SECURITIES PURCHASE AGREEMENT
between
METRIS COMPANIES INC.
AND
XXXXXX X. XXX EQUITY FUND IV, L.P.,
____________________
November 13, 1998
____________________
SECURITIES PURCHASE AGREEMENT
AGREEMENT made and entered into on this 13th day of
November, 1998, among METRIS COMPANIES INC., a Delaware
corporation (the "Company"), XXXXXX X. XXX EQUITY FUND IV, L.P.,
a Delaware limited partnership ("THL Equity Fund", and
collectively with any Affiliate of THL Equity Fund who shall
agree to purchase Bridge Securities pursuant to this Agreement in
accordance with the terms hereof, the "Purchasers").
WITNESSETH
WHEREAS, the Company desires to sell to the Purchasers, and
the Purchasers desire to purchase from the Company, shares of the
Company's Series B Perpetual Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), and senior notes due 2006
of the Company (the "Senior Notes"), and warrants to purchase
shares of the Common Stock, par value $.01 per share ("Common
Stock"), of the Company (including any rights to acquire Series A
Junior Participating Preferred Stock of the Company ("Junior
Preferred Stock") associated therewith) (the "Warrants" and,
together with the Series B Preferred Stock and the Senior Notes,
the "Bridge Securities"); and
WHEREAS, upon the occurrence of certain events, the Bridge
Securities will automatically be exchanged for shares of the
Company's Series C Perpetual Convertible Preferred Stock, par
value $.01 per share (the "Series C Preferred Stock" and,
together with the Bridge Securities, the "Securities"), each such
share to be convertible in accordance with the Certificate of
Designation of Series C Perpetual Convertible Preferred Stock
into shares of Common Stock (including any rights to acquire
Junior Preferred Stock associated therewith) and shares of the
Non-Voting Stock (as defined herein); and
WHEREAS, the Company and the Purchasers are entering into
this Agreement to provide for said purchase and sale of
Securities and to establish various rights and obligations in
connection therewith, upon the terms and subject to the
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual premises and
covenants contained herein, and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
AUTHORIZATION OF ISSUANCE OF THE SECURITIES
Prior to the Closing, the Company shall have duly authorized
and taken all such corporate and other action which is necessary
in accordance with the terms of this Agreement to effect the valid
issuance, sale and delivery to the Purchasers of the Securities to
be purchased by each Purchaser hereunder.
ARTICLE II
PURCHASE AND SALE OF BRIDGE SECURITIES; CLOSING
Section 2.01. Purchase and Sale. Upon the terms and subject
to the conditions hereinafter set forth, on the Closing Date, the
Company shall issue, sell and deliver to each Purchaser, and each
Purchaser shall purchase from the Company, the Bridge Securities
set forth opposite the name of such Purchaser on Schedule I
hereto, for the purchase price set forth thereon. Payment for the
Bridge Securities shall be made by wire transfer of immediately
available funds to the account of the Company designated on
Schedule 2.01 hereto (or in such other manner as may be agreed by
the Purchasers and the Company), and shall be wired against the
issuance and delivery by the Company on the Closing Date to the
respective Purchasers of certificates in definitive and fully
registered form representing the aggregate number of Bridge
Securities being purchased by each Purchaser. The obligations
undertaken by each of the Purchasers under this Agreement are
several and not joint, and the failure of one Purchaser to comply
with its obligations hereunder shall not relieve the other
Purchaser from its respective obligations hereunder.
Section 2.02. Closing. Subject to the terms and conditions
of this Agreement, the closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of
Xxxxxxxx, Xxxxxxx & Xxxxxxx, A Professional Corporation, at 10:00
a.m., Eastern time, on December 3, 1998, or at such other later
date or such other place as the parties shall mutually agree. The
date of the Closing is referred to in this Agreement as the
"Closing Date."
Section 2.03 Deliveries. At or prior to the Closing, the
parties shall deliver all documents, instruments, certificates and
writings required to be executed and delivered by them at or prior
to the Closing pursuant to this Agreement.
Section 2.04 Use of Proceeds. The proceeds from the
purchase and sale of the Bridge Securities hereunder will be used
for general corporate purposes and in connection with the
acquisition simultaneously with the Closing of certain assets of
the PNC National Bank in accordance with the Purchase and Sale
Agreement, dated September 4, 1998, by and between Direct
Merchants Credit Card Bank, National Association and the PNC
National Bank, as amended (the "PNC Agreement").
