restriction Termination Date") only (a) to the Company, (b) pursuant to
-----------------------------------
a registration statement which has been declared effective under the Securities
Act, (c) in a transaction complying with the requirements of Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified institutional
buyer under Rule 144A (a "QIB") that purchases for its own account or for the
---
account of a QIB and to whom notice is given that the transfer is being made in
reliance on Rule 144A, (d) to an institutional "accredited investor" within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is
purchasing for its own account or for the account of such an institutional
"accredited investor," in each case in a minimum principal amount of Notes of
$250,000, (e) pursuant to offers and sales that occur outside the United States
within the meaning of Regulation S under the Securities Act or (f) pursuant to
any other available exemption from the registration requirements of the
Securities Act, subject in each of the foregoing cases to any requirement of law
that the disposition
E-1
<PAGE>
of our property or the property of such investor account or accounts be at all
times within our or their control and in compliance with any applicable state
securities laws. The foregoing restrictions on resale will not apply subsequent
to the Resale Restriction Termination Date. If any resale or other transfer of
the Notes is proposed to be made pursuant to clause (d) above prior to the
Resale Restriction Termination Date, the transferor shall deliver a letter from
the transferee substantially in the form of this letter to the Company and the
Trustee, which shall provide, among other things, that the transferee is an
institutional "accredited investor" within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act and that it is acquiring such Notes for
investment purposes and not for distribution in violation of the Securities Act.
Each purchaser acknowledges that the Company and the Trustee reserve the right
prior to any offer, sale or other transfer prior to the Resale Restriction
Termination Date of the Notes pursuant to clause (d), (e) or (f) above to
require the delivery of an opinion of counsel, certificates and/or other
information satisfactory to the Company and the Trustee.
Dated: ______________________ TRANSFEREE: ___________________________
By: ___________________________________
E-2
<PAGE>
EXHIBIT F
---------
Form of Certificate To Be
Delivered in Connection
with Regulation S Transfers
_______________, ____
The Bank of New York
101 Barclay Street - 21W
New York, N. Y. 10286
Attention: Corporate Trust Administration
Re: Metris Companies Inc. (the "Company")
10 1/8% Senior Notes due 2006, Series A, and
10 1/8% Senior Notes due 2006, Series B (the "Securities")
----------------------------------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $____________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
--------------
(1) the offer of the Securities was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
F-1
<PAGE>
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S.
Very truly yours,
[Name of Transferor]
By: _________________________
[Authorized Signatory]
F-2
<PAGE>
EXHIBIT 4.2
Metris Companies Inc.
$150,000,000
10 1/8% Senior Notes due 2006
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
July 13, 1999
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
SALOMON SMITH BARNEY INC.
BARCLAYS CAPITAL INC.
c/o Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Ladies and Gentlemen:
Metris Companies Inc., a Delaware corporation (the "Company"),
-------
proposes to issue and sell to Bear, Stearns & Co. Inc. ("Bear, Stearns"), Chase
-------------
Securities Inc., Salomon Smith Barney Inc. and Barclays Capital Inc.
(collectively, the "Initial Purchasers"), upon the terms and subject to the
------------------
conditions set forth in a purchase agreement dated July 8, 1999 (the "Purchase
--------
Agreement"), $150,000,000 aggregate principal amount of its 10 1/8% Senior
- ---------
Notes due 2006 (the "Notes"). The Notes will be unconditionally guaranteed
-----
(collectively, the "Guarantees") on a senior basis by the Company's subsidiary,
Metris Direct, Inc. (the "Guarantor" and together with the Company, the
---------
"Issuers"). The Notes and the Guarantees are collectively referred to herein as
-------
the "Securities". Capitalized terms used but not defined herein shall have the
----------
meanings given to such terms in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the Initial
Purchasers thereunder, the Issuers agree with the Initial Purchasers, for the
benefit of the holders (including the Initial Purchasers) of the Securities, the
Exchange Securities (as defined herein) and the Private Exchange Securities (as
defined herein) (collectively, the "Holders"), as follows:
-------
1. Registered Exchange Offer. The Issuers shall (i) prepare and, on
-------------------------
or prior to 60 days following the date of original issuance of the Securities
(the "Issue Date"), file with the Commission a registration statement (the
----------
"Exchange Offer Registration Statement") on an appropriate form under the
-------------------------------------
Securities Act with respect to a proposed offer to the Holders of the Securities
(the "Registered Exchange Offer") to issue and deliver to such Holders, in
-------------------------
exchange for the Securities, a like aggregate principal amount of debt
securities of the Company that are identical in all material respects to the
Securities, and are unconditionally guaranteed by the
<PAGE>
Guarantor, except for the transfer restrictions relating to the Securities, (ii)
use their reasonable best efforts to cause the Exchange Offer Registration
Statement to become effective under the Securities Act within 150 days after the
Issue Date and the Registered Exchange Offer to be consummated within 185 days
after the Issue Date and (iii) keep the Exchange Offer Registration Statement
effective for not less than 20 business days (or longer, if required by
applicable law) after the date on which notice of the Registered Exchange Offer
is mailed to the Holders (such period being called the "Exchange Offer
--------------
Registration Period"). The Exchange Securities will be issued under the
- -------------------
Indenture or an indenture (the "Exchange Securities Indenture") between the
-----------------------------
Issuers and the trustee under the Indenture (the "Trustee") or such other bank
-------
or trust company that is reasonably satisfactory to the Initial Purchasers, as
trustee (the "Exchange Securities Trustee"), such indenture to be identical in
---------------------------
all material respects to the Indenture, except for the transfer restrictions
relating to the Securities (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Issuers shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Securities for Exchange Securities to do so (assuming that such Holder
(a) is not an affiliate any of the Issuers or an Exchanging Dealer (as defined
herein) not complying with the requirements of the next sentence, (b) is not an
Initial Purchaser holding Securities that have, or that are reasonably likely to
have, the status of an unsold allotment in an initial distribution, (c) acquires
the Exchange Securities in the ordinary course of such Holder's business and (d)
has no arrangements or understandings with any person to participate in the
distribution of the Exchange Securities) and to trade such Exchange Securities
from and after their receipt without any limitations or restrictions under the
Securities Act and without material restrictions under the securities laws of
the several states of the United States. The Issuers, the Initial Purchasers
and each Exchanging Dealer (as hereinafter defined) acknowledge that, pursuant
to current interpretations by the Commission's staff of Section 5 of the
Securities Act, each Holder that is a broker-dealer electing to exchange
Securities, acquired for its own account as a result of market-making activities
or other trading activities, for Exchange Securities (an "Exchanging Dealer"),
-----------------
is required to deliver a prospectus containing substantially the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section and in Annex
C hereto in the "Plan of Distribution" section of such prospectus in connection
with a sale of any such Exchange Securities received by such Exchanging Dealer
pursuant to the Registered Exchange Offer.
If, prior to the consummation of the Registered Exchange Offer, any
Holder holds any Securities acquired by it that have, or that are reasonably
likely to be determined to have, the status of an unsold allotment in an initial
distribution, or any Holder is not entitled pursuant to current interpretations
by the Commission's Staff to participate in the Registered Exchange Offer, the
Issuers shall, upon the request of any such Holder, simultaneously with the
delivery of the Exchange Securities in the Registered Exchange Offer, issue and
deliver to any such Holder, in exchange for the Securities held by such Holder
(the "Private Exchange"), a like aggregate principal amount of debt securities
----------------
of the Company (the "Private Exchange Securities") that are identical in all
---------------------------
material respects to the Exchange Securities, and are unconditionally guaranteed
-2-
<PAGE>
by the Guarantor , except for the placement of a legend setting forth transfer
restrictions relating to such Private Exchange Securities. The Private Exchange
Securities will be issued under the same indenture as the Exchange Securities,
and the Company shall use its commercially reasonable efforts to cause the
Private Exchange Securities to bear the same CUSIP number as the Exchange
Securities.
In connection with the Registered Exchange Offer, the Issuers shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(b) keep the Registered Exchange Offer open for not less than 20
business days (or longer, if required by applicable law) after the date on
which notice of the Registered Exchange Offer is mailed to the Holders;
(c) utilize the services of a depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Securities at any time prior
to the close of business, New York City time, on the last business day on
which the Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all laws that are
applicable to the Registered Exchange Offer.
As soon as practicable after the close of the Registered Exchange
Offer and any Private Exchange, as the case may be, the Issuers shall:
(a) accept for exchange all Securities tendered and not validly
withdrawn pursuant to the Registered Exchange Offer and the Private
Exchange;
(b) deliver to the Trustee for cancellation all Securities so
accepted for exchange; and
(c) cause the Trustee or the Exchange Securities Trustee, as the case
may be, promptly to authenticate and deliver to each Holder, Exchange
Securities or Private Exchange Securities, as the case may be, equal in
principal amount to the Securities of such Holder so accepted for exchange.
The Issuers shall use their commercially reasonable efforts to keep
the Exchange Offer Registration Statement effective and to amend and supplement
the prospectus contained therein in order to permit such prospectus to be used
by all persons subject to the prospectus delivery requirements of the Securities
Act for such period of time as such persons must comply with such requirements
in order to resell the Exchange Securities; provided that (i) in the case
--------
-3-
<PAGE>
where such prospectus and any amendment or supplement thereto must be delivered
by an Exchanging Dealer, such period shall be the lesser of 90 days and the date
on which all Exchanging Dealers have sold all Exchange Securities held by them
and (ii) the Issuers shall make such prospectus and any amendment or supplement
thereto available to any broker-dealer for use in connection with any resale of
any Exchange Securities for a period of not less than 90 days after the
consummation of the Registered Exchange Offer.
The Indenture or the Exchange Securities Indenture, as the case may
be, shall provide that the Securities, the Exchange Securities and the Private
Exchange Securities shall vote and consent together on all matters as one class
and that none of the Securities, the Exchange Securities or the Private Exchange
Securities will have the right to vote or consent as a separate class on any
matter.
Interest on each Exchange Security and Private Exchange Security
issued pursuant to the Registered Exchange Offer and in the Private Exchange
will accrue from the last interest payment date on which interest was paid on
the Securities surrendered in exchange therefor or, if no interest has been paid
on the Securities, from the Issue Date.
Each Holder participating in the Registered Exchange Offer shall be
required to represent to the Issuers that at the time of the consummation of the
Registered Exchange Offer (i) any Exchange Securities received by such Holder
will be acquired in the ordinary course of business, (ii) such Holder will have
no arrangements or understanding with any person to participate in the
distribution of the Securities or the Exchange Securities within the meaning of
the Securities Act and (iii) such Holder is not an affiliate of any of the
Issuers or, if it is such an affiliate, such Holder will comply with the
registration and prospectus delivery requirements of the Securities Act to the
extent applicable.
Notwithstanding any other provisions hereof, the Issuers will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations of the
Commission thereunder, (ii) any Exchange Offer Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading and
(iii) any prospectus forming part of any Exchange Offer Registration Statement,
and any supplement to such prospectus, does not, as of the consummation of the
Registered Exchange Offer, include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading.
2. Shelf Registration. If (i) because of any change in law or
------------------
applicable interpretations thereof by the Commission's staff the Issuers are not
permitted to effect the Registered Exchange Offer as contemplated by Section 1
hereof, or (ii) any Securities validly tendered pursuant to the Registered
Exchange Offer are not exchanged for Exchange Securities within 185 days after
the Issue Date, or (iii) any Initial Purchaser so requests with respect to
Securities or
-4-
<PAGE>
Private Exchange Securities not eligible to be exchanged for Exchange Securities
in the Registered Exchange Offer and held by it following the consummation of
the Registered Exchange Offer, or (iv) any applicable law or interpretations do
not permit any Holder to participate in the Registered Exchange Offer, or (v)
any Holder that validly tenders Securities in the Registered Exchange Offer does
not receive freely transferable Exchange Securities in exchange for tendered
Securities (other than due solely to the status of such Holder as an affiliate
of the Company), or (vi) the Issuers so elect, then the following provisions
shall apply:
(a) The Issuers shall use their reasonable best efforts to file as
promptly as practicable (but in no event more than 30 days after so
required or requested pursuant to this Section 2) with the Commission, and
thereafter shall use its reasonable best efforts to cause to be declared
effective, a shelf registration statement on an appropriate form under the
Securities Act relating to the offer and sale of the Transfer Restricted
Securities (as defined below) by the Holders thereof from time to time in
accordance with the methods of distribution set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with
----------------------------
any Exchange Offer Registration Statement, a "Registration Statement").
