THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE
DISPOSED OF UNLESS IT HAS BEEN REGISTERED UNDER THAT ACT
OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
ALLIANCE DATA SYSTEMS CORPORATION
10% Subordinated Note
Due October 25, 2005
Registered New York, New York
R-001 January 24, 1996
$30,000,000
ALLIANCE DATA SYSTEMS CORPORATION, a Delaware corporation
(hereinafter called the "Company"), for value received, hereby promises to pay
to WCAS CAPITAL PARTNERS II, L.P., a Delaware limited partnership, or registered
assigns, the principal sum of THIRTY MILLION AND NO/100 Dollars ($30,000,000),
on October 25, 2005, and to pay interest (computed on the basis of a 360-day
year consisting of twelve 30-day months) from the date hereof on the unpaid
principal amount hereof at the rate of 10% per annum, payable semi-annually in
arrears on the first day of July and January of each year (each said day being
an "Interest Payment Date"), commencing on July 1, 1996, until the principal
amount hereof shall have become due and payable, whether at maturity or by
acceleration or otherwise, and thereafter at the rate of 12% per annum on any
overdue principal amount and (to the extent permitted by applicable law) on any
overdue interest until paid.
All payments of principal and interest on this Note shall be in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for payment of public and private debts.
For purposes of this Note, "Business Day" shall mean any day other
than a Saturday, Sunday or a legal holiday under the laws of the State of New
York.
1. NOTES. This Note is one of a duly authorized issue of
Subordinated Notes (herein called the "Notes") made or to be made by the Company
in the aggregate principal amount of $50,000,000, maturing on October 25, 2005
and bearing interest payable at the same rate and on the same dates as the
interest on the principal amount of this Note.
2. TRANSFER, ETC. OF NOTES. The Company shall keep at its office
or agency maintained as provided in paragraph (a) of Section 10 a register in
which the Company shall provide for the registration of Notes and for the
registration of transfer and exchange of Notes. The holder of this Note may, at
its option, and either in person or by duly authorized attorney, surrender the
same for registration of transfer or exchange at the office or agency of the
Company maintained as provided in paragraph (a) of Section 10, and, without
expense to such holder (except for taxes or governmental charges imposed in
connection therewith), receive in exchange therefor a Note or Notes each in such
denomination or denominations as such holder may request, dated as of the date
to which interest has been paid on the Note or Notes so surrendered for transfer
or exchange, for the same aggregate principal amount as the then unpaid
principal amount of the Note or Notes so surrendered for transfer or exchange,
and registered in the name of such person or persons as may be designated by
such holder. Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed, or shall be accompanied by a written instrument
of transfer, satisfactory in form to the Company, duly executed by the holder of
such Note or his attorney duly authorized in writing. Every Note so made and
delivered in exchange for this Note shall in all other respects be in the same
form and have the same terms as this Note. No transfer or exchange of any Note
shall be valid unless made in the foregoing manner at such office or agency.
3. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Note, and, in the case of any such loss, theft or
destruction, upon receipt of an affidavit of loss and indemnity from the holder
hereof reasonably satisfactory to the Company, or, in the case of any such
mutilation, upon surrender and cancellation of this Note, the Company will make
and deliver, in lieu of this Note, a new Note of like tenor and unpaid principal
amount and dated as of the date to which interest has been paid on this Note.
4. PERSONS DEEMED OWNERS; HOLDERS. The Company may deem and
treat the person in whose name any Note is registered as the owner and holder of
such Note for the purpose of receiving payment of principal of and interest on
such Note and for all other purposes whatsoever, whether or not such Note shall
be overdue. With respect to any Note at any time outstanding, the term "holder",
as used herein, shall be deemed to mean the person in whose name such Note is
registered as aforesaid at such time.
5. PREPAYMENTS.
(a) OPTIONAL PREPAYMENT. Upon notice given as provided in
Section 6 the Company may, at its option, prepay the Notes, as a
whole at any time or in part from
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the Company shall fail to pay this Note or such portion, as the case may be, in
which event this Note or such portion, as the case may be, and, so far as may be
lawful, any overdue installment of interest, shall bear interest on and after
the date fixed for such prepayment and until paid at the rate PER ANNUM provided
herein for overdue principal.