Section 2.05 Definitions. Terms used as defined terms
herein and not otherwise defined shall have the meanings set forth
in Article XII.
Section 2.06 Allocation of Purchase Price. The parties
hereto agree that $100,000,000 of the purchase price shall be
allocated to the Senior Notes and $200,000,000 shall be allocated
to the Series B Preferred Stock and the Warrants, as an investment
unit, and neither party will take any position for tax purposes
inconsistent with such allocations.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser
as follows:
Section 3.01. Organization and Good Standing. The Company
is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is duly
qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the
business transacted by it or the character or location of the
properties owned or leased by it requires such qualification,
except where the failure to be so qualified or in good standing
would not have a Material Adverse Effect. The Company has full
corporate power and authority to own and manage its properties and
to carry on its business as it is now being (and as it is
currently proposed to be) conducted. The copies of the Company's
certificate of incorporation, by-laws and other organizational
documents and instruments (in each case, as amended and/or
restated through the date hereof), heretofore made available to
the Purchasers, are true, complete and correct copies thereof.
The Company, directly or indirectly, owns all of the outstanding
capital stock of each Subsidiary. The Company does not own any
interest in any other company or entity other than the
Subsidiaries set forth on Schedule 3.01(b), and other than
interests in trusts established by the Company or its Subsidiaries
in connection with the Company's securitization program. Each
Subsidiary is duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization and has the power and authority to own or lease its
properties and to conduct its business as now conducted. Except
as set forth on Schedule 3.01(c), all outstanding shares of the
capital stock of each Subsidiary have been validly issued and are
fully paid and non-assessable. Except as set forth on Schedule
3.01(d) hereto, there are no outstanding options, warrants,
rights, agreements or commitments of any nature whatsoever of any
third party to subscribe for or purchase any equity security of
any Subsidiary or to cause any Subsidiary to issue any such equity
security.
Section 3.02. Capitalization. The authorized capitalization
of the Company consists of: (a) 100,000,000 shares of Common
Stock, par value $.01 per share, and (b) 10,000,000 shares of
Preferred Stock, par value $.01 per share ("Preferred Stock"),
1,000,000 of which have been designated as Series A Junior
Participating Preferred Stock. At the Closing, (i) 2,400,000
shares of Preferred Stock shall have been designated as Series B
Preferred Stock, (ii) 2,000,000 shares of Preferred Stock shall
have been designated as Series C Preferred Stock, and (iii)
100,000 shares of Preferred Stock shall have been designated as
Series D Preferred Stock. As of September 30, 1998, there were
19,242,000 shares of Common Stock outstanding, and there are
currently no shares of Preferred Stock outstanding. No other
class or series of capital stock of the Company is, or at the
Closing will be, authorized or issued except, as of the Closing,
for the Bridge Securities. All such shares outstanding on the
date hereof are, and the Securities, when issued, will be, duly
authorized, validly issued and fully paid and non-assessable.
Except as set forth on Schedule 3.02, there are no outstanding
options, warrants, rights, puts, calls, commitments, or other
contracts, arrangements, or understandings issued by or binding
upon the Company requiring or providing for, and there are no
outstanding debt or equity securities of the Company which upon
the conversion, exchange or exercise thereof would require or
provide for, the issuance by the Company of any shares of capital
stock (or any other securities of the Company which, with notice,
lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for shares of
capital stock). Except as set forth in Schedule 3.02, there are
no preemptive or other similar rights available to the existing
holders of Common Stock or other securities of the Company. From
the date hereof until the Closing, the Company will not issue any
shares of its capital stock or securities convertible or
exchangeable for shares of capital stock, except for the issuances
set forth on Schedule 3.02.
Section 3.03. Due Authorization; Execution and Delivery.