----------------------
(b) The Issuers shall use their reasonable best efforts to keep the
Shelf Registration Statement continuously effective in order to permit the
prospectus forming part thereof to be used by Holders of Transfer
Restricted Securities (as defined below) for a period ending on the earlier
of (i) two years from the Issue Date or such shorter period that will
terminate when all the Transfer Restricted Securities covered by the Shelf
Registration Statement have been sold pursuant thereto and (ii) the date on
which the Securities become eligible for resale without volume restrictions
pursuant to Rule 144 under the Securities Act (in any such case, such
period being called the "Shelf Registration Period").
-------------------------
(c) Notwithstanding any other provisions hereof, the Issuers will
ensure that (i) any Shelf Registration Statement and any amendment thereto
and any prospectus forming part thereof and any supplement thereto complies
in all material respects with the Securities Act and the rules and
regulations of the Commission thereunder, (ii) any Shelf Registration
Statement and any amendment thereto (in either case, other than with
respect to information included therein in reliance upon or in conformity
with written information furnished to the Issuers by or on behalf of any
Holder specifically for use therein (the "Holders' Information")) does not
--------------------
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any prospectus forming part of any Shelf
Registration Statement, and any supplement to such prospectus (in either
case, other than with respect to Holders' Information), does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
-5-
<PAGE>
3. Liquidated Damages.
------------------
(a) The parties hereto agree that the Holders of Transfer Restricted
Securities (as hereinafter defined) will suffer damages if the Company fails to
fulfill its obligations under Section 1 or Section 2, as applicable, and that it
would not be feasible to ascertain the extent of such damages. Accordingly, if
(i) the applicable Registration Statement is not filed with the Commission on or
prior to 60 days after the Issue Date, (ii) the Exchange Offer Registration
Statement (or a Shelf Registration Statement, as the case may be) is not
declared effective within 150 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or the applicable interpretations of the Commission's staff, if later, within 30
days after publication of the change in law or interpretation), (iii) the
Registered Exchange Offer is not consummated within 185 days after the Issue
Date, provided that if such day is not a business day, then the next succeeding
business day thereafter, or (iv) a Shelf Registration Statement is filed and
declared effective within 150 days after the Issue Date (or in the case of a
Shelf Registration Statement required to be filed in response to a change in law
or the applicable interpretations of Commission's staff, if later, within 30
days after publication of the change in law or interpretation) but shall
thereafter cease to be effective (at any time that the Company is obligated to
maintain the effectiveness thereof) without being succeeded within 30 days by an
additional Registration Statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), the Company
--------------------
will be obligated to pay liquidated damages to each Holder of Transfer
Restricted Securities, during the period of one or more such Registration
Defaults, in an amount equal to 0.50% per annum on the principal amount of
Transfer Restricted Securities held by such Holder for the first 90 days
immediately following such Registration Default, with such liquidated damages
increasing by an additional 0.50% per annum at the beginning of any subsequent
90-day period, until (i) the applicable Registration Statement is filed, (ii)
the Exchange Offer Registration Statement is declared effective and the
Registered Exchange Offer is consummated, (iii) the Shelf Registration Statement
is declared effective or (iv) the Shelf Registration Statement again becomes
effective, as the case may be; provided, however, that the Company shall not be
-------- -------
obligated to pay liquidated damages in excess of 1.0% per annum in the
aggregate. Following the cure of all Registration Defaults, the accrual of
liquidated damages will cease. As used herein, the term "Transfer Restricted
-------------------
Securities" means (i) each Security until the date on which such Security has
- ----------
been exchanged for a freely transferable Exchange Security in the Registered
Exchange Offer, (ii) each Security or Private Exchange Security until the date
on which it has been effectively registered under the Securities Act and
disposed of in accordance with the Shelf Registration Statement or (iii) each
Security or Private Exchange Security until the date on which it is distributed
to the public pursuant to Rule 144 under the Securities Act or is saleable
pursuant to Rule 144(k) under the Securities Act. Notwithstanding anything to
the contrary in this Section 3(a), the Company shall not be required to pay
liquidated damages to a Holder of Transfer Restricted Securities if such Holder
failed to comply with its obligations to make the representations set forth in
the second to last paragraph of Section 1 or failed to provide the information
required to be provided by it, if any, pursuant to Section 4(n).
-6-
<PAGE>
(b) The Company shall notify the Trustee and the Paying Agent under
the Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Securities by depositing with the Paying Agent (which may not be the
Company for these purposes), in trust, for the benefit of the Holders thereof,
prior to 10:00 a.m., New York City time, on the next interest payment date
specified by the Indenture and the Securities, sums sufficient to pay the
liquidated damages then due. The liquidated damages due shall be payable on each
interest payment date specified by the Indenture and the Securities to the
record holder entitled to receive the interest payment to be made on such date.
Each obligation to pay liquidated damages shall be deemed to accrue from and
including the date of the applicable Registration Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by Holders of Transfer
Restricted Securities by reason of the failure of (i) the Shelf Registration
Statement or the Exchange Offer Registration Statement to be filed, (ii) the
Shelf Registration Statement to remain effective or (iii) the Exchange Offer
Registration Statement to be declared effective and the Registered Exchange
Offer to be consummated, in each case to the extent required by this Agreement.
4. Registration Procedures. In connection with any Registration
-----------------------
Statement, the following provisions shall apply:
(a) The Issuers shall (i) furnish to each Initial Purchaser, prior to
the filing thereof with the Commission, a copy of the Registration
Statement and each amendment thereof and each supplement, if any, to the
prospectus included therein and shall use its reasonable best efforts to
reflect in each such document, when so filed with the Commission, such
comments as any Initial Purchaser may reasonably propose; (ii) include, in
substantially similar form, the information set forth in Annex A hereto on
the cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the
"Plan of Distribution" section of the prospectus forming a part of the
Exchange Offer Registration Statement, and include the information set
forth in Annex D hereto in the Letter of Transmittal delivered pursuant to
the Registered Exchange Offer; and (iii) if requested by any Initial
Purchaser, include the information required by Items 507 or 508 of
Regulation S-K, as applicable, in the prospectus forming a part of the
Exchange Offer Registration Statement.
(b) The Issuers shall advise each Initial Purchaser, each Exchanging
Dealer who participates in the Exchange Offer and notifies the Company in
writing that it is an Exchanging Dealer (a "Notifying Exchanging Dealer")
---------------------------
and the Holders (if applicable) and, if requested by any such person,
confirm such advice in writing (which advice pursuant to clauses (ii)-(v)
hereof shall be accompanied by an instruction to suspend the use of the
prospectus until the requisite changes have been made):
-7-
<PAGE>
(i) when any Registration Statement and any amendment thereto
has been filed with the Commission and when such Registration
Statement or any post-effective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or
supplements to any Registration Statement or the prospectus included
therein or for additional information;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Securities, the
Exchange Securities or the Private Exchange Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; and
(v) of the happening of any event that requires the making of
any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do
not omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(c) The Issuers will make every reasonable effort to obtain the
withdrawal at the earliest possible time of any order suspending the
effectiveness of any Registration Statement.
(d) The Issuers will furnish to each Holder of Transfer Restricted
Securities included within the coverage of any Shelf Registration
Statement, without charge, at least one conformed copy of such Shelf
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules and, if any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(e) The Issuers will, during the Shelf Registration Period, promptly
deliver to each Holder of Transfer Restricted Securities included within
the coverage of any Shelf Registration Statement, without charge, as many
copies of the prospectus (including each preliminary prospectus) included
in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; and the Company consents to
the use of such prospectus or any amendment or supplement thereto by each
of the selling Holders of Transfer Restricted Securities in connection with
the offer and sale of the Transfer Restricted Securities covered by such
prospectus or any amendment or supplement thereto.
(f) The Issuers will furnish to each Initial Purchaser and each
Exchanging Dealer, and to any other Holder who so requests, without charge,
at least one conformed
-8-
<PAGE>
copy of the Exchange Offer Registration Statement and any post-effective
amendment thereto, including financial statements and schedules and, if any
Initial Purchaser or Exchanging Dealer or any such Holder so requests in
writing, all exhibits thereto (including those, if any, incorporated by
reference).
(g) The Issuers will, during the Exchange Offer Registration Period
or the Shelf Registration Period, as applicable, promptly deliver to each
Initial Purchaser, each Notifying Exchanging Dealer and such other persons
that are required to deliver a prospectus following the Registered Exchange
Offer and have so advised the Company in writing, without charge, as many
copies of the final prospectus included in the Exchange Offer Registration
Statement or the Shelf Registration Statement and any amendment or
supplement thereto as such Initial Purchaser, Notifying Exchanging Dealer
or other persons may reasonably request; and the Issuers consent to the use
of such prospectus or any amendment or supplement thereto by any such
Initial Purchaser, Notifying Exchanging Dealer or other persons, as
applicable, as aforesaid.
(h) Prior to the effective date of any Registration Statement, the
Issuers will use their reasonable best efforts to register or qualify, or
cooperate with the Holders of Securities, Exchange Securities or Private
Exchange Securities included therein in connection with the registration or
qualification of, such Securities, Exchange Securities or Private Exchange
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holder reasonably requests in writing and to do
any and all other acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Securities, Exchange Securities or
Private Exchange Securities covered by such Registration Statement;
provided that the Issuers will not be required to qualify generally to do
--------
business in any jurisdiction where such Issuers are not then so qualified
or to take any action which would subject such Issuers to general service
of process or to taxation in any such jurisdiction where such Issuers are
not then so subject.
(i) The Issuers will cooperate with the Holders of Securities,
Exchange Securities or Private Exchange Securities to facilitate the timely
preparation and delivery of certificates representing Securities, Exchange
Securities or Private Exchange Securities to be sold pursuant to any
Registration Statement free of any restrictive legends and in such
denominations and registered in such names as the Holders thereof may
request in writing prior to sales of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Registration Statement.
(j) If any event contemplated by Section 4(b)(ii) through (v) occurs
during the period for which the Issuers are required to maintain an
effective Registration Statement, the Issuers will promptly prepare and
file with the Commission a post-effective amendment to the Registration
Statement or a supplement to the related prospectus or file any other
required document so that, as thereafter delivered to purchasers of the
Securities, Exchange Securities or Private Exchange Securities from a
Holder, the prospectus will not include an untrue statement of a material
fact or omit to state a material fact necessary
-9-
<PAGE>
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Issuers will provide a CUSIP number for the Securities, the
Exchange Securities and the Private Exchange Securities, as the case may
be, and provide the applicable trustee with printed certificates for the
Securities, the Exchange Securities or the Private Exchange Securities, as
the case may be, in a form eligible for deposit with The Depository Trust
Company.
(l) The Issuers will comply with all applicable rules and regulations
of the Commission and will make generally available to their security
holders as soon as practicable after the effective date of the applicable
Registration Statement an earnings statement satisfying the provisions of
Section 11(a) of the Securities Act; provided that in no event shall such
--------
earnings statement be mailed later than 45 days after the end of a 12-month
period (or 90 days, if such period is a fiscal year) beginning with the
first month of the Company's first fiscal quarter commencing after the
effective date of the applicable Registration Statement, which statement
shall cover such 12-month period.
(m) The Issuers will cause the Indenture or the Exchange Securities
Indenture, as the case may be, to be qualified under the Trust Indenture
Act as required by applicable law in a timely manner.
(n) The Issuers may require each Holder of Transfer Restricted
Securities to be registered pursuant to any Shelf Registration Statement to
furnish to the Company such information concerning the Holder and the
distribution of such Transfer Restricted Securities as the Issuers may from
time to time reasonably require for inclusion in such Shelf Registration
Statement, and the Issuers may exclude from such registration the Transfer
Restricted Securities of any Holder that fails to furnish such information
within a reasonable time after receiving such request.
