EXHIBIT 99.3
CAPITAL ASSURANCE AND LIQUIDITY MAINTENANCE AGREEMENT
This Capital Assurance and Liquidity Maintenance Agreement ("Agreement") is
entered into, and is effective as of, the 18th day of March, 2003, by and
between Direct Merchants Credit Card Bank, N. A. ("Bank") and Metris Companies
Inc. ("Parent" or "Metris"), a Delaware corporation.
RECITALS
A. The Bank is a national bank chartered by the Office of the Comptroller of the
Currency ("OCC") and is authorized to conduct business as a national bank; and
B. The Parent as the sole stockholder of Metris Direct, Inc. ("MDI"), which in
turn is the sole stockholder of the Bank, is the indirect parent company of the
Bank; and
C. In consideration of the mutual covenants and promises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
expressly acknowledged by both parties, the Bank and the Parent hereby enter
into this Agreement setting forth the Parent's requirement to provide to the
Bank, either directly or through MDI, any necessary capital and/or liquidity
support, all in order to ensure that the Bank continues to operate in a safe and
sound manner without need of recourse to external sources; and
D. For purposes of the OCC's regulations under 12 C.F.R. Part 6, this Agreement
shall not be deemed to have been issued by the OCC, and shall not prevent the
Bank from being deemed "well capitalized" so long as the Bank achieves and
maintains the required minimum capital ratios detailed in Section 6.4(b)(1) of
such Part; and
E. In consideration of the mutual covenants and conditions contained herein, the
parties to this Agreement hereby agree as follows:
ARTICLES
1. CAPITAL ASSURANCES
A. Initial and ongoing Capital Requirements. In accordance with conditions
imposed in writing in connection with the conditional approval by the OCC for
the Bank to pay a dividend to its Parent and the terms of the Operating
Agreement entered into by and between the Bank, Metris, and the OCC on March 18,
2003, (the "Operating Agreement"), the Bank is required to maintain, at
a minimum, capital in the aggregate amount of: (i) the Liquidity Reserve Deposit
described in Article VI of the Operating Agreement; (ii) the result of the 200%
risk-weight applied to on-book subprime credit card receivables; and (iii) the
minimum capital required pursuant to 12 C.F.R. Part 3, Appendix A, for
well-capitalized institutions for all remaining assets owned by the Bank
(collectively, "the Required Capital").
B. Bank's Obligation to First Seek Parent's Assistance. The Bank agrees that if
it becomes necessary for it to secure capital infusions so as to remain in
compliance with its Required Capital, or a higher minimum capital ratio as set
forth in subparagraph D, the Bank will promptly notify and first make demand on
the Parent or MDI for such capital.
C. Capital Infusions from the Parent. Parent hereby agrees to make or cause MDI
to make such capital infusions or take such other actions, to which the OCC has
no supervisory objection, as may be necessary from time to time to ensure the
Bank achieves and remains in compliance with the Required Capital. If at any
time the Bank's capital level falls below the Required Capital, then the Parent
agrees that no later than ten (10) business days after receiving notification
regarding this capital deficiency from the Bank, MDI or the OCC, the Parent will
and subject to the exceptions and limitations set out on the attached Schedule A
(incorporated herein by reference), the Parent, acting directly or by causing
MDI to take such action, will either (i) contribute sufficient additional
capital to return the Bank's capital ratios to the required level; or (ii) take
such other action, to which the OCC has no supervisory objection, sufficient to
return the Bank's capital ratios to the required level. Any capital contribution
pursuant to subsection (i) in the preceding sentence will be in the form of
cash, or if appropriate, other qualified assets, and the capital contribution
will be credited to the Bank's surplus capital account.
D. Higher Minimum Capital Ratios. Subject to Schedule A, should the OCC
subsequently deem it necessary for the Bank to maintain capital above the
Required Capital, pursuant to its regulatory authority, or that the Bank achieve
and thereafter maintain higher minimum capital ratios than those detailed in 12
C.F.R. Part 3, the Parent agrees that no later than ten (10) business days after
receiving notification from the Bank, MDI or the OCC regarding this new minimum
capital level, the Parent, acting directly or by causing MDI to take such
action, will either (i) contribute sufficient additional capital to achieve the
revised minimum capital; or (ii) take such other action, to which the OCC has no
supervisory objection, sufficient to achieve the revised minimum capital. Any
capital contribution pursuant to subsection (i) in the preceding sentence will
be in the form of cash, or if appropriate, other qualified assets, and the
capital contribution will be credited to the Bank's surplus capital account.