The Company has all requisite corporate right, power and authority
to enter into this Agreement, the Registration Rights Agreement,
the Warrant Agreement and the Indenture (the Registration Rights
Agreement, the Warrant Agreement and the Indenture referred to
collectively as the "Related Agreements), and to consummate the
transactions contemplated hereby and thereby, including without
limitation the issuance of the Bridge Securities, the issuance of
the Series C Preferred Stock pursuant to the Exchange and the
issuance of Common Stock or Non-Voting Stock upon conversion of
the Series C Preferred Stock and exercise of the Warrants, and the
exercise by the Purchasers of their rights hereunder and
thereunder. The execution, delivery and performance of this
Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby, have been duly
authorized and approved by the Board of Directors of the Company
and no further corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance by
the Company of such agreements or the consummation by the Company
of the transactions contemplated hereby or thereby, including
without limitation the issuance of the Bridge Securities, the
Series C Preferred Stock pursuant to the Exchange, and the Common
Stock or Non-Voting Stock upon conversion of the Series C
Preferred Stock and exercise of the Warrants, and the exercise by
the Purchasers of their rights hereunder and thereunder. This
Agreement constitutes, and the Related Agreements will constitute
as of the Closing Date, the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with
their respective terms, except that such enforcement may be
subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights, and the remedies of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may
be brought.
Section 3.04. Absence of Breach; No Conflict. Except as set
forth on Schedule 3.04 hereto, the execution, delivery, and
performance of this Agreement and the Related Agreements by the
Company, the consummation by the Company of the transactions
contemplated hereby and thereby, including without limitation the
issuance of the Bridge Securities, the Series C Preferred Stock
pursuant to the Exchange, and the issuance of Common Stock or Non-
Voting Stock upon conversion of the Series C Preferred Stock and
exercise of the Warrants, and the exercise by the Purchasers of
their rights hereunder and thereunder, will not (a) give rise to a
right to (or otherwise) terminate, accelerate the maturity of or
accelerate or increase any payment due under, trigger a right of
redemption of, conflict with, result in a breach or violation of
any of the terms, conditions or provisions of, constitute a
default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, require any approval, waiver or
consent under, or result in the creation or imposition of any
obligations on behalf of the Company or any Lien upon any property
or assets of the Company or any Subsidiary pursuant to the terms
of, any note, bond, mortgage, pledge, indenture, deed of trust,
lease, agreement, indemnity, obligation, commitment, instrument,
franchise, license, certificate or permit to which the Company or
any of the Subsidiaries is a party or by which any of their
respective properties or assets may be bound; (b) violate or
conflict with any term or provision of the certificate of
incorporation, by-laws or equivalent organizational instruments
and documents (in each case, as amended and/or restated through
the date hereof) of the Company or any Subsidiary; or (c) assuming
the accuracy of the representations and warranties of the
Purchasers contained in Article IV hereof, violate any judgment,
decree, order, writ, statute, rule or regulation of any judicial,
arbitral, public, or governmental authority having jurisdiction
over the Company, any of the Subsidiaries or any of their
respective properties or assets. None of the issuance of the
Bridge Securities, the issuance of the Series C Preferred Stock
pursuant to the Exchange and the issuance of the Common Stock and
Non-Voting Stock upon conversion thereof, will violate the rules,
regulations or bylaws of the Nasdaq Stock Market or any other
securities exchange on which the securities of the Company are
traded or listed.
Section 3.05. Validity. The Bridge Securities to be issued,
sold and delivered to the Purchasers hereunder, all shares of
Series C Preferred Stock to be issued pursuant to the Exchange and
the Common Stock and Non-Voting Stock issuable upon the
conversion, exercise or exchange of the Warrants or the Series C
Preferred Stock shall, upon such issuance, sale, exercise and
delivery in accordance with this Agreement and the Certificates of
Designation and the Indenture, be duly authorized, validly issued,
fully paid and non-assessable, and free and clear of any and all
Liens and preemptive and other similar rights.
Section 3.06. Securities Law Compliance. Assuming the
representations and warranties of the Purchasers set forth in
Section 4.02 hereof are true and correct in all material respects,
the offer and sale of the Securities and the shares of Common
Stock and Non-Voting Common Stock issuable upon conversion of the
Series C Preferred Stock (collectively, the "Issuable Securities")
pursuant to this Agreement will be exempt from the registration
requirements of the Securities Act. Neither the Company nor any
Person acting on its behalf has, in connection with the offering
of the Securities and the Issuable Securities, engaged in (i) any
form of general solicitation or general advertising (as those
terms are used within the meaning of Rule 502(c) under the
Securities Act), (ii) any action involving a public offering
within the meaning of Section 4(2) of the Securities Act, or (iii)
any action that would require the registration under the
Securities Act of the offering and sale of the Issuable Securities
pursuant to this Agreement or that would violate applicable state
securities or "blue sky" laws. The Company has not made and will
not prior to the Closing make, directly or indirectly, any offer
or sale of the Issuable Securities or of securities of the same or
similar class as the Issuable Securities if, as a result, the
offer and sale contemplated hereby could fail to be entitled to
exemption from the registration requirements of the Securities
Act. As used herein, the terms "offer" and "sale" have the
meanings specified in Section 2(3) of the Securities Act.