9. SURRENDER OF NOTES; NOTATION THEREON. Upon any prepayment of
a portion of the principal amount of this Note, the holder hereof, at its
option, may require the Company to execute and deliver at the expense of the
Company (except for taxes or governmental charges imposed in connection
therewith), upon surrender of this Note, a new Note registered in the name of
such person or persons as may be designated by such holder for the principal
amount of this Note then remaining unpaid, dated as of the date to which
interest has been paid on the principal amount of this Note then remaining
unpaid, or may present this Note to the Company for notation hereon of the
payment of the portion of the principal amount of this Note so prepaid.
10. COVENANTS. The Company covenants and agrees that, so long as
any Note shall be outstanding:
(a) MAINTENANCE OF OFFICE. The Company will maintain an office or
agency in such place in the United States of America as the Company may
designate in writing to the registered holder hereof, where the Notes may
be presented for registration of transfer and for exchange as herein
provided, where notices and demands to or upon the Company in respect of
the Notes may be served and where, at the option of the holders thereof,
the Notes may be presented for payment.
(b) PAYMENT OF TAXES. The Company will promptly pay and discharge
or cause to be paid and discharged, before the same shall become in
default, all lawful taxes and assessments imposed upon the Company or any
subsidiary or upon the income and profits of the Company or any
subsidiary, or upon any property, real, personal or mixed, belonging to
the Company or any subsidiary, or upon any part thereof by the United
States or any State thereof, as well as all lawful claims for labor,
materials and supplies which, if unpaid, would become a lien or charge
upon such property or any part thereof; PROVIDED, HOWEVER, that neither
the Company nor any subsidiary shall be required to pay and discharge or
to cause to be paid and discharged any such tax, assessment, charge, levy
or claim so long as both (x) the Company has set aside adequate reserves
for such tax, assessment, charge, levy or claim and (y)(i) the Company or
a subsidiary shall be contesting the validity thereof in good faith by
appropriate proceedings or (ii) the Company shall, in its good faith
judgment, deem the validity thereof to be questionable and the party to
whom such tax, assessment, charge, levy or claim is allegedly owed shall
not have made written demand for the payment thereof.
(c) CORPORATE EXISTENCE. The Company will do or cause to be done
all things necessary and lawful to preserve and keep in full force and
effect its corporate existence,
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rights and franchises and the corporate existence, rights and franchises
of each of its subsidiaries; PROVIDED, HOWEVER, that nothing in this
paragraph (c) shall prevent the abandonment or termination of any rights
or franchises of the Company, or the liquidation or dissolution of, or a
sale, transfer or disposition (whether through merger, consolidation, sale
or otherwise) of all or any substantial part of the property and assets
of, any subsidiary or the abandonment or termination of the corporate
existence, rights and franchises of any subsidiary if such abandonment,
termination, liquidation, dissolution, sale, transfer or disposition is,
in the good faith business judgment of the Company, in the best interests
of the Company and is not disadvantageous in any material respect to the
holders of the Notes.
(d) MAINTENANCE OF PROPERTY. The Company will at all times
maintain and keep, or cause to be maintained and kept, in good repair,
working order and condition all significant properties of the Company and
its subsidiaries used in the conduct of the business of the Company and
its subsidiaries, and will from time to time make or cause to be made all
needful and proper repairs, renewals, replacements, betterments and
improvements thereto, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that nothing in this paragraph (d) shall require (i)
the making of any repair or renewal or (ii) the continuance of the
operation and maintenance of any property or (iii) the retention of any
assets if such action (or inaction) is, in the good faith
business judgment of the Company, in the best interests of the Company
(and the best interests of any subsidiary concerned or affected thereby)
and is not disadvantageous in any material respect to the holders of the
Notes.