(o) In the case of a Shelf Registration Statement, each Holder of
Transfer Restricted Securities to be registered pursuant thereto agrees by
acquisition of such Transfer Restricted Securities that, upon receipt of
any notice from the Issuers pursuant to Section 4(b)(ii) through (v), such
Holder will discontinue disposition of such Transfer Restricted Securities
until such Holder's receipt of copies of the supplemental or amended
prospectus contemplated by Section 4(j) or until advised in writing (the
"Advice") by the Company that the use of the applicable prospectus may be
------
resumed. If the Issuers shall give any notice under Section 4(b)(ii)
through (v) during the period that the Issuers are required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
--------------------
Effectiveness Period shall be extended by the number of days during such
period from and including the date of the giving of such notice to and
including the date when each seller of Transfer Restricted Securities
covered by such Registration Statement shall have received (x) the copies
of the supplemental or amended prospectus contemplated by Sec-
-10-
<PAGE>
tion 4(j) (if an amended or supplemental prospectus is required) or (y) the
Advice (if no amended or supplemental prospectus is required).
(p) In the case of a Shelf Registration Statement, the Issuers shall
enter into such customary agreements (including, if requested, not more
than one underwriting agreement in customary form) and take all such other
action, if any, as Holders of a majority in aggregate principal amount of
the Securities, Exchange Securities and Private Exchange Securities being
sold or the managing underwriters (if any) shall reasonably request in
order to facilitate any disposition of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Shelf Registration Statement.
(q) In the case of a Shelf Registration Statement, the Issuers shall
(i) make reasonably available for inspection by a representative of, and
Special Counsel (as defined below) acting for, Holders of a majority in
aggregate principal amount of the Securities, Exchange Securities and
Private Exchange Securities being sold and any underwriter participating in
any disposition of Securities, Exchange Securities or Private Exchange
Securities pursuant to such Shelf Registration Statement, all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries and (ii) use its commercially
reasonable efforts to have its officers, directors, employees, accountants
and counsel supply all relevant information reasonably requested by such
representative, Special Counsel (as defined below) or any such underwriter
(an "Inspector") in connection with such Shelf Registration Statement.
---------
(r) In the case of a Shelf Registration Statement, the Issuers shall,
if requested by Holders of a majority in aggregate principal amount of the
Securities, Exchange Securities and Private Exchange Securities being sold,
their Special Counsel (as defined below) or the managing underwriters (if
any) in connection with such Shelf Registration Statement, use their
reasonable best efforts to cause (i) their counsel to deliver an opinion
relating to the Shelf Registration Statement and the Securities, Exchange
Securities or Private Exchange Securities, as applicable, in customary
form, (ii) their officers to execute and deliver all customary documents
and certificates requested by Holders of a majority in aggregate principal
amount of the Securities, Exchange Securities and Private Exchange
Securities being sold, their Special Counsel (as defined below) or the
managing underwriters (if any) and (iii) their independent public
accountants to provide a comfort letter or letters in customary form,
subject to receipt of appropriate documentation as contemplated, and only
if permitted, by Statement of Auditing Standards No. 72.
5. Registration Expenses. The Issuers will bear all expenses
---------------------
incurred in connection with the performance of their obligations under Sections
1, 2, 3 and 4 and the Issuers will reimburse the Initial Purchasers and the
Holders for the reasonable fees and disbursements of one firm of attorneys (in
addition to any local counsel) chosen by the Holders of a majority in aggregate
principal amount of the Securities, the Exchange Securities and the Private
Exchange Securities to be sold pursuant to each Registration Statement (the
"Special Counsel") acting for the Initial Purchasers or Holders in connection
---------------
therewith.
-11-
<PAGE>
6. Indemnification.
---------------
(a) In the event of a Shelf Registration Statement or in connection
with any prospectus delivery pursuant to an Exchange Offer Registration
Statement by an Initial Purchaser or Exchanging Dealer, as applicable, each of
the Issuers, jointly and severally, shall indemnify and hold harmless each
Holder (including, without limitation, any such Initial Purchaser or Exchanging
Dealer), its affiliates, their respective officers, directors, employees,
representatives and agents, and each person, if any, who controls such Holder
within the meaning of the Securities Act or the Exchange Act (collectively
referred to for purposes of this Section 6 and Section 7 as a Holder) from and
against any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, without limitation, any loss, claim, damage,
liability or action relating to purchases and sales of Securities, Exchange
Securities or Private Exchange Securities), to which that Holder may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and shall
reimburse each Holder promptly upon demand for any legal or other expenses
reasonably incurred by that Holder in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Issuers shall not be liable
-------- -------
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such documents in
reliance upon and in conformity with any Holders' Information; and provided,
--------
further, that with respect to any such untrue statement in or omission from any
- -------
related preliminary prospectus, the indemnity agreement contained in this
Section 6(a) shall not inure to the benefit of any Holder from whom the person
asserting any such loss, claim, damage, liability or action received Securities,
Exchange Securities or Private Exchange Securities to the extent that such loss,
claim, damage, liability or action of or with respect to such Holder results
from the fact that both (A) a copy of the final prospectus was not sent or given
to such person at or prior to the written confirmation of the sale of such
Securities, Exchange Securities or Private Exchange Securities to such person
and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of non-compliance by the
Company with Section 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder shall
indemnify and hold harmless the Issuers, their affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls any Issuer within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 6(b) and
Section 7 as the Issuers), from and against any loss, claim, damage or
liability, joint or
-12-
<PAGE>
several, or any action in respect thereof, to which the Issuers may become
subject, whether commenced or threatened, under the Securities Act, the Exchange
Act, any other federal or state statutory law or regulation, at common law or
otherwise, insofar as such loss, claim, damage, liability or action arises out
of, or is based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any such Registration Statement or any prospectus
forming part thereof or in any amendment or supplement thereto or (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, but in
each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with any Holders' Information furnished to the Issuers by such
Holder, and shall reimburse the Issuers for any legal or other expenses
reasonably incurred by the Issuers in connection with investigating or defending
or preparing to defend against or appearing as a third party witness in
connection with any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that no such Holder shall be liable
-------- -------
for any indemnity claims hereunder in excess of the amount of net proceeds
received by such Holder from the sale of Securities, Exchange Securities or
Private Exchange Securities pursuant to such Shelf Registration Statement.
(c) Promptly after receipt by an indemnified party under this Section
6 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to Section 6(a) or 6(b), notify the indemnifying
party in writing of the claim or the commencement of that action; provided,
--------
however, that the failure to notify the indemnifying party shall not relieve it
- -------
from any liability which it may have under this Section 6 except to the extent
that it has been materially prejudiced (through the forfeiture of substantive
rights or defenses) by such failure; and provided, further, that the failure to
-------- -------
notify the indemnifying party shall not relieve it from any liability which it
may have to an indemnified party otherwise than under this Section 6. If any
such claim or action shall be brought against an indemnified party, and it shall
notify the indemnifying party thereof, the indemnifying party shall be entitled
to participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
-------- -------
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying
-13-
<PAGE>
party (in which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel reasonably satisfactory to
the indemnified party to assume the defense of such action within a reasonable
time after receiving notice of the commencement of the action, in each of which
cases the reasonable fees, disbursements and other charges of counsel will be at
the expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 6(a) and 6(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
7. Contribution. If the indemnification provided for in Section 6 is
------------
unavailable or insufficient to hold harmless an indemnified party under Section
6(a) or 6(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the Issuers from the offering and sale of the Securities,
on the one hand, and a Holder with respect to the sale by such Holder of
Securities, Exchange Securities or Private Exchange Securities, on the other, or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Issuers on the one hand and such Holder on the other with respect to the
statements or omissions that resulted in such loss, claim, damage or liability,
or action in respect thereof, as well as any other relevant equitable
considerations. The relative benefits received by the Issuers on the one hand
and a Holder on the other with respect to such offering and such sale shall be
deemed to be in the same proportion as the total net proceeds from the offering
of the Securities (before deducting expenses) received by or on behalf of the
Company as set forth in the table on the cover of the Offering Memorandum, on
the one hand, bear to the total proceeds received by such Holder with respect to
its sale of Securities, Exchange Securities or Private Exchange Securities, on
the other. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material
-14-
<PAGE>
fact relates to the Issuers or information supplied by the Issuers on the one
hand or to any Holders' Information supplied by such Holder on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 7 were to be determined by pro rata allocation or by any other
method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7 shall be deemed to include, for
purposes of this Section 7, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending or
preparing to defend any such action or claim. Notwithstanding the provisions of
this Section 7, an indemnifying party that is a Holder of Securities, Exchange
Securities or Private Exchange Securities shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Securities, Exchange Securities or Private Exchange Securities sold by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
8. Rules 144 and 144A. The Issuers shall use their reasonable best
------------------
efforts to file the reports required to be filed by them under the Securities
Act and the Exchange Act in a timely manner and, if at any time the Issuers are
not required to file such reports, such Issuers will, upon the written request
of any Holder of Transfer Restricted Securities, make publicly available other
information so long as necessary to permit sales of such Holder's securities
pursuant to Rules 144 and 144A. Each of the Issuers covenants that it will take
such further action as any Holder of Transfer Restricted Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Transfer Restricted Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rules 144 and
144A (including, without limitation, the requirements of Rule 144A(d)(4)). Upon
the written request of any Holder of Transfer Restricted Securities, the Issuers
shall deliver to such Holder a written statement as to whether they have
complied with such requirements. Notwithstanding the foregoing, nothing in this
Section 8 shall be deemed to require any of the Issuers to register any of such
Issuer's securities pursuant to the Exchange Act.
9. Underwritten Registrations. If any of the Transfer Restricted
--------------------------
Securities covered by any Shelf Registration Statement are to be sold in an
underwritten offering, the investment bank or investment banks and manager or
managers that will administer the offering will be selected by the Holders of a
majority in aggregate principal amount of such Transfer Restricted Securities
included in such offering, subject to the consent of the Company (which shall
not be unreasonably withheld or delayed), and such Holders shall be responsible
for all underwriting commissions and discounts in connection therewith.
-15-
<PAGE>
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted
Securities on the basis reasonably provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (ii)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
10. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement may
----------------------
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the Company has obtained the
written consent of Holders of a majority in aggregate principal amount of the
Securities, the Exchange Securities and the Private Exchange Securities, taken
as a single class. Notwithstanding the foregoing, a waiver or consent to depart
from the provisions hereof with respect to a matter that relates exclusively to
the rights of Holders whose Securities, Exchange Securities or Private Exchange
Securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of a majority in aggregate principal amount of the Securities, the
Exchange Securities and the Private Exchange Securities being sold by such
Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telecopier or air courier guaranteeing next-day delivery:
(i) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 10(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy in
like manner to Bear, Stearns & Co. Inc., Chase Securities Inc., Salomon
Smith Barney Inc. and Barclays Capital Inc.;
(ii) if to an Initial Purchaser, initially at its address set forth
in the Purchase Agreement; and
(iii) if to the Issuers, initially at the address of the Company set
forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; and when receipt is acknowledged by the recipient's
telecopier machine, if sent by telecopier.
(c) Successors and Assigns. This Agreement shall be binding upon
----------------------
the Issuers and their successors and assigns.
-16-
<PAGE>
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts (which may be delivered in original form or by telecopier) and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(e) Definition of Terms. For purposes of this Agreement, (a) the
-------------------
term "business day" means any day on which the New York Stock Exchange, Inc. is
open for trading, (b) the term "subsidiary" has the meaning set forth in Rule
405 under the Securities Act and (c) except where otherwise expressly provided,
the term "affiliate" has the meaning set forth in Rule 405 under the Securities
Act.
(f) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of New York.
(h) Remedies. In the event of a breach by the Issuers or by any
--------
Holder of any of their obligations under this Agreement, each Holder or the
Issuers, as the case may be, in addition to being entitled to exercise all
rights granted by law, including recovery of damages (other than the recovery of
damages for a breach by the Issuers of their obligations under Sections 1 or 2
hereof for which liquidated damages have been paid pursuant to Section 3
hereof), will be entitled to specific performance of its rights under this
Agreement. The Issuers and each Holder agree that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby further agree that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(i) No Inconsistent Agreements. Each of the Issuers represents,
--------------------------
warrants and agrees that (i) it has not entered into, shall not, on or after the
date of this Agreement, enter into any agreement that is inconsistent with the
rights granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof, (ii) it has not previously entered into any agreement which
remains in effect granting any registration rights with respect to any of its
debt securities to any person and (iii) without limiting the generality of the
foregoing, without the written consent of the Holders of a majority in aggregate
principal amount of the then outstanding Transfer Restricted Securities, it
shall not grant to any person the right to request the Issuers to register any
debt securities of any of the Issuers under the Securities Act unless the rights
so granted are not in conflict or inconsistent with the provisions of this
Agreement.