Section 3.07. Commission Documents; Financial Information.
(a) The Company has made available to the Purchasers
true and complete copies of all SEC Documents filed with the
Commission prior to the date hereof and will furnish the
Purchasers a true and correct copy of each amendment thereto and
any SEC Documents filed by the Company with the Commission on or
before the Closing Date. As of their respective filing dates, the
SEC Documents complied (or will comply) in all material respects
with the requirements of the Securities Act, Exchange Act and the
rules and regulations of the Commission thereunder applicable to
such SEC Documents, and as of their respective dates none of the
SEC Documents contained (or will contain) any untrue statement of
a material fact or omitted (or will omit) to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the
Company and its Subsidiaries included in the SEC Documents comply
(or will comply) as of their respective dates as to form in all
material respects with applicable accounting requirements and the
rules and regulations of the Commission with respect thereto
(except as may be indicated in the notes thereto or, in the case
of the unaudited statements, as permitted by Form 10-Q promulgated
by the Commission), and present fairly (or will present fairly) as
of their respective dates the consolidated financial position of
the Company and the Subsidiaries as at the dates thereof and the
consolidated results of their operations and their consolidated
cash flows for each of the respective periods, in conformity with
GAAP. As used in this Agreement, the consolidated balance sheet
of the Company and its Subsidiaries at September 30, 1998
previously provided to the Purchasers is hereinafter referred to
as the "Balance Sheet", and September 30, 1998 is hereinafter
referred to as the "Balance Sheet Date."
(b) Except as and to the extent expressly set forth in
the Balance Sheet, or the notes, schedules or exhibits thereto, or
as disclosed in the SEC Documents, (i) as of the Balance Sheet
Date, neither the Company nor the Subsidiaries had any material
liabilities or obligations (whether absolute, contingent, accrued
or otherwise) that would be required to be included on a balance
sheet or in the notes, schedules or exhibits thereto prepared in
accordance with GAAP and (ii) since the Balance Sheet Date, the
Company and its Subsidiaries have not incurred any such material
liabilities or obligations other than in the ordinary course of
business.
Section 3.08. Approvals; Compliance with Laws; Licenses and
Authorities.
(a) Except as set forth on Schedule 3.08(a) and
assuming the accuracy of the representations and warranties of the
Purchasers contained in Article IV hereof, no notices, reports or
other filings are required to be made by the Company or any
Subsidiary with, nor are any consents, registrations,
applications, approvals, permits, licenses or authorizations
required to be obtained by the Company or any Subsidiary from, any
public or governmental authority or other third party in
connection with the execution and delivery of this Agreement the
consummation by the Company of the transactions contemplated
hereby, or the exercise by the Purchasers of their rights
hereunder, except for any of the foregoing, the failure of which
to make or obtain would not have a Material Adverse Effect or
adversely affect the Purchasers' rights hereunder.
(b) Except as set forth on Schedule 3.08(b) and except
as would not have a Material Adverse Effect, the business of the
Company and each of the Subsidiaries has been and is presently
being conducted in compliance with all applicable federal, state,
county and local ordinances, statutes, rules, regulations and laws
(collectively "Laws"), including without limitation, any consumer
lending Laws of any Authority to which the Company's or its
Subsidiaries' operations are or have been subject.
(c) Except as disclosed on Schedule 3.08(c) and except
as would not have a Material Adverse Effect, (i) the Company and
its Subsidiaries have all permits or licenses of all Authorities
that are necessary to carry on the business of the Company and its
Subsidiaries as now conducted; (ii) each such permit or license is
in full force and effect and has not been revoked, canceled or
encumbered and the Company or relevant Subsidiary is in compliance
therewith in all respects; and (iii) no such permit or license
will be terminated or adversely affected by virtue of the
execution of the Agreement or the performance by the parties of
their obligations or the exercise by the parties of their rights
hereunder.