(e) INSURANCE. The Company will, and will cause each of its
subsidiaries to, (i) keep adequately insured, by financially sound and
reputable insurers, all property of a character usually insured by
corporations engaged in the same or a similar business similarly situated
against loss or damage of the kinds customarily insured against by such
corporations and (ii) carry, with financially sound and reputable
insurers, such other insurance (including, without limitation, liability
insurance) in such amounts as are available at reasonable expense and to
the extent believed necessary in the good faith business judgment of the
Company.
(f) KEEPING OF BOOKS. The Company will at all times keep, and
cause each of its subsidiaries to keep, proper books of record and account
in which proper entries will be made of its transactions in accordance
with generally accepted accounting principles consistently applied.
(g) TRANSACTIONS WITH AFFILIATES. The Company will enter into any
transaction with any director, officer, stockholder, employee or affiliate
of the Company only upon fair and reasonable terms.
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(h) NOTICE OF DEFAULT. If any one or more events which
constitute, or which with notice or lapse of time or both would
constitute, an Event of Default under Section 13 shall occur, or if the
holder of any Note shall demand payment or take any other action permitted
upon the occurrence of any such Event of Default, the Company shall,
immediately after it becomes aware that any such event has occurred or
that such demand has been made or that any such action has been taken,
give notice to all holders of the Notes, specifying the nature of such
event or of such demand or action, as the case may be; PROVIDED, HOWEVER,
that if such event, in the good faith judgment of the Company, will be
cured within ten days after the Company has knowledge that such event
would, with or without notice or lapse of time or both, constitute such an
Event of Default, no such notice need be given if such Event of Default
shall be cured within such ten-day period.
11. MODIFICATION BY HOLDERS; WAIVER. The Company may, with the
written consent of the holders of not less than 66 2/3% in principal amount of
the Notes then outstanding, modify the terms and provisions of the Notes or the
rights of the holders of the Notes or the obligations of the Company thereunder,
and the observance by the Company of any term or provision of the Notes may be
waived with the written consent of the holders of not less than 66 2/3% in
principal amount of the Notes then outstanding; PROVIDED, HOWEVER, that no such
modification or waiver shall:
(a) change the maturity of any Note or reduce the principal
amount thereof or reduce the rate or extend the time of payment of
interest thereon without the consent of the holder of each Note so
affected; or
(b) give any Note any preference over any other Note;
(c) reduce the percentage of Notes, the consent of the holders of
which is required for any such modification; or
(d) amend the provisions of Section 16 hereof without the consent
of the holders of Senior Indebtedness (as hereinafter defined).
Any such modification or waiver shall apply equally to all the
holders of the Notes and shall be binding upon them, upon each future holder of
any Note and upon the Company, whether or not such Note shall have been marked
to indicate such modification or waiver, but any Note issued thereafter shall
bear a notation referring to any such modification or waiver. Promptly after
obtaining the written consent of the holders as herein provided, the Company
shall transmit a copy of such modification or waiver to all the holders of the
Notes at the time outstanding.
12. EVENTS OF DEFAULT. If any one or more of the following
events, herein called Events of Default, shall occur, for any reason whatsoever,
and whether such occurrence
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shall, on the part of the Company or any subsidiary, be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of a court of competent jurisdiction or any
order, rule or regulation of any administrative or other governmental authority
and such Event of Default shall be continuing:
(a) default shall be made in the payment of the principal of any
Note when and as the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or
otherwise; or
(b) default shall be made in the payment of any installment of
interest on any Note according to its terms when and as the same shall
become due and payable and such default shall continue for a period of
five days; or
(c) default shall be made in the due observance or performance of
any other covenant, condition or agreement on the part of the Company to
be observed or performed pursuant to the terms hereof or of the Securities
Purchase Agreement dated as of January 24, 1996 among the Company and the
several Purchasers named therein (the "Purchase Agreement"), and such
default shall continue for 30 days after written notice thereof,
specifying such default and requesting that the same be remedied, shall
have been given to the Company by the holder or holders of at least 25% of
the principal amount of the Notes then outstanding (the Company to give
forthwith to all other holders of Notes at the time outstanding written
notice of the receipt of such notice specifying the default referred to
therein); or
(d) any representation or warranty made by the Company in the