(j) No Piggyback on Registrations. Neither the Issuers nor any of
-----------------------------
their security holders (other than the Holders of Transfer Restricted Securities
in such capacity) shall have the right to include any securities of any of the
Issuers in any Shelf Registration or Registered Exchange Offer other than
Transfer Restricted Securities.
-17-
<PAGE>
(k) Severability. The remedies provided herein are cumulative and not
------------
exclusive of any remedies provided by law. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed the
remaining terms, provisions, covenants and restrictions without including any of
such that may be hereafter declared invalid, illegal, void or unenforceable.
-18-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Issuers and the Initial Purchasers.
Very truly yours,
METRIS COMPANIES INC.
By: _____________________________________
Name:
Title:
METRIS DIRECT, INC.
By: _____________________________________
Name:
Title:
<PAGE>
Accepted:
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
SALOMON SMITH BARNEY INC.
BARCLAYS CAPITAL INC.
By: Bear, Stearns & Co. Inc.
By____________________________
Authorized Signatory
<PAGE>
ANNEX A
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
The Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with resales of Exchange Securities received in exchange for
Securities where such Securities were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Securities for its own
account in exchange for Securities, where such Securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Securities. See "Plan of Distribution."
<PAGE>
ANNEX C
PLAN OF DISTRIBUTION
--------------------
Each broker-dealer that receives Exchange Securities for its own
account pursuant to the Registered Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Securities.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Securities
received in exchange for Securities where such Securities were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, for a period of 90 days after the Expiration Date, it will make
this prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. In addition, until _______________,
199_, all dealers effecting transactions in the Exchange Securities may be
required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange
Securities by broker-dealers. Exchange Securities received by broker-dealers
for their own account pursuant to the Registered Exchange Offer may be sold from
time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange
Securities or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or at negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such broker-dealer or the
purchasers of any such Exchange Securities. Any broker-dealer that resells
Exchange Securities that were received by it for its own account pursuant to the
Registered Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Securities may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
Exchange Securities and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The Letter of Transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Registered Exchange Offer (including the expenses of one counsel for the Holders
of the Securities) other than commissions or concessions of any
<PAGE>
broker-dealers and will indemnify the Holders of the Securities (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
-2-
<PAGE>
ANNEX D
o CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR
SUPPLEMENTS THERETO.
Name: ______________________________
Address ______________________________
______________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Securities. If the undersigned is a broker-dealer that will receive Exchange
Securities for its own account in exchange for Securities that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such Exchange Securities; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
EXHIBIT 4.4
METRIS COMPANIES INC., as Issuer,
and
the GUARANTORS named herein
$100,000,000
10% Senior Notes due 2004, Series A
10% Senior Notes due 2004, Series B
FIRST SUPPLEMENTAL INDENTURE
Dated as of June 25, 1999
TO
INDENTURE
Dated as of November 7, 1997
THE FIRST NATIONAL BANK OF CHICAGO,
as Trustee
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of June 25, 1999, among METRIS
COMPANIES INC., a Delaware corporation (the "Company"), the GUARANTOR named
herein and THE FIRST NATIONAL BANK OF CHICAGO, as Trustee (the "Trustee").
RECITALS
The Company and Metris Direct, Inc., as Guarantor (the "Guarantor"), have
heretofore executed and delivered to the Trustee a certain Indenture, dated as
of November 7, 1997 (the "Indenture"), pursuant to which the Company issued and
has outstanding $100,000,000 aggregate principal amount of its 10% Senior Notes
due 2004, Series B (the "Securities"). All terms used in this First Supplemental
Indenture which are defined in the Indenture shall have the meanings assigned to
them in the Indenture.
The Company desires and has requested the Trustee to join with it in the
execution and delivery of this First Supplemental Indenture for the purpose of
amending the Indenture to cure an ambiguity with respect to the provision in
Section 1.01 of the Indenture relating to the definition of "Consolidated Net
Worth."
Section 9.01(a) of the Indenture provides that a supplemental indenture may
be entered into by the Company and the Trustee without the consent of any Holder
to cure any ambiguity, defect or inconsistency, provided that such supplement
does not adversely affect the rights of any Holder.
The Company has furnished the Trustee with (i) an Opinion of Counsel and an
Officers' Certificate stating that the execution of this First Supplemental
Indenture is authorized or permitted by the Indenture, that it is not
inconsistent with the Indenture and that it will be a valid and binding
obligation of the Company and (ii) a copy of the resolutions of its Board of
Directors certified by its Secretary, pursuant to which this First Supplemental
Indenture has been authorized.
All things necessary to make this First Supplemental Indenture a valid
agreement of the Company and the Trustee and a valid amendment of and supplement
to the Indenture have been done.
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
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, as follows:
<PAGE>
ARTICLE ONE
SECTION 101. The definition of "Consolidated Net Worth"contained in Section
1.01 of the Indenture is hereby amended to insert the words "(other than
dividends paid solely in Equity Interests (other than Disqualified Stock))"
after the first occurrence of the word "dividends" in clause (ii) of such
definition.
ARTICLE TWO
SECTION 201. For all purposes of this First Supplemental Indenture, except
as otherwise herein expressly provided or unless the context otherwise requires:
(i) the terms and expressions used herein shall have the same meanings as
corresponding terms and expressions used in the Indenture; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
First Supplemental Indenture refer to this First Supplemental Indenture as a
whole and not to any particular section hereof.
SECTION 202. Except as expressly amended hereby, the Indenture is in all
respects ratified and confirmed and all the terms, conditions and provisions
thereof shall remain in full force and effect.
SECTION 203. This First Supplemental Indenture shall form a part of the
Indenture for all purposes, and every Holder of Securities heretofore or
hereafter authenticated and delivered shall be bound hereby.
SECTION 204. This First Supplemental Indenture may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original, and all of such counterparts shall together constitute one and the
same instrument.
SECTION 205. The Trustee makes no representation as to the validity or
sufficiency of this First Supplemental Indenture.
SECTION 206. The Recitals contained herein shall be taken as the statements
of the Company and the Trustee assumes no responsibility for their correctness.
SECTION 207. This instrument shall be deemed to be a contract made under
the laws of the State of New York and for all purposes shall be governed by and
construed in accordance with the laws of the State of New York.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
METRIS COMPANIES INC.
By
-----------------------------------
Name:
Title:
METRIS DIRECT, INC.
By
-----------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
-----------------------------------
Name:
Title:
-3-
<PAGE>
Exhibit 5.1
[LETTERHEAD OF DORSEY & WHITNEY LLP]
Metris Companies Inc.
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to each of Metris Companies Inc., a Minnesota
corporation (the "Company"), and its subsidiary, Metris Direct, Inc., a
Minnesota corporation (the "Guarantor") in connection with a Registration
Statement on Form S-4 (the "Registration Statement") relating to (1) the
proposed issuance by the Company of $150,000,000 aggregate principal amount of
the Company's 10 1/8% Senior Notes Due 2006 (the "New Notes") registered under
the Securities Act of 1933, as amended (the "Securities Act"), in exchange for
up to $150,000,000 aggregate principal amount of the Company's outstanding 10
1/8% Senior Notes Due 2006 (the "Old Notes") and (2) the guarantee of the New
Notes (the "New Guarantee") registered under the Securities Act in exchange for
the guarantee of the Old Notes (the "Old Guarantee"). The New Notes are issuable
under an Indenture, dated as of July 13, 1999 (the "Indenture"), by and among
the Company, the Guarantor and The Bank of New York, as Trustee (the "Trustee").
The Old Notes are, and the New Notes will be, unconditionally guaranteed on a
senior basis by the Guarantor pursuant to a guarantee contained in the
Indenture.
We have examined such documents, including resolutions adopted by the Board
of Directors of the Company on June 25, 1999 and resolutions adopted by the
Board of Directors of the Guarantor on June 11, 1999 (collectively, the
"Resolutions"), and have reviewed such questions of law as we have considered
necessary and appropriate for the purposes of our opinion set forth below. In
rendering our opinion, we have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures and the
conformity to authentic originals of all documents submitted to us as copies. We
have also assumed the legal capacity for all purposes relevant hereto of all
natural persons and, with respect to all parties to agreements or instruments
relevant hereto other than the Company, that such parties had the requisite
power and authority (corporate or otherwise) to execute, deliver and perform
such agreements or instruments, that such agreements or instruments have been
duly authorized by all requisite action (corporate or otherwise), executed and
delivered by such parties and that such agreements or instruments are the valid,
binding and enforceable obligations of such parties. As to questions of fact
material to our opinion, we have relied upon certificates of officers of the
Company and the Guarantor and of public officials.
Based on the foregoing, we are of the opinion that:
(1) the New Notes have been duly authorized by all requisite corporate
action and, when executed and authenticated as specified in the Indenture and
delivered against surrender and cancellation of a like principal amount of Old
Notes in the manner described in the Registration Statement, the New Notes will
constitute valid and binding obligations of the Company, enforceable in
accordance with their terms.
(2) The New Guarantee has been duly authorized by the Guarantor and, when
executed as specified in the Indenture and delivered against surrender and
cancellation of the Old Guarantee, will constitute the legally binding
obligation of the Guarantor, enforceable in accordance with its terms.
<PAGE>
Metris Companies Inc.
Page 2
The opinions set forth above are subject to the following qualifications
and exceptions:
(a) Our opinions stated above are subject to the effect of any
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar law of general application affecting creditors' rights.
(b) Our opinions stated above are subject to the effect of general
principles of equity, including (without limitation) concepts of
materiality, reasonableness, good faith and fair dealing, and other similar
doctrines affecting the enforceability of agreements generally (regardless
of whether considered in a proceeding in equity or at law).
(c) In rendering the opinions set forth above, we have assumed that,
at the time of the authentication and delivery of the New Notes and
delivery of the New Guarantee, the Resolutions referred to above will not
have been modified or rescinded, there will not have occurred any change in
the law affecting the authorization, execution, delivery, validity or
enforceability of the New Notes and the New Guarantee, the Registration
Statement will have been declared effective by the Securities and Exchange
Commission and will continue to be effective, none of the particular terms
of the New Notes and the New Guarantee will violate any applicable law and
neither the issuance and sale thereof nor the compliance by the Company or
the Guarantor with the terms thereof will result in a violation of any
agreement or instrument then binding upon the Company or the Guarantor or
any order of any court or governmental body having jurisdiction over the
Company or the Guarantor.
(d) Minnesota Statutes ss. 290.371, Subd. 4, provides that any
corporation required to file a Notice of Business Activities Report does
not have a cause of action upon which it may bring suit under Minnesota law
unless the corporation has filed a Notice of Business Activities Report and
provides that the use of the courts of the State of Minnesota for all
contracts executed and all causes of action that arose before the end of
any period for which a corporation failed to file a required report is
precluded. Insofar as our opinion may relate to the valid, binding and
enforceable character of any agreement under Minnesota law or in a
Minnesota court, we have assumed that any party seeking to enforce such
agreement has at all times been, and will continue at all times to be,
exempt from the requirement of filing a Notice of Business Activities
Report or, if not exempt, has duly filed, and will continue to duly file,
all Notice of Business Activities Reports.
Our opinion expressed above is limited to the laws of the State of
Minnesota and New York and the federal laws of the United States of America.
We hereby consent to your filing of this opinion as an exhibit to the
Registration Statement, and to the reference to our firm under the caption
"Legal Matters" contained in the Prospectus that is part of the Registration
Statement.