Section 3.09. Litigation. Except as set forth in SEC
Documents filed with the Commission prior to the date of this
Agreement or as set forth on Schedule 3.09, there are no pending
actions, suits, proceedings, arbitrations or investigations
against or affecting the Company or any of its Subsidiaries or any
of their respective properties, assets or operations, or with
respect to which the Company or any such Subsidiary is responsible
by way of indemnity or otherwise (a "Material Claim"), that are
required under the Securities Act or Exchange Act to be described
in such SEC Documents or which, if there is an adverse decision,
could singly, or in the aggregate, with all such other actions,
suits, investigations or proceedings, have a Material Adverse
Effect and, to the knowledge of the Company, no such actions,
suits, proceedings or investigations are threatened. No adverse
development has occurred with respect to any Material Claim except
as disclosed in the SEC Documents filed with the Commission prior
to the date of this Agreement.
Section 3.10. Tax Matters.
Except as described in Schedule 3.10:
(a) Each of the Company and its Subsidiaries has filed or
caused to be filed, or has properly filed extensions for, all
material Tax Returns that are required to be filed by or respect
to the Company, any of its Subsidiaries or the business of the
Company and its Subsidiaries; and each of the Company and its
Subsidiaries has timely paid or caused to be paid all material
Taxes with respect thereto whether or not shown on said Tax
Returns (and on all material assessments received by it) to the
extent that such Taxes and assessments have become due, except for
any failure to so file or cause to be filed, any failure to so
file an extension, or any failure to so pay or cause to be paid,
in each case that would not, individually or in the aggregate,
have a Material Adverse Effect, and, except for any failure to pay
or cause to be paid Taxes the validity or amount of which is being
contested in good faith by appropriate proceedings and with
respect to which adequate reserves, in accordance with generally
accepted accounting principles, have been set aside. All said Tax
Returns are complete and accurate in all respects and have been
prepared in compliance with all applicable laws and regulations,
except for any such failure to be complete and accurate or to be
so prepared that would not, individually or in the aggregate, have
a Material Adverse Effect. The Company and its Subsidiaries
reasonably believe (i) the reserves on the Balance Sheet of the
Company and its Subsidiaries for Taxes due or owing by the Company
and its Subsidiaries to be adequate in all material respects for
all unpaid Taxes, whether or not disputed, of the Company and its
Subsidiaries for all fiscal years that, as of the Balance Sheet
Date, had not been examined and reported on by any taxing
authorities (or closed by applicable statutes), and (ii) that as
of the Closing Date, such reserves as adjusted on the books in
accordance with past practice, will be sufficient for the then-
unpaid taxes of the Company and its Subsidiaries attributable to
periods prior to and ending on the Closing Date, except in either
case where any failure to establish any such reserve would not
individually or in the aggregate constitute a Material Adverse
Effect.
(b) Except for the Tax Sharing Agreement with Fingerhut
Companies, Inc. ("Fingerhut"), dated October 31, 1996, as amended
as of January 1, 1998 (the "Tax Sharing Agreement"), neither the
Company nor any Subsidiary is a party to nor is bound by any tax
allocation or sharing agreement with a third party allocating
liability for Taxes among members of a combined, consolidated or
unitary group.
(c) There are no actions or proceedings currently pending
or, to the best knowledge of the Company or any of its
Subsidiaries, threatened in writing against the Company, any of
its Subsidiaries or any affiliated group with respect to the
Company, any of its Subsidiaries or the business of the Company
and its Subsidiaries by any governmental authority for the
assessment or collection of material Taxes, and no claim for the
assessment or collection of material Taxes has been asserted in
writing against the Company or any of its Subsidiaries or any
affiliate group with respect to the Company, any of its
Subsidiaries or the business of the Company and its Subsidiaries,
in either case which singly or in the aggregate are likely to have
a Material Adverse Effect.
(d) Except for the IRS ruling relating to the distribution
of stock of the Company by Fingerhut, neither the Company nor any
Subsidiary has received any written ruling of a taxing authority
related to Taxes or entered into any written and legally binding
agreement with a taxing authority relating to Taxes which
currently has any ongoing effect on the Company. The IRS ruling
relating to the distribution of stock of the Company by Fingerhut
has not been withdrawn or revoked by the IRS.