Purchase Agreement shall prove to have been false or incorrect in any
material respect on the date on or as of which made; or
(e) the entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Company or any subsidiary
in an involuntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or other similar laws, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of the Company or any subsidiary or for any substantial part of
any of their property, or ordering the winding-up or liquidation of any of
their affairs and the continuance of any such decree or order unstayed and
in effect for a period of 60 consecutive days; or
(f) the commencement by the Company or any subsidiary of a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar laws, or the consent by any of them to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or other similar official) of the
Company or any subsidiary or for any substantial part of their property,
or the making by any of them of any
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assignment for the benefit of creditors, or the failure of the Company or
any subsidiary generally to pay its debts as such debts become due; or
(g) default as defined in any instrument evidencing or under
which the Company or any subsidiary has outstanding at the time any
indebtedness for money borrowed in excess of $50,000 in aggregate
principal amount shall occur and as a result thereof the maturity of any
such indebtedness shall have been accelerated so that the same shall have
become due and payable prior to the date on which the same would otherwise
have become due and payable and such acceleration shall not have been
rescinded or annulled within 30 days; or
(h) final judgment for the payment of money in excess of $50,000
shall be rendered against the Company or a subsidiary and the same shall
remain undischarged for a period of 30 days during which execution shall
not be effectively stayed;
then, the holder or holders of a least 25% in aggregate principal amount of the
Notes at the time outstanding may, at its or their option, by notice to the
Company, declare all the Notes to be, and all the Notes shall thereupon be and
become, forthwith due and payable together with interest accrued thereon without
presentment, demand, protest or further notice of any kind, all of which are
expressly waived to the extent permitted by law.
At any time after any declaration of acceleration as to all of the
Notes has been made as provided in this Section 12, the holders of at least
66 2/3% in principal amount of the Notes then outstanding may, by notice to the
Company, rescind such declaration and its consequences, if (i) the Company has
paid all overdue installments of interest on the Notes and all principal that
has become due otherwise than by such declaration of acceleration and (ii) all
other defaults and Events of Default (other than nonpayments of principal and
interest that have become due solely by reason of acceleration) shall have been
remedied or cured or shall have been waived pursuant to this paragraph,
PROVIDED, HOWEVER, that no such rescission shall extend to or affect any
subsequent default or Event of Default or impair any right consequent thereon.
13. SUITS FOR ENFORCEMENT. In case any one or more of the Events
of Default specified in Section 12 of this Note shall occur and be continuing,
the holder of this Note may proceed to protect and enforce its rights by suit in
equity, action at law and/or by other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Note or in
aid of the exercise of any power granted in this Note, or may proceed to enforce
the payment of this Note or to enforce any other legal or equitable right of the
holder of this Note.
In case of any default under any Note, the Company will pay to the
holder thereof such amounts as shall be sufficient to cover the costs and
expenses of such holder due to said default, including, without limitation,
collection costs and reasonable attorneys' fees, to the extent actually
incurred.
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14. REMEDIES CUMULATIVE. No remedy herein conferred upon the
holder of this Note is intended to be exclusive of any other remedy and each and
every such remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
15. REMEDIES NOT WAIVED. No course of dealing between the Company
and the holders of this Note or any delay on the part of the holder hereof in
exercising any rights hereunder shall operate as a waiver of any right of any
holder of this Note.
16. SUBORDINATION. (a) SUBORDINATION. Anything in this Note to
the contrary notwithstanding, the obligation of the Company to pay the
principal of and interest on, this Note, and to discharge all its other
obligations hereunder, shall be subordinate and junior in right of payment
to the extent set forth in the following paragraphs (A), (B) and (C),
inclusive, to (i) all obligations of the Company to banks or other
financial institutions for borrowed money, and (ii) all obligations of the
Company to banks or other financial institutions under guarantees by the
Company of obligations of wholly owned subsidiaries of the Company to
banks or other financial institutions for borrowed money, in each case,
whether such obligations are outstanding at the date of this Note or
created or incurred after the date of this Note but prior to the maturity
of this Note. The obligations of the Company to which this Note is
subordinate and junior in right of payment are sometimes herein referred
to as "Senior Indebtedness".