Dated: September 8, 1999
Very truly yours,
/s/ Dorsey & Whitney LLP
KLP
<PAGE>
EXHIBIT 12.1
METRIS COMPANIES INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- ------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- ------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before income taxes: (1) $83,155 $38,413 $93,248 $61,883 $32,546 $7,449 $3,503
Fixed Charges: (1)
Interest on indebtedness, and
amortization of debt expense 19,436 12,831 30,513 11,951 4,106 1,217 -
Interest factor of rental expense 1,710 843 2,134 1,313 378 50 26
-------- ------- -------- ------- ------- ------ ------
Total fixed charges 21,146 13,674 32,647 13,264 4,484 1,267 26
-------- ------- -------- ------- ------- ------ ------
Total available earnings $104,301 $52,087 $125,895 $75,147 $37,030 $8,716 $3,529
======== ======= ======== ======= ======= ====== ======
Ratio of earnings to fixed charges 4.93 3.81 3.86 5.67 8.26 6.88 134.16
</TABLE>
(1) As defined in Item 503(d) of Regulation S-K.
<PAGE>
EXHIBIT 12.2
METRIS COMPANIES INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30, Year Ended December 31,
------------------------- ----------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- ------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings before income taxes: (1) $83,155 $38,413 $93,248 $61,883 $32,546 $7,449 $3,503
Preferred dividend requirement $9,973 $1,100
Ratio of earnings before tax expense to net income 1.63 1.63
-------- ------- -------- ------- ------- ------ ------
Preferred dividends (2) $16,296 $0 $1,789
Fixed Charges: (1)
Interest on indebtedness, and
amortization of debt expense 19,436 12,831 30,513 11,951 4,106 1,217 -
Interest factor of rental expense 1,710 843 2,134 1,313 378 50 26
-------- ------- -------- ------- ------- ------ ------
21,146 13,674 32,647 13,264 4,484 1,267 26
Total fixed charges and preferred dividends 37,442 13,674 34,436 13,264 4,484 1,267 26
-------- ------- -------- ------- ------- ------ ------
Total available earnings $104,301 $52,087 $125,895 $75,147 $37,030 $8,716 $3,529
======== ======= ======== ======= ======= ====== ======
Ratio of earnings to fixed charges and preferred
dividends 2.79 3.81 3.66 5.67 8.26 6.88 134.16
</TABLE>
(1) As defined in Item 503(d) of Regulation S-K.
(2) The preferred dividends were increased to amounts representing the pretax
earnings that would be required to cover such dividend requirements.
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Metris Companies Inc.:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KMPG LLP
September 7, 1999
<PAGE>
EXHIBIT 24.1
POWERS OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Z. Jill Barclift and David
Wesselink and each of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign a Registration Statement on Form
S-4 with respect to an offer to exchange registered 10 1/8% Senior Notes for
unregistered 10 1/8% Senior Notes due 2006 of Metris Companies Inc., and any and
all amendments thereto, including a registration statement under Rule 462 and
post-effective amendments, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission and any necessary state securities commissions or other agencies,
each of said attorneys and agents to have the power to act with or without the
other, and granting unto said attorney-in-fact and agent, full power and
authority to do and perform to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or the substitutes for such attorney-in-fact and
agent, duly lawfully do or cause to be done by virtue hereof.
SIGNATURE DATE
--------- ----
By: Dated:
----------------------------------------
Theodore Deikel
Chairman of the Board of Directors
By: /s/ Dudley C. Mecum Dated: August 31, 1999
----------------------------------------
Dudley C. Mecum
Director
By: /s/ Frank D. Trestman Dated: August 31, 1999
----------------------------------------
Frank D. Trestman
Director
By: /s/ Derek V. Smith Dated: August 31, 1999
----------------------------------------
Derek V. Smith
Director
By: /s/ Lee R. Anderson, Sr. Dated: August 31, 1999
----------------------------------------
Lee R. Anderson, Sr.
Director
<PAGE>
By: /s/ John A. Cleary Dated: August 31, 1999
----------------------------------------
John A. Cleary
Director
By: Dated:
----------------------------------------
Thomas H. Lee
Director
By: Dated:
----------------------------------------
David V. Harkins
Director
By: Dated:
----------------------------------------
C. Hunter Boll
Director
By: Dated:
----------------------------------------
Thomas M. Hagerty
Director
2
<PAGE>
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |_|
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
METRIS COMPANIES INC.
(Exact name of obligor as specified in its charter)
Delaware 41-1849591
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
(Address of principal executive offices) (Zip code)
----------
METRIS DIRECT, INC.
(Exact name of obligor as specified in its charter)
Minnesota 41-1111974
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
(Address of principal executive offices) (Zip code)
----------
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, N.Y.
New York 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-2-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 16th day of August, 1999.
THE BANK OF NEW YORK
By: /s/ REMO J. REALE
------------------------------------
Name: REMO J. REALE
Title: VICE PRESIDENT
-3-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business March 31, 1999,
published in accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS In Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin.. $ 4,508,742
Interest-bearing balances........................... 4,425,071
Securities:
Held-to-maturity securities......................... 836,304
Available-for-sale securities....................... 4,047,851
Federal funds sold and Securities purchased under
agreements to resell................................ 1,743,269
Loans and lease financing receivables:
Loans and leases, net of unearned income............ 39,349,679
LESS: Allowance for loan and lease losses........... 603,025
LESS: Allocated transfer risk reserve............... 15,906
Loans and leases, net of unearned income,
allowance, and reserve........................... 38,730,748
Trading Assets......................................... 1,571,372
Premises and fixed assets (including capitalized
leases)............................................. 685,674
Other real estate owned................................ 10,331
Investments in unconsolidated subsidiaries and
associated companies................................ 182,449
Customers' liability to this bank on acceptances
outstanding......................................... 1,184,822
Intangible assets...................................... 1,129,636
Other assets........................................... 2,632,309
-----------
Total assets........................................... $61,688,578
===========
LIABILITIES
Deposits:
In domestic offices................................. $25,731,036
Noninterest-bearing................................. 10,252,589
Interest-bearing.................................... 15,478,447
In foreign offices, Edge and Agreement
subsidiaries, and IBFs............................ 18,756,302
Noninterest-bearing................................. 111,386
Interest-bearing.................................... 18,644,916
Federal funds purchased and Securities sold under
agreements to repurchase............................ 3,276,362
Demand notes issued to the U.S.Treasury................ 230,671
Trading liabilities.................................... 1,554,493
Other borrowed money:
With remaining maturity of one year or less......... 1,154,502
With remaining maturity of more than one year
through three years............................... 465
With remaining maturity of more than three years.... 31,080
Bank's liability on acceptances executed and
outstanding......................................... 1,185,364
Subordinated notes and debentures...................... 1,308,000
Other liabilities...................................... 2,743,590
-----------
Total liabilities...................................... 55,971,865
-----------
EQUITY CAPITAL
Common stock........................................... 1,135,284
Surplus................................................ 764,443
Undivided profits and capital reserves................. 3,807,697
Net unrealized holding gains (losses) on
available-for-sale securities....................... 44,106
Cumulative foreign currency translation adjustments.... (34,817)
-----------
Total equity capital................................... 5,716,713
-----------
Total liabilities and equity capital................... $61,688,578
===========
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Reyni )
Alan R. Griffith ) Directors
Gerald L. Hassell )
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
METRIS COMPANIES, INC.
Offer for Outstanding
10 1/8% Senior Notes due 2006
Which Were Issued in a Private Offering
In Exchange For
10 1/8% Senior Notes due 2006
Which Have Been Registered Under the Securities Act of 1933
Pursuant to the Prospectus, dated _________________, 1999
================================================================================
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON
______________________, 1999, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS
MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
================================================================================
The Exchange Agent for the Exchange Offer is The Bank of New York
By Registered or Certified Mail: Facsimile Transmissions:
(Eligible Institutions Only)
The Bank of New York
101 Barclay Street, 7E (212) 815-6339
New York, New York 10286
Attention: Gertrude Jean Pirre
By Hand or Overnight Delivery: Confirm by Telephone
or For Information Call:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window (212) 815-5920
Ground Level
New York, New York 10286
Attention: Gertrude Jean Pirre
----------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET
FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY BEFORE COMPLETING THIS
LETTER OF TRANSMITTAL.
<PAGE>
The undersigned acknowledges that he or she has received and reviewed the
Prospectus, dated ____________, 1999 (the "Prospectus"), of Metris Companies
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
offer") to exchange an aggregate principal amount of up to $150,000,000 of the
Company's 10 1/8% Senior Notes due 2006 which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), for a like principal
amount of the Company's issued and outstanding 10 1/8% Senior Notes due 2006
(the "Old Notes") from the registered holders thereof (the "Holders").
For each Old Note accepted for exchange, the Holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. The New Notes will bear interest from the most recent date
to which interest has been paid on the Old Notes or, if no interest has been
paid on the Old Notes, from ________________, 1999. Accordingly, registered
Holders of New Notes on the relevant record date for the first interest payment
date following the consummation of the Exchange Offer will receive interest
accruing from the most recent date to which interest has been paid or, if no
interest has been paid, from _____________________, 1999. Old Notes accepted for
exchange will cease to accrue interest from and after the date of consummation
of the Exchange offer. Holders of Old Notes whose Old Notes are accepted for
exchange will not receive any payment in respect of accrued interest on such Old
Notes otherwise payable on any interest payment date the record date for which
occurs on or after consummation of the Exchange Offer.
This Letter is to be completed by a holder of Old Notes either if (1)
certificates are to be forwarded herewith or (2) tenders are to be made by
book-entry transfer to the account maintained by the Exchange Agent at The
Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the
procedures set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus. Holders of Old Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or confirmation of
the book-entry tender of their Old Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other
documents required by this Letter to the Exchange Agent on or prior to the
Expiration Date, must tender their Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus. See Instruction 1. Delivery of documents
to the Book-Entry Transfer Facility does not constitute delivery to the Exchange
Agent.
Tenders by book-entry transfer also may be made by delivering an Agent's
Message in lieu of this Letter. The term "Agent's Message" means a message
transmitted by the Book-Entry Transfer Facility and received by the Exchange
Agent and forming a part of a Book-Entry Confirmation, which states that the
Book-Entry Transfer Facility has received an express acknowledgment from the
tendering participant, which acknowledgment states that such participant has
received and agrees to be bound by this Letter and the Company may enforce this
Letter against such participant.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Notes. If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act of
1933, as amended, in connection with any resale of such New Notes; however, by
so acknowledging and by delivering such a prospectus the undersigned will not be
deemed to admit that it is an "underwriter" within the meaning of the Securities
Act of 1933, as amended. If the undersigned is a broker-dealer that will receive
New Notes, it represents that the Old Notes to be exchanged for the New Notes
were acquired as a result of market-making activities or other trading
activities.
-2-
<PAGE>
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- -----------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s)
(Please fill in, if blank) Certificate Principal Amount Aggregate Principal
Number(s)* of Old Note(s) Amount Tendered**
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total:
- -----------------------------------------------------------------------------------------------------------------
* Do not complete if Old Notes are being tendered by book-entry transfer.
- -----------------------------------------------------------------------------------------------------------------
** A Holder will be deemed to have tendered ALL Old Notes unless a lesser
amount is specified in this column. See Instruction 2. Old Notes tendered
hereby must be in denominations of principal amount of $1,000 and any
integral multiple thereof. See Instruction 1.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE
BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ____________________________________________
Account Number ______________________ Transaction Code Number ____________
================================================================================
================================================================================
[ ] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND
COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s)___________________________________________
Window Ticket Number (if any)_____________________________________________
Date of Execution of Notice of Guaranteed Delivery________________________
Name of Institution Which Guaranteed Delivery_____________________________
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number ______________________ Transaction Code Number ____________
================================================================================
================================================================================
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:_______________________________________________________________________
Address:____________________________________________________________________
================================================================================
-3-
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated on page 3. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the undersigned's true and lawful agent and attorney-in-fact with
respect to such tendered Old Notes, with full power of substitution, among other
things, to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned hereby represents and warrants that the undersigned has full power
and authority to tender, sell, assign and transfer the Old Notes, and to acquire
Exchange Notes issuable upon the exchange of such tendered old Notes, and that,
when the same are accepted for exchange, the Company will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and not subject to any adverse claim when the same are accepted
by the Company. The undersigned hereby further represents that: (1) any New
Notes acquired in exchange for Old Notes tendered hereby will have been acquired
in the ordinary course of business of the person receiving such New Notes,
whether or not such person is the undersigned, (2) neither the Holder of such
Old Notes nor any such other person is participating in, intends to participate
in or has an arrangement or understanding with any person to participate in the
distribution of such New Notes and (3) neither the Holder of such Old Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned acknowledges that this Exchange Offer is being made in
reliance on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), as set forth in no-action letters issued to third
parties, that the New Notes issued pursuant to the Exchange Offer in exchange
for the Old Notes may be offered for resale, resold and otherwise transferred by
Holders thereof (other than any such Holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the ordinary course
of such Holders' business, such Holders are not engaging in and do not intend to
engage in the distribution of such New Notes and such Holders have no
arrangement or understanding with any person to participate in the distribution
of such New Notes. However, the SEC has not considered the Exchange Offer in the
context of a no-action letter and there can be no assurance that the staff of
the SEC would make a similar determination with respect to the Exchange Offer as
in other circumstances. If the undersigned is not a broker-dealer, the
undersigned represents that it is not engaged in, and does not intend to engage
in, a distribution of New Notes and has no arrangement or understanding to
participate in a distribution of New Notes. If any Holder is an affiliate of the
Company, is engaged in or intends to engage in or has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange offer, such Holder (i) could not rely on the applicable
interpretations of the staff of the SEC and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, it
represents that the Old Notes to be exchanged for the New Notes were acquired by
it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus meeting the requirements of the
Securities Act, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
-4-
<PAGE>
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
Description of Old Notes."