(e) During the past three years, no written claim has ever
been made on the Company or any Subsidiary by a taxing authority
of a jurisdiction where the Company or any Subsidiary does not
file, or has not filed, Tax Returns to the effect that the Company
or such Subsidiary is or may be subject to the imposition of any
Tax by that jurisdiction.
Section 3.11. Material Contracts. All of the material
contracts of the Company or any of its Subsidiaries that are
required to be described in the SEC Documents or to be filed as
exhibits thereto prior to the date hereof are described in the SEC
Documents filed prior to the date hereof or filed as exhibits
thereto and are in full force and effect. True and complete
copies of all such material contracts have been made available to
the Purchasers. All material contracts to which the Company or
its Subsidiaries are parties on or prior to the date hereof which
will be required to be described or filed as an Exhibit in the SEC
Documents required to be filed following the date hereof,
including any amendment to the PNC Agreement have been provided to
the Purchasers or are listed on Schedule 3.11 and are in full
force and effect. Neither the Company nor any of its Subsidiaries
nor, to the knowledge of the Company, any other party is in
material breach of or in default under any such contract.
Section 3.12. Title to Properties, Encumbrances. Except as
set forth on Schedule 3.12, each of the Company and its
Subsidiaries has good and valid title to its respective assets,
free and clear of all defects and Liens except (a) matters
specified in Schedule 3.12; (b) materialmen's, mechanics',
carriers', workmen's, warehousemen's, repairmen's, or other like
Liens arising in the ordinary course of business; (c) Liens for
current Taxes not yet due and payable; (d) Liens or minor
imperfections of title that do not materially interfere with the
use or materially detract from the value of such property and (e)
Liens permitted by Section 6.03 of the Credit Agreement.
Section 3.13. Plant and Equipment; Sufficiency Of Assets.
(a) The plant and equipment used by the Company and its
Subsidiaries has been maintained to the standards of operating
condition and repair typical of companies engaged in the same or
similar businesses except as would not have a Material Adverse
Effect.
(b) Each of the Company and its Subsidiaries own or
have the lawful right to use all assets, properties, operating
rights, easements, contracts, leases, licenses, and other
instruments necessary to operate their businesses lawfully and to
maintain the same as presently conducted except as would not have
a Material Adverse Effect.
Section 3.14. Benefits Plans.
(a) Schedule 3.14(a) contains a list of all "employee
pension benefit plans" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(l) of ERISA),
"employee benefit plans" (as defined in Section 3(3) of ERISA),
and all other material Benefit Plans maintained, or contributed
to, by the Company for the benefit of any current or former
employees, officers, or directors of the Company or any of its
Subsidiaries. The Company has made available to the Purchasers
true, complete, and correct copies of each such Benefit Plan (or,
in the case of any unwritten Benefit Plans, descriptions thereof).
Each Benefit Plan has been administered in all material respects
in accordance with its terms. The Company, its Subsidiaries, and
all the Benefit Plans are all in compliance in all material
respects with applicable provisions of applicable law, including
ERISA and the Code. All contributions required to be made under
the terms of each Benefit Plan have been timely made or have been
reflected on the most recent audited financial statements included
in the SEC Documents.
(b) Each Pension Plan has been the subject of a
determination letter from the Internal Revenue Service to the
effect that such plan is qualified and exempt from Federal income
taxes under Sections 401(a) and 501(a), respectively, of the Code,
and no such determination letter has been revoked nor has any
event occurred since the issuance of such determination letter
that would adversely affect the plan's qualification or materially
increase its costs.
(c) With respect to each Benefit Plan that is an
employee welfare benefit plan, there are no understandings,
agreements, or undertakings, written or oral, that would prevent
any such plan from being amended or terminated without material
liability to the Company or any Subsidiary on or at any time after
the Closing Date. No employee welfare benefit plan of the Company
or any Subsidiary provides for continuing benefits or coverages
after termination or retirement from employment, except for
benefits mandated by Section 4980B of the Code or applicable State
statute. None of the Benefit Plans is a "multiple employer
welfare arrangement" as described in Section 3(40) of ERISA.