(A) In the event of any insolvency, bankruptcy,
liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the
Company or its creditors or its property, and in the event of any
proceedings for voluntary liquidation, dissolution or other winding
up of the Company, whether or not involving insolvency or bankruptcy
proceedings, then all Senior Indebtedness shall first be paid in
full, before any payment on account of principal or interest is made
upon this Note.
(B) In any of the proceedings referred to in paragraph (A)
above, any payment or distribution of any kind or character, whether
in cash, property, stock or obligations which may be payable or
deliverable in respect of this Note shall be paid or delivered
directly to the holders of Senior Indebtedness for application in
payment thereof, unless and until all Senior Indebtedness shall have
been paid in full.
(C) In the event the Company shall default under any
Senior Indebtedness obligation held by any bank or other financial
institution, which default shall continue without cure or waiver,
and the effect of such default is to accelerate the maturity of such
obligation or the holder thereof shall cause such obligation to
become due prior to the stated maturity thereof or the Company shall
not pay such obligation at maturity, the Company will not make,
directly or indirectly, to the
9
holder of this Note any payment of any kind of or on account of all
or any part of this Note, and the holder of this Note will not
accept from the Company any payment of any kind of or on account of
all or any part of this Note, unless and until all such Senior
Indebtedness shall have been paid in full; and if, with respect to
any such default, the holder of such Senior Indebtedness obligation
shall have made a demand for payment and commenced an action, suit
or other proceeding against the Company, then the holder of this
Note may not take, demand, receive, sue for, accelerate or commence
any remedial proceedings with respect to any amount payable under
this Note during the pendency of such action, suit or other
proceeding. Notwithstanding the provisions of the immediately
preceding sentence, if any such default shall have continued for
180 days or more, the Company may make and the holder of this Note
may accept from the Company all past due and current payments of
any kind of or on account of this Note, and such holder may demand,
receive, retain, sue for or otherwise seek enforcement or
collection of all amounts payable on account of principal of or
interest on this Note.
Upon request of any holder of Senior Indebtedness, the holder of this Note will
affirm its obligations under this Section 16.
(b) SUBROGATION. Subject to the payment in full of all Senior
Indebtedness as aforesaid, the holder of this Note shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of any kind or character, whether in cash, property, stock or
obligations, which may be payable or deliverable to the holders of Senior
Indebtedness, until the principal of, and interest on, this Note shall be paid
in full, and, as between the Company, its creditors other than the holders of
Senior Indebtedness, and the holder of this Note, no such payment or
distribution made to the holders of Senior Indebtedness by virtue of this
Section 16 which otherwise would have been made to the holder of this Note shall
be deemed a payment by the Company on account of the Senior Indebtedness, it
being understood that the provisions of this Section 16 are and are intended
solely for the purposes of defining the relative rights of the holder of this
Note, on the one hand, and the holder of the Senior Indebtedness, on the other
hand. Subject to the rights, if any, under this Section 16 of holders of Senior
Indebtedness to receive cash, property, stock or obligations otherwise payable
or deliverable to the holder of this Note, nothing herein shall either impair,
as between the Company and the holder of this Note, the obligation of the
Company, which is unconditional and absolute, to pay to the holder hereof the
principal hereof and interest hereon in accordance with its terms and the
provisions of this Note or prevent the holder of this Note from exercising all
remedies otherwise permitted by applicable law or upon default hereunder.
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17. COVENANTS BIND SUCCESSORS AND ASSIGNS. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
the Company shall bind its successors and assigns, whether so expressed or not.
18. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
19. HEADINGS. The headings of the Sections and paragraphs of this
Note are inserted for convenience only and do not constitute a part of this
Note.
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IN WITNESS WHEREOF, ALLIANCE DATA SYSTEMS CORPORATION has caused
this Note to be signed in its corporate name by one of its officers thereunto
duly authorized and to be dated as of the day and year first above written.
ALLIANCE DATA SYSTEMS CORPORATION
By /s/ [ILLEGIBLE]
-------------------------------
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