2. LIQUIDITY MAINTENANCE. The Bank's funds management policy and Operating
Agreement provides for the Bank's maintenance of sufficient liquidity to meet
the cash needs of its depositors and other obligations. Parent hereby covenants
that it will, either directly or through MDI, provide the Bank with financial
assistance so as to permit the Bank to meet its liquidity requirements. The Bank
will promptly notify and first make demand on the Parent or MDI for such
financial support. If the Bank identifies liquidity requirements that it cannot
satisfy, then the Parent agrees that, within two (2) days of receiving
notification from the Bank regarding these liquidity requirements, the Parent
will provide, or arrange for MDI or a third party to provide (on fair market
value terms) the Bank with financial support, in such amount, form and duration
as may be necessary for the Bank to meet its on-going liquidity obligations.
3. TERM AND TERMINATION OF AGREEMENT. The term of this Agreement shall commence
on the 18th day of March, 2003 ("Effective Date"), and will continue unabated
unless terminated by the earliest to occur of (i) the Parent shall no longer
own, directly or indirectly in excess of 25% of Bank stock; or (ii) mutual
agreement of the Bank and the Parent. The Bank reserves the right to seek the
OCC's supervisory non-objection in writing prior to termination of this
Agreement pursuant to subsection (ii) hereof.
4. MODIFICATION OR AMENDMENT OF AGREEMENT. This Agreement may be modified or
amended only by the mutual written consent of both parties. The Bank reserves
the right to seek the OCC's supervisory non-objection in writing prior to
modifying or amending this Agreement.
5. ASSIGNABILITY OF AGREEMENT. This Agreement shall not be assigned, without the
express written consent of both parties. The Bank reserves the right to seek the
OCC's supervisory non-objection in writing prior to this Agreement being
assigned.
6. SUCCESSORS-IN-INTEREST. This Agreement shall remain in full force and effect
against any successors-in-interest to the Bank or the Parent.
7. NOTICES. All notices or other communications required hereunder shall be in
writing and shall be made by facsimile transmission, with a copy sent by
certified mail, return receipt requested, to the following persons, addressed as
follows:
Metris Companies Inc. Direct Merchants Credit Card Bank, N.A.
Board of Directors Board of Directors
x/x Xxxxxxx Xxxxxxx x/x Xxxxxxxxx
00000 Xxxxxxx Xxxxxxxxx 00000 X. Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000 Xxxxxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
Such notice or communication shall be effective upon receipt at the offices of
the party to whom the notice shall have been directed.
8. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter at issue, and all prior agreements,
arrangements, and negotiations between the parties, whether oral or written,
with respect to this Agreement are deemed to be merged herein.
9. CONFIDENTIALITY. The Parent and the Bank understand and agree that the terms
of this Agreement are proprietary and confidential information, and both parties
further agree that they shall not disclose such information to any other person
or entity, except the OCC, without obtaining the other party's prior written
consent, except as required by law.
10. GOVERNING LAW. To the extent that Federal law does not control, this
Agreement shall be governed, construed, and controlled by the laws of the State
of Delaware.
11. SEVERABILITY. If any portion of this Agreement shall be held by a court of
competent jurisdiction to be invalid or inoperative, then, so far as is
reasonable and possible, the remainder of this Agreement shall be considered
valid and operative, and effect will be given to the intent manifested by the
portion held invalid or inoperative.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set
forth in the opening paragraph:
PARENT BANK
Metris Companies Inc. Direct Merchants Credit Card Bank, N. A.
By: /s/Xxxxx X. Xxxxxxxxx By: /s/Xxxx Xxxxxx
Name: Xxxxx X. Xxxxxxxxx Name: Xxxx Xxxxxx
Title: Chairman and CEO Title: President and CEO
SCHEDULE A
The commitments of the Parent to infuse capital notwithstanding, the Parent
shall not be obligated to infuse capital to the Bank to extent such infusion
would result in a default under any existing credit agreement or indenture to
which the Parent is a party as a borrower or obligor, specifically, the
following:
1. Amended and Restated Credit Agreement dated as of July 21, 2000 among
Metris Companies Inc., (the "Borrower"), the banks and other financial
institutions from time to time parties thereto (the "Lenders"), Bank of
America, N.A., as Syndication Agent (in such capacity, the "Syndication
Agent"), Deutsche Bank AG, New York Branch, as co-documentation agent, and
U.S. Bank National Association, as co-documentation agent (collectively in
such capacity, the "Co-Documentation Agents"), Barclays Bank PLC as
co-agent (in such capacity, the "Co-Agent"), and The Chase Manhattan Bank,
as administrative agent for the Lenders (the $170 million Revolving
facility that matures on July 21, 2003, and the $100 million Term loan that
matures on June 30, 2003);
2. Indenture dated as of November 7, 1997 among Metris Companies Inc., as
Issuer, the Guarantors named therein and U.S. Bank, National Association as
Successor Trustee to the First National Bank of Chicago (the $100 million
Senior Notes that mature on November 1, 2004); and
3. Indenture dated as of July 13, 1999 among Metris Companies Inc., as Issuer,
the Guarantors named therein and U.S. Bank, National Association as
Successor Trustee to the Bank of New York (the $150 million Senior Notes
that mature on July 1, 2006).