(d) None of the Company, any Subsidiary, or any person
or entity that, together with the Company, is treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA
maintains, contributes to, or has any liability or contingent
liability to the Pension Benefit Guaranty Corporation or any other
person, plan, or entity under or with respect to (i) a Pension
Plan subject to Title IV of ERISA (including under Section 4069 of
ERISA) or Section 412 of the Code, or (ii) a "multiemployer
pension plan", as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Schedule 3.14(e), the
consummation of the transactions contemplated by this Agreement
would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following
the Closing Date) reasonably be expected to (i) entitle any
current or former employee, consultant, or director of the Company
or any Subsidiary to any payment (including severance pay, change
of control payments, or similar compensation), (ii) result in the
vesting or acceleration of any benefits under any Benefit Plan, or
(iii) result in any material increase in benefits under any
Benefit Plan.
(f) Neither the Company nor any Subsidiary maintains
any compensation plans, programs, or arrangements the payments
under which would not be expected to be deductible as a result of
the limitations under Section 162(m) of the Code and the
regulations issued thereunder, except for any such payments which
in the aggregate would not constitute a Material Adverse Effect.
(g) As a result, directly or indirectly, of the
transactions contemplated by this Agreement (including, without
limitation, as a result of any termination of employment prior to
or following the Closing Date) none of the Company or any of its
subsidiaries will be obligated to make a payment to an individual
who is a "disqualified individual" that would be characterized as
an "excess parachute payment" (as such terms are defined in
Section 280G(b)(1) of the Code) without regard to whether such
payment is reasonable compensation for personal services performed
or to be performed in the future, except for any such payments
which in the aggregate would not constitute a Material Adverse
Effect.
Section 3.15. Labor Matters.
(a) Neither the Company nor any of its Subsidiaries is
party to any labor or collective bargaining agreement and there
are no labor or collective bargaining agreements which pertain to
employees of the Company or any of its Subsidiaries.
(b) No employees of the Company or any Subsidiary are
represented by any labor organization. No labor organization or
group of employees of the Company or any of its Subsidiaries has
made a pending demand for recognition or certification, and there
are no representation or certification proceedings or petitions
seeking a representation proceeding presently pending or, to the
knowledge of the Company, threatened to be brought or filed, with
the NLRB or any other labor relations tribunal or authority. To
the knowledge of the Company, there are no organizing activities
involving the Company or any of its Subsidiaries pending with, or
threatened by, any labor organization.
(c) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other
material labor disputes pending or, to the knowledge of the
Company, threatened against or involving the Company or any of its
Subsidiaries. Except as would not result in any Material Adverse
Effect, there are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of the Company, threatened
by or on behalf of any employee or group of employees of the
Company or any of its Subsidiaries.
Section 3.16. Environmental Matters.
(a) Except as set forth in Schedule 3.16, (i) each of
the Company and its Subsidiaries is in material compliance with
all Environmental Laws and (ii) neither the Company nor any of its
Subsidiaries has received any written communication from a
governmental authority with respect to such compliance or the
failure thereof.
(b) Except as set forth in Schedule 3.16, (i) there is
no civil, criminal or administrative action, claim, demand,
investigation or notice relating to a violation of an
Environmental Law (an "Environmental Claim") pending or, to the
knowledge of the Company, threatened and (ii) to the knowledge of
the Company, there are no past or present actions, activities,
circumstances, conditions, events or incidents, including, without
limitation, the release, emission, discharge or disposal of any
chemical, pollutant, contaminant, waste, toxic substance,
petroleum or petroleum product, that would form the basis of any
Environmental Claim, in either case (A) against the Company or any
of its Subsidiaries, (B) against any person or entity whose
liability for any Environmental Claim the Company or any of its
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (C) involving any real or
personal property which the Company or any of its Subsidiaries
owns, leases or manages except, in each case, as would not have a
Material Adverse Effect.
Section 3.17. Investment Company; Operating Company; Bank
Regulatory Matters. Subject to the accuracy of the
representations and warranties of the Purchasers contained in
Section 4.06, the Company is not (and immediately after
consummation of the transactions contemplated by this Agreement
will not be) an investment company, a company controlled by an
investment company, or otherwise subject to any provisions of the
Investment Company Act of 1940, as amended, and/or the rules and
regulations of the Commission promulgated thereunder. The Company
is an "operating company" within the meaning of Department of
Labor Regulation 2510.3-101. The Company is not a "bank holding
company" as that term is defined in the Bank Holding Company Act
of 1956, and Direct Merchants Credit Card Bank, National
Association and each other Subsidiary of the Company which engages
in credit transactions; (i) engages only in credit card
operations, (ii) does not accept demand deposits or deposits that
the depositor may withdraw by check or similar means for payment
to third parties or others, (iii) does not accept any savings or
time deposits of less than $100,000, (iv) maintains only one
office that accepts deposits, and (v) does not engage in the
business of making commercial loans.