The undersigned, by completing the box entitled "Description of Old Notes"
on page 3 and signing this letter, will be deemed to have tendered the Old Notes
as set forth in such box on page 3.
-5-
<PAGE>
================================================================================
SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of and sent to someone other than the person
or persons whose signature(s) appear(s) on this Letter on page 7, or if Old
Notes delivered by book-entry transfer which are not accepted for exchange are
to be returned by credit to an account maintained at the Book-Entry Transfer
Facility other than the account indicated above.
Issue: [ ] New Notes to:
[ ] Old Notes to:
Name(s)_________________________________________________________________________
(Please Type or Print)
_________________________________________________________________________
_________________________________________________________________________
Address_________________________________________________________________________
_________________________________________________________________________
(Zip Code)
(Complete Substitute Form W-9)
[ ] Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below.
________________________________________________________________________
(Book-Entry Transfer Facility Account Number, if applicable)
================================================================================
================================================================================
SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter or to such person or persons at an address
other than shown in the box entitled "Description of Old Notes" on this Letter.
Mail: [ ] New Notes to:
[ ] Old Notes to:
Name(s)________________________________________________________________________
________________________________________________________________________
(Please Type or Print)
Address________________________________________________________________________
________________________________________________________________________
================================================================================
-6-
<PAGE>
================================================================================
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9 on next page)
x ____________________________________ __________________, 1999
x ____________________________________ __________________, 1999
Signature(s) of owner Date
Area Code and Telephone Number __________________________________
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) exactly as the name(s) appear(s) on the certificate(s) for
the Old Notes or on a security position listing or by any person(s) authorized
to become registered holder(s) by endorsements and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
officer or other person acting in a fiduciary or representative capacity, please
set forth full title. See Instruction 3.
Name(s): _________________________________________________________________
(Please Type or Print)
Capacity:_________________________________________________________________
_________________________________________________________________
Address: _________________________________________________________________
__________________________________________________________________________
(Including Zip Code)
================================================================================
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:_________________________________________________
(Authorized Signature)
Title:___________________________________________________________________
Name and Firm:___________________________________________________________
Dated:_____________________ , 1999
================================================================================
IMPORTANT: This Letter (or a facsimile hereof), together with the certificates
for Old Notes or a Book-Entry Confirmation and all other required documents or
The Notice of Guaranteed Delivery, must be received by the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
-7-
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYOR'S NAME: THE BANK OF NEW YORK
SUBSTITUTE Payor's Request for
Taxpayer Identification
Form W-9 Number ("TIN") and
Certification
Department of the Treasury
Internal Revenue Service
- --------------------------------------------------------------------------------
Part 1
PLEASE PROVIDE YOUR TIN
IN THE BOX AT RIGHT AND CERTIFY TIN: _______________________________
BY SIGNING AND DATING BELOW. Social Security Number or
Employer Identification Number
- --------------------------------------------------------------------------------
Part 2
TIN Applied For [ ]
- --------------------------------------------------------------------------------
CERTIFICATION: UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) the number shown on this form is my correct Tax Identification Number (or I
am waiting for a number to be issued to me);
(2) I am not subject to backup withholding either because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding; and
(3) any other information provided on this form is true and correct.
SIGNATURE_______________________________________ DATE_____________________
- --------------------------------------------------------------------------------
You must cross out item (2) of the above certification if you have been notified
by the IRS that you are subject to backup withholding because of underreporting
of interest or dividends on your tax return and you have not been notified by
the IRS that you are no longer subject to backup withholding.
================================================================================
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9
================================================================================
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (a) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (b) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of the exchange, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
________________________________________ __________________________
Signature Date
================================================================================
-8-
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter and Notes; Guaranteed Delivery Procedures.
This Letter is to be completed by holders of Old Notes either if
certificates are to be forwarded herewith or if tenders are to be made pursuant
to the procedures for delivery by book-entry transfer set forth in "The Exchange
Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all
physically tendered Old Notes, or Book-Entry Confirmation, as the case may be,
as well as a properly completed and duly executed Letter (or manually signed
facsimile hereof), with any required signature guarantees, and any other
documents required by this Letter, must be received by the Exchange Agent at the
address set forth herein on or prior to the Expiration Date, or the tendering
holder must comply with the guaranteed delivery procedures set forth below. Old
Notes tendered hereby must be in denominations of principal amount of $1,000 and
any integral multiple thereof.
Holders who tender their Old Notes by delivering an Agent's Message do not
need to submit this Letter.
Holders whose certificates for Old Notes are not immediately available or
who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution,
(ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered stating that the tender
is being made thereby and guaranteeing that within three New York Stock Exchange
("NYSE") trading days after the Expiration Date, the certificates for all
physically tendered Old Notes, in proper form for transfer, or a Book-Entry
confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent,
and (iii) the certificates for all physically tendered Old Notes, in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by this Letter, are received by the Exchange Agent within
three NYSE trading days after the date of execution of the Notice of
Guraranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be
registered mail, properly insured, with return receipt requested, made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date.
In all cases, sufficient time should be allowed to ensure timely delivery.
See "The Exchange Offer" section of the Prospectus.
2. Partial Tenders (not applicable to note holders who tender by book-entry
transfer).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Aggregate Principal Amount Tendered." A reissued certificate representing
the balance of non-tendered Old Notes will be sent to such tendering holder,
unless otherwise provided in the appropriate box on this Letter promptly after
the Expiration Date. All of the Old Notes delivered to the Exchange Agent will
be deemed to have been tendered unless otherwise indicated.
-9-
<PAGE>
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all of such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificate(s) must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate bond powers, in either case signed
exactly as the name or names of the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company, must
submit proper evidence satisfactory to the Company of their authority to so act.
Endorsements on certificates for Old Notes or signatures on bond owners
required by this Instruction 3 must be guaranteed by a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor
institution," including (as such terms are defined therein) (i) a bank, (ii)
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer, (iii) a credit union, (iv) a national securities exchange,
registered securities association or clearing agency, or (v) a savings
association that is a participant in a Securities Transfer Association (an
"Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible Institution
if the Old Notes are tendered: (i) by a registered holder of Old Notes (which
term, for purposes of the Exchange Offer, includes any participant in the
Book-Entry Transfer Facility whose name appears on a security position listing
as the holder of such Old Notes) who has not completed the box entitled "Special
Issuance Instructions" or Special Delivery Instructions" on this Letter, or (ii)
for the account of an Eligible Institution.
4. Special Issuance and Delivery Instructions.
Tendering holders of Old Notes should indicate in the applicable box on
page 6 the name and address to which New Notes issued pursuant to the Exchange
Offer and/or substitute certificates evidencing Old Notes not exchanged are to
be issued or sent, if different from the name or address of the person signing
this Letter. In the case of issuance in a different name, the employer
identification or social security number of the person named must also be
indicated. Note holders tendering Old Notes by book-entry transfer may request
that Old Notes not exchanged be credited to such account maintained at the
Book-Entry Transfer Facility as such note holder may designate hereon. If no
such instructions are given, such Old Notes not exchanged will be returned to
the name and address of the person signing this Letter.
-10-
<PAGE>
5. Taxpayer Identification Number.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Company (as payor) with such
holder's correct Taxpayer Identification Number ("TIN") on the Substitute Form
W-9 on page 8, which in the case of a tendering holder who is an individual, is
his or her social security number. If the Company is not provided with the
current TIN or an adequate basis for an exemption from backup withholding, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, the Exchange Agent may be required to withhold 31% of the
amount of any reportable payments made after the exchange to such tendering
holder of New Notes. If withholding results in an overpayment of taxes, a refund
may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the Substitute Form W-9 on page 8,
certifying, under penalties of perjury, that the TIN provided is correct (or
that such holder is awaiting a TIN) and that (i) the holder is exempt from
backup withholding, or (ii) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
a failure to report all interest or dividends or (iii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to backup
withholding. If the tendering holder of Old Notes is a nonresident alien or
foreign entity not subject to backup withholding, such holder must give the
Exchange Agent a completed Form W-8, Certificate of Foreign Status. These forms
may be obtained from the Exchange Agent. If the Old Notes are in more than one
name or are not in the name of the actual owner, such holder should consult the
W-9 Guidelines for information on which TIN to report. If such holder does not
have a TIN, such holder should consult the W-9 Guidelines for instructions on
applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write
"applied for" in lieu of its TIN Note: Checking this box and writing "applied
for" on the form means that such holder has already applied for a TIN or that
such holder intends to apply for one in the near future. If the box in Part 2 of
the Substitute Form W-9 is checked, the Exchange Agent will retain 31% of
reportable payments made to a holder during the 60-day period following the date
of the Substitute Form W-9. If the holder furnishes the Exchange Agent with his
or her TIN within 60 days of the Substitute Form W-9, the Exchange Agent will
remit such amounts retained during such 60-day period to such holder and no
further amounts will be retained or withheld from payments made to the holder
thereafter. If, however, such holder does not provide its TIN to the Exchange
Agent within such 60-day period, the Exchange Agent will remit such previously
withheld amounts to the Internal Revenue Service as backup withholding and will
withhold 31% of all reportable payments to the holder thereafter until such
holder furnishes its TIN to the Exchange Agent.
6. Transfer Taxes.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or it tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
-11-
<PAGE>
7. No Conditional Tenders.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
8. Mutilated, Lost, Stolen or Destroyed Old Notes.
Any holder whose certificate(s) representing Old Notes have been mutilated,
lost, stolen or destroyed should contact the Exchange Agent at the address
indicated above for further instructions. This Letter and related documents
cannot be processed until the procedures for replacing mutilated, lost, stolen
or destroyed certificates have been followed.
9. Withdrawal Rights
Tenders of Old Notes may be withdrawn at any time prior to 5:00 P.M., New
York City time, on the Expiration Date. For a withdrawal of a tender of Old
Notes to be effective, a written notice of withdrawal must be received by the
Exchange Agent at the address on page 1 prior to 5:00 P.M., New York City time,
on the Expiration Date. Any such notice of withdrawal must (i) specify the name
of the person having tendered the Old Notes to be withdrawn (the "Depositor"),
(ii) identify the Old Notes to be withdrawn (including certificate number or
numbers and the principal amount of such Old Notes), (iii) contain a statement
that such holder is withdrawing his election to have such Old Notes exchanged,
(iv) be signed by the holder in the same manner as the original signature on the
Letter by which such Old Notes were tendered (including any required signature
guarantees) or be accompanied by documents of transfer to have the Trustee with
respect to the Old Notes register the transfer of such Old Notes in the name of
the person withdrawing the tender and (v) specify the name in which such Old
Notes are registered, if different from that of the Depositor. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer set forth in
"The Exchange Offer--Book-Entry Transfer" section of the Prospectus, any notice
of withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Old Notes and otherwise
comply with the procedures of such facility.