Section 3.18. No Existing Violation, Default, Etc. Neither
the Company nor any of its Subsidiaries is (a) in violation of any
provision of its certificate of incorporation, by-laws or other
organizational documents or (b) in violation of any applicable
Law, stock exchange rule or regulation, which violation has or
would reasonably be expected to have a Material Adverse Effect.
Except as disclosed on Schedule 3.18, no breach, event of default
or event that, but for the giving of notice or the lapse of time
or both, would constitute an event of default exists under any
indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or
instrument for borrowed money or any lease, permit, license or
other agreement to which the Company or any of its Subsidiaries is
a party or by which the Company or any such Subsidiary is bound or
to which any of the properties, assets or operations of the
Company or any such Subsidiary is subject, which breach, event of
default, or event that, but for the giving of notice or the lapse
of time or both, would constitute an event of default, has or
would reasonably be expected to have a Material Adverse Effect.
Section 3.19. Affiliate Transactions. Except as disclosed
in the SEC Documents or on Schedule 3.19, the Company and its
Subsidiaries have not entered into any material transaction or
material series of transactions with any current or former
director, officer, employee or Affiliate of the Company.
Section 3.20. Insurance. The Company and its Subsidiaries,
in the reasonable determination of the Company's management,
maintain with financially sound and reputable insurers insurance
against loss or damage of the kinds customarily insured against by
corporations of established reputation engaged in the same or a
similar business and similarly situated, and of such types and in
such amounts as is customarily carried under similar circumstances
by such other corporations.
Section 3.21. Unlawful Payments and Contributions. Neither
the Company nor any of its directors, officers or, to the
Company's knowledge, any of its other employees or agents has (a)
used any Company funds for any unlawful contribution, endorsement,
gift, entertainment or other unlawful expense relating to
political activity; (b) made any direct or indirect unlawful
payment to any government official or employee from Company funds;
(c) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended in connection with the
Company's and its Subsidiaries' business; or (d) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful
payment to any person or entity with respect to matters pertaining
to the Company.
Section 3.22. Absence of Certain Events; No Material Adverse
Change. Except as disclosed in the SEC Documents filed with the
Commission prior to the date hereof, since the Balance Sheet Date,
the Company and its Subsidiaries each has conducted its business
operations in the ordinary course and there has not occurred any
event or condition having or, that is reasonably likely to have, a
Material Adverse Effect. Without limiting the generality of the
foregoing, other than as is disclosed in the SEC Documents filed
with the Commission prior to the date hereof or on Schedule 3.22
hereto, since the Balance Sheet Date there has not occurred:
(a) any change or agreement to change the character or
nature of the business of the Company or any of its Subsidiaries;
(b) any purchase, sale, transfer, assignment,
conveyance or pledge of the assets or properties of the Company or
any of its Subsidiaries, except in the ordinary course of
business;
(c) any waiver or modification by the Company or any of
its Subsidiaries of any right or rights of substantial value, or
any payment, direct or indirect, in satisfaction of any liability,
in each case, having a Material Adverse Effect;
(d) any liability, contract, agreement, license or
other commitment entered into or assumed by or on behalf of the
Company or any of its Subsidiaries relating to the business,
assets or properties of the Company or any of its Subsidiaries,
whether oral or written, except in the ordinary course of
business;
(e) any loan, advance or capital expenditure by the
Company or any of its Subsidiaries, except for loans, advances and
capital expenditures made in the ordinary course of business;
(f) any change in the accounting principles, methods,
practices or procedures followed by the Company in connection with
the business of the Company or any change in the depreciation or
amortization policies or rates theretofore adopted by the Company
in connection with the business of the Company and its
Subsidiaries;
(g) any declaration or payment of any dividends, or
other distributions in respect of the outstanding shares of
capital stock of the Company or any of its Subsidiaries (other
than dividends declared or paid by wholly-owned Subsidiaries);
(h) any issuance of any shares of capital stock of the
Company or any of its Subsidiaries or any other change in the
authorized capitalization of the Company or any of its
Subsidiaries, except as contemplated by this Agreement;
(i) any