All questions as to the validity, form and eligibility (including time of
receipt) of such notices will be determined by the Company, whose determination
shall be final and binding on all parties. Any Old Notes so withdrawn will be
deemed not to have been validly tendered for exchange for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly retendered. Any Old Notes that have been
tendered for exchange but which are not exchanged for any reason will be
returned to the Holder thereof without cost to such Holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
set forth in "The Exchange Offer--Book-Entry Transfer" section of the
Prospectus, such Old Notes will be credited to an account maintained with the
Book-Entry Transfer Facility for the Old Note:) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange offer. Properly
withdrawn Old Notes may be retendered by following the procedures described
above at any time on or prior to 5:00 P.M., New York City time, on the
Expiration Date.
10. Requests for Assistance or Additional Copies.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus, this Letter, the Notice of Guaranteed
Delivery and other related documents may be directed to the Exchange Agent, at
the address and telephone number indicated on page 1.
-12-
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
FOR TENDER OF
10 1/8% SENIOR NOTES DUE 2006
OF
METRIS COMPANIES INC.
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Metris Companies Inc. (the "Company") made pursuant to the
Prospectus, dated ___________________, 1999 (the Prospectus"), if certificates
for the outstanding 10 1/8% Senior Notes due 2006 of the Company (the "Old
Notes") are not immediately available or if the procedure for book-entry
transfer cannot be completed on a timely basis or time will not permit all
required documents to reach The Bank of New York, as exchange agent (the
"Exchange Agent") prior to 5:00 P.M., New York City time, on the Expiration Date
of the Exchange Offer. Such form may be delivered or transmitted by facsimile
transmission, overnight courier, mail or hand delivery to the Exchange Agent as
set forth below. In addition, in order to utilize the guaranteed delivery
procedure to tender Old Notes pursuant to the Exchange offer, a completed,
signed and dated Letter of Transmittal (or facsimile thereof) must also be
received by the Exchange Agent prior to 5:00 P.M., New York City time, on the
Expiration Date. Capitalized terms not defined herein are defined in the
Prospectus.
The Exchange Agent for the Exchange Offer is The Bank of New York
By Registered or Certified Mail: Facsimile Transmissions:
(Eligible Institutions Only)
The Bank of New York
101 Barclay Street, 7E (212) 815-6339
New York, New York 10286
Attention: Gertrude Jean Pirre
By Hand or Overnight Delivery: To Confirm by Telephone
or For Information Call:
The Bank of New York
101 Barclay Street
Corporate Trust Services Window (212) 815-5920
Ground Level
New York, New York 10286
Attention: Gertrude Jean Pirre
----------
Delivery of this notice to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, the signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
<PAGE>
Ladies and Gentlemen:
Upon the terms and subject to the conditoins set forth in the Prospectus
and the accompanying Letter of Transmittal, the undersigned hereby tenders to
the Company the principal amount of Old Notes set forth below pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
- ------------------------------------- -------------------------------------
Principal Amount of Old Notes If Old Notes will be delivered by
Tendered:* book-entry transfer to The Depository
Trust Company, provide account number.
$_________________________________
Certificate Nos. (if available):
Total Principal Amount Represented
by Certificate(s) for Old Notes:
$_________________________________ Account Number _____________________
- ------------------------------------- -------------------------------------
* Must be in denominations of principal amount of $1,000 and any integral
multiple thereof.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
PLEASE SIGN HERE
X____________________________________________ _________________________
X____________________________________________ _________________________
Signature(s) of Owner(s) Date
or Authorized Signatory
Area Code and Telephone Number:___________________
Must be signed by the holder(s) of Old Notes as their name(s) appear(s) on
certificates for Old Notes or on a security position listing, or by person(s)
authorized to become registered holder(s) by endorsement and documents
transmitted with this Notice of Guaranteed Delivery. If signature is by a
trustee, executor, administrator, guardian, attorney-in-fact, officer or other
person acting in a fiduciary or representative capacity, such person must set
forth his or her full title below.
Please print name(s) and address(es)
Name(s): ____________________________________________________________
____________________________________________________________
____________________________________________________________
Capacity: ____________________________________________________________
Address(es): ____________________________________________________________
____________________________________________________________
____________________________________________________________
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a firm or other entity identified in Rule 17Ad-15 under
Exchange Act as an "eligible guarantor institution" including (as such terms are
defined therein) (i) a bank, (ii) broker, dealer, municipal securities broker or
dealer or government securities broker or dealer, (iii) a credit union, (iv) a
national securities exchange, registered securities association or clearing
agency, or (v) a savings association that is a participant in a Securities
Transfer Association (an "Eligible Institution"), hereby guarantees that the
certificates representing the principal amount of Old Notes tendered hereby in
proper form for transfer, or timely confirmation of the book-entry transfer of
such Old Notes into the Exchange Agent's account at The Depository Trust Company
pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery
Procedures" section of the Prospectus, together with any required signature
guarantee and any other documents required by the Letter of Transmittal, will be
received by the Exchange Agent at the address set forth above, no later than
three New York Stock Exchange trading days after the date of execution hereof.
__________________________________ __________________________________
Name of Firm Authorized Signature
__________________________________ __________________________________
Address Title
__________________________________ Name:_____________________________
Zip Code (Please Type or Print)
__________________________________ Dated:____________________________
Telephone Number
NOTE: DO NOT SEND CERTIFICATES FOR OLD NOTES WITH THIS FORM. CERTIFICATES FOR
OLD NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED
LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.3
METRIS COMPANIES INC.
Instruction to Registered Holder and/or Depository
Trust Company Participant from Beneficial Owner
for
Offer to Exchange
10 1/8% Senior Notes due 2006
which have been registered under the Securities Act
for any and all outstanding
10 1/8% Senior Notes due 2006
which were issued in a private offering
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1999,
UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
To Registered Holder and/or Depository Trust Company Participant:
The undersigned hereby acknowledges receipt of the Prospectus dated
__________________________, 1999 (the "Prospectus") of Metris Companies Inc., a
Delaware corporation (the "Company"), and the accompanying Letter of Transmittal
(the "Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer") to exchange its 10 1/8% Senior Notes due 2006 (the "New
Notes"), which have been registered under the Securities Act of 1933, as amended
(the "Securities Act"), for all of its outstanding 10 1/8% Senior Notes due 2006
(the "Old Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or Depository Trust
Company Participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Old Notes held by you for the account of the
undersigned.
The aggregate principal amount of Old Notes held by you for the account of
the undersigned is (Fill in amount):
$_________________________ of the 10 1/8% Senior Notes due 2006.
With respect to the Exchange Offer, the undersigned hereby instructs you
(Check appropriate box):
[ ] To TENDER the following Old Notes held by you for the account
of the undersigned (Insert principal amount of Old Notes to be
tendered, if less than all):
$______________________
[ ] NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender Old Notes held by you for the
account of the undersigned, it is understood that you are authorized to make, on
behalf of the undersigned (and the undersigned, by its signature below, hereby
makes to you), the representations and warranties contained in the Letter of
Transmittal that are to be made with respect to the undersigned as a beneficial
owner, including but not limited to the representations, that (i) the
undersigned is not an "affiliate" of the Company, (ii) any New Notes to be
received by the undersigned are being acquired in the ordinary course of its
business, (iii) the undersigned has no arrangement or understanding with any
person to participate in a distribution (within the meaning of the Securities
Act) of New Notes to be received in the Exchange Offer, and (iv) if the
undersigned is not a broker-dealer, the undersigned is not engaged in, and does
<PAGE>
not intend to engage in, a distribution (within the meaning of the Securities
Act) of such New Notes. If the undersigned is a broker-dealer that will receive
New Notes for its own account in exchange for Old Notes, it represents that the
Old Notes to be exchanged for New Notes were acquired by it as a result of
market-making activities or other trading activities and acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
- --------------------------------------------------------------------------------
SIGN HERE
______________________________________________________________________________
Name of beneficial owner(s)
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
Signature(s)
______________________________________________________________________________
______________________________________________________________________________
Name(s) (please print)
______________________________________________________________________________
______________________________________________________________________________
Address
______________________________________________________________________________
Telephone Numbers
______________________________________________________________________________
Taxpayer Identification or Social Security Number
______________________________________________________________________________
Date
2
<PAGE>
EXHIBIT 99.4
___________, 1999
EXCHANGE AGENT AGREEMENT
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Ladies and Gentlemen:
Metris Companies Inc., a Delaware corporation (the "Company") proposes to
make an offer (the "Exchange Offer") to exchange all of its outstanding 10 1/8%
Senior Notes due 2006 (the "Old Notes") for its 10 1/8% Senior Notes due 2006
(the "New Notes"). The terms and conditions of the Exchange Offer as currently
contemplated are set forth in a prospectus, dated ___________ (the
"Prospectus"), proposed to be distributed to all record holders of the Old
Notes. The Old Notes and the New Notes are collectively referred to herein as
the "Notes".
The Company hereby appoints The Bank of New York to act as exchange agent
(the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to The Bank of New York.
The Exchange Offer is expected to be commenced by the Company on or about
_____________. The Letter of Transmittal accompanying the Prospectus (or in the
case of book-entry Notes, the Automated Tender Offer Program ("ATOP") of the
Book-Entry Transfer Facility (as defined below)) is to be used by the holders of
the Old Notes to accept the Exchange Offer and contains instructions with
respect to the delivery of certificates for Old Notes tendered in connection
therewith.
The Exchange Offer shall expire at 5:00 p.m., New York City time, on
_________ or on such subsequent date or time to which the Company may extend the
Exchange Offer (the "Expiration Date"). Subject to the terms and conditions set
forth in the Prospectus, the Company expressly reserves the right to extend the
Exchange Offer from time to time and may extend the Exchange Offer by giving
oral (promptly confirmed in writing) or written notice to you before 9:00 a.m.,
New York City time, on the business day following the previously scheduled
Expiration Date.
The Company expressly reserves the right to amend or terminate the Exchange
<PAGE>
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified in the Prospectus under the caption "The Exchange Offer --
Conditions." The Company will give oral (promptly confirmed in writing) or
written notice of any amendment, termination or nonacceptance to you as promptly
as practicable.
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
1. You will perform such duties and only such duties as are specifically set
forth in the section of the Prospectus captioned "The Exchange Offer," the
Letter of Transmittal and herein; provided, however, that in no way will
your general duty to act in good faith be discharged by the foregoing.
2. You will establish a book-entry account with respect to the Old Notes at
The Depository Trust Company (the "Book-Entry Transfer Facility") for
purposes of the Exchange Offer within two business days after the date of
the Prospectus, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of the
Old Notes by causing the Book-Entry Transfer Facility to transfer such Old
Notes into your account in accordance with the Book-Entry Transfer
Facility's procedure for such transfer.
3. You are to examine each of the Letters of Transmittal and certificates for
Old Notes (or confirmation of book-entry transfer into your account at the
Book-Entry Transfer Facility) and any other documents delivered or mailed
to you by or for holders of the Old Notes to ascertain whether: (i) the
Letters of Transmittal and any such other documents are duly executed and
properly completed in accordance with instructions set forth therein; and
(ii) the Old Notes have otherwise been properly tendered. In each case
where the Letter of Transmittal or any other document has been improperly
completed or executed or any of the certificates for Old Notes are not in
proper form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any
other action as may be reasonably necessary or advisable to cause such
irregularity to be corrected.
4. With the approval of the President, Senior Vice President, Executive Vice
President, or any Vice President of the Company (such approval, if given
orally, to be promptly confirmed in writing) or any other party designated
in writing by such an officer, you are authorized to waive any
irregularities in connection with any tender of Old Notes pursuant to the
Exchange Offer.
-2-
<PAGE>
5. Tenders of Old Notes may be made only as set forth in the Letter of
Transmittal and in the section of the Prospectus captioned "The Exchange
Offer", and Old Notes shall be considered properly tendered to you only
when tendered in accordance with the procedures set forth therein.
Notwithstanding the provisions of this Section 5, Old Notes which the
President, Senior Vice President, Executive Vice President, or any Vice
President of the Company shall approve as having been properly tendered
shall be considered to be properly tendered (such approval, if given
orally, shall be promptly confirmed in writing).
6. You shall advise the Company with respect to any Old Notes received as soon
as possible after the Expiration Date and accept its instructions with
respect to disposition of such Old Notes.
7. You shall accept tenders:
a. in cases where the Old Notes are registered in two or more names only
if signed by all named holders;
b. in cases where the signing person (as indicated on the Letter of
Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is
submitted; and
c. from persons other than the registered holder of Old Notes, provided
that customary transfer requirements, including payment of any
applicable transfer taxes, are fulfilled.
You shall accept partial tenders of Old Notes where so indicated and as
permitted in the Letter of Transmittal and deliver certificates for Old Notes to
the registrar for split-up and return any untendered Old Notes to the holder (or
such other person as may be designated in the Letter of Transmittal) as promptly
as practicable after expiration or termination of the Exchange Offer.
8. Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will notify you (such notice, if given orally, to be promptly
confirmed in writing) of its acceptance, promptly after the Expiration
Date, of all Old Notes properly tendered and you, on behalf of the Company,
will exchange such Old Notes for New Notes and cause such Old Notes to be
cancelled. Delivery of New Notes
-3-
<PAGE>
will be made on behalf of the Company by you at the rate of $1,000
principal amount of New Notes for each $1,000 principal amount of the
corresponding series of Old Notes tendered promptly after notice (such
notice if given orally, to be promptly confirmed in writing) of acceptance
of said Old Notes by the Company; provided, however, that in all cases, Old
Notes tendered pursuant to the Exchange Offer will be exchanged only after
timely receipt by you of certificates for such Old Notes (or confirmation
of book-entry transfer into your account at the Book-Entry Transfer
Facility), a properly completed and duly executed Letter of Transmittal (or
manually signed facsimile thereof) with any required signature guarantees
and any other required documents. You shall issue New Notes only in
denominations of $1,000 or any integral multiple thereof.
9. Tenders pursuant to the Exchange Offer are irrevocable, except that,
subject to the terms and upon the conditions set forth in the Prospectus
and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange
Offer may be withdrawn at any time prior to the Expiration Date.
10. The Company shall not be required to exchange any Old Notes tendered if any
of the conditions set forth in the Exchange Offer are not met. Notice of
any decision by the Company not to exchange any Old Notes tendered shall be
given (if given orally, to be promptly confirmed in writing) by the Company
to you.
11. If, pursuant to the Exchange Offer, the Company does not accept for
exchange all or part of the Old Notes tendered because of an invalid
tender, the occurrence of certain other events set forth in the Prospectus
under the caption "The Exchange Offer -- Conditions" or otherwise, you
shall as soon as practicable after the expiration or termination of the
Exchange Offer return those certificates for unaccepted Old Notes (or
effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
12. All certificates for reissued Old Notes, unaccepted Old Notes or for New
Notes shall be forwarded by (a) first-class mail, postage prepaid under a
surety bond protecting you and the Company from loss or liability arising
out of the nonreceipt or nondelivery of such certificates or (b) by
registered mail insured separately for the replacement value of each of
such certificates.
13. You are not authorized to pay or offer to pay any concessions, commissions
or solicitation fees to any broker, dealer, bank or other persons or to
engage or utilize any person to solicit tenders.
-4-
<PAGE>
14. As Exchange Agent hereunder you:
a. shall not be liable to the Company for any action or omission to act
unless the same constitutes your own gross negligence, willful
misconduct or bad faith, and in no event shall you be liable to a
securityholder, the Company or any third party for special, indirect
or consequential damages, or lost profits, arising in connection with
this Agreement.
b. shall have no duties or obligations other than those specifically set
forth in the Prospectus, the Letter of Transmittal and herein or as
may be subsequently agreed to in writing between you and the Company;
c. will be regarded as making no representations and having no
responsibilities as to the validity, sufficiency, value or genuineness
of any of the certificates or the Old Notes represented thereby
deposited with you pursuant to the Exchange Offer, and will not be
required to and will make no representation as to the validity, value
or genuineness of the Exchange Offer;
d. shall not be obligated to take any legal action hereunder which might
in your judgment involve any expense or liability, unless you shall
have been furnished with reasonable indemnity satisfactory to you;
e. may rely on and shall be protected in acting in reliance upon any
certificate, instrument, opinion, notice, letter, telegram or other
document or security delivered to you and reasonably believed by you
to be genuine and to have been signed or presented by the proper
person or persons;
f. may act upon any tender, statement, request, document, agreement,
certificate or other instrument whatsoever not only as to its due
execution and validity and effectiveness of its provisions, but also
as to the truth and accuracy of any information contained therein,
which you shall in good faith reasonably believe to be genuine or to
have been signed or presented by the proper person or persons;
g. may rely on and shall be protected in acting upon written or oral
instructions from any authorized officer of the Company;
h. may consult with counsel of your selection with respect to any
questions relating to your duties and responsibilities and the written
advice or opinion
-5-
<PAGE>
of such counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to be
taken by you hereunder in good faith and in accordance with the
written advice or opinion of such counsel; and
i. shall not advise any person tendering Old Notes pursuant to the
Exchange Offer as to the wisdom of making such tender or as to the
market value or decline or appreciation in market value of any Old
Notes.
15. You shall take such action as may from time to time be requested by the
Company or its counsel (and such other action as you may deem appropriate)
to furnish copies of the Prospectus, Letter of Transmittal and the Notice
of Guaranteed Delivery (as defined in the Prospectus) or such other forms
as may be approved from time to time by the Company, to all persons
requesting such documents and to accept and comply with telephone requests
for information relating to the Exchange Offer, provided that such
information shall relate only to the procedures for accepting (or
withdrawing from) the Exchange Offer. The Company will furnish you with
copies of such documents on your request. All other requests for
information relating to the Exchange Offer shall be directed to the
Company, Attention: ____________________.
16. You shall advise by facsimile transmission, and promptly thereafter confirm
in writing, to ______ of the Company, Kathleen Prudhomme, Esq. of Dorsey &
Whitney, counsel for the Company, and such other person or persons as the
Company may request, daily (and more frequently during the week immediately
preceding the Expiration Date if requested) up to and including the
Expiration Date, as to the number of Old Notes which have been tendered
pursuant to the Exchange Offer and the items received by you pursuant to
this Agreement, separately reporting and giving cumulative totals as to
items properly received and items improperly received. In addition, you
will also inform, and cooperate in making available to, the Company or any
such other person or persons upon oral request made from time to time prior
to the Expiration Date of such other information as they may reasonably
request. Such cooperation shall include, without limitation, the granting
by you to the Company and such person as the Company may request of access
to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the
Company shall have received information in sufficient detail to enable it
to decide whether to extend the Exchange Offer. You shall prepare a final
list of all persons whose tenders were accepted, the aggregate principal
amount of Old Notes tendered, the aggregate principal amount of Old Notes
accepted and deliver said list to the Company.
-6-
<PAGE>
17. Letters of Transmittal and Notices of Guaranteed Delivery shall be stamped
by you as to the date and, after the expiration of the Exchange Offer, the
time, of receipt thereof and shall be preserved by you for a period of time
at least equal to the period of time you preserve other records pertaining
to the transfer of Notes. You shall dispose of unused Letters of
Transmittal and other surplus materials by returning them to the Company.
18. You hereby expressly waive any lien, encumbrance or right of set-off
whatsoever that you may have with respect to funds deposited with you for
the payment of transfer taxes by reason of amounts, if any, borrowed by the
Company or any of its subsidiaries or affiliates pursuant to any loan or
credit agreement with you or for compensation owed to you hereunder.
19. For services rendered as Exchange Agent hereunder, you shall be entitled to
such compensation as set forth on Schedule I attached hereto. The
provisions of this section shall survive the termination of this Agreement.
20. You hereby acknowledge receipt of the Prospectus and the Letter of
Transmittal. Any inconsistency between this Agreement, on the one hand, and
the Prospectus and the Letter of Transmittal (as they may be amended from
time to time), on the other hand, shall be resolved in favor of the latter
two documents, except with respect to your duties, liabilities and
indemnification as Exchange Agent which shall be controlled by this
Agreement.
21. The Company covenants and agrees to fully indemnify and hold you harmless
against any and all loss, liability, cost or expense, including reasonable
attorneys' fees and expenses, incurred without gross negligence, bad faith
or willful misconduct on your part, arising out of or in connection with
any act, omission, delay or refusal made by you in reliance upon any
signature, endorsement, assignment, certificate, order, request, notice,
instruction or other instrument or document believed by you in good faith
to be valid, genuine and sufficient and in accepting any tender or
effecting any transfer of Old Notes believed by you in good faith to be
authorized, and in delaying or refusing in good faith to accept any tenders
or effect any transfer of Old Notes. In no case shall the Company be liable
under this indemnity with respect to any claim against you unless the
Company shall be notified by you, by letter or facsimile transmission
confirmed by letter, of the written assertion of a claim against you or of
any other action commenced against you, promptly after you shall have
received any such written assertion or shall have been served with a
summons in connection therewith. The Company shall be entitled to
participate at its own expense in the defense of any such claim or other
action and, if the Company so elects, the Company
-7-
<PAGE>
shall assume the defense of any suit brought to enforce any such claim. In
the event that the Company shall assume the defense of any such suit, the
Company shall not be liable for the fees and expenses of any additional
counsel thereafter retained by you, so long as the Company shall retain
counsel reasonably satisfactory to you to defend such suit, and so long as
you have not determined, in your reasonable judgment, that representation
of both you and the Company in such suit by the same legal counsel would
result in a conflict of interest between you and the Company. The
provisions of this section shall survive the termination of this Agreement.
22. You shall arrange to comply with all requirements under the tax laws of the
United States, including those relating to missing Tax Identification
Numbers, and shall file any appropriate reports with the Internal Revenue
Service.
23. You shall deliver or cause to be delivered, in a timely manner to each
governmental authority to which any transfer taxes are payable in respect
of the exchange of Old Notes, your check in the amount of all transfer
taxes so payable, and the Company shall reimburse you for the amount of all
transfer taxes payable; provided, however, that you shall reimburse the
Company for amounts refunded to you in respect of your payment of any such
transfer taxes, at such time as such refund is received by you.
24. This Agreement and your appointment as Exchange Agent hereunder shall be
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such
state, and without regard to conflicts of law principles, and shall inure
to the benefit of, and the obligations created hereby shall be binding
upon, the successors and assigns of each of the parties hereto.
25. This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original and all of which together shall
constitute one and the same agreement.
26. In case any provision of this Agreement 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.
27. This Agreement shall not be deemed or construed to be modified, amended,
rescinded, cancelled or waived, in whole or in part, except by a written
instrument signed by a duly authorized representative of the party to be
charged. This Agreement may not be modified orally.
-8-
<PAGE>
28. Unless otherwise provided herein, all notices, requests and other
communications to any party hereunder shall be in writing (including
facsimile or similar writing) and shall be given to such party, addressed
to it, at its address or telecopy number set forth below:
If to the Company:
Metris Companies Inc.
600 S. Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
Facsimile: (612) 593-4733
Attention: __________________
With a copy to:
Dorsey & Whitney LLP
Pillsbury Center South
220 South Sixth Street
Minneapolis, Minnesota 55402
Facsimile: (612) 340-8738
Attention: Kathleen Prudhomme
If to the Exchange Agent:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Facsimile: (212) 815-5915
Attention: Corporate Trust Trustee
Administration
29. Unless terminated earlier by the parties hereto, this Agreement shall
terminate 90 days following the Expiration Date. Notwithstanding the
foregoing, Sections 18, 19 and 21 shall survive the termination of this
Agreement. Upon any termination of this Agreement, you shall promptly
deliver to the Company any certificates for Notes, funds or property then
held by you as Exchange Agent under this Agreement.
30. This Agreement shall be binding and effective as of the date hereof.
-9-
<PAGE>
Please acknowledge receipt of this Agreement and confirm the arrangements
herein provided by signing and returning the enclosed copy.
METRIS COMPANIES INC.
By:
----------------------------------
Name:
Title:
Accepted as of the date
first above written:
THE BANK OF NEW YORK, as Exchange Agent
By:
----------------------------------
Name:
Title:
-10-
<PAGE>
SCHEDULE I
COMPENSATION OF EXCHANGE AGENT:
[$5,000] PLUS $500 PER EXTENSION OF OFFER
PLUS REIMBURSEMENT OF REASONABLE OUT-OF POCKET EXPENSES,
INCLUDING WITHOUT LIMITATION,
LEGAL FEES AND EXPENSES.
-11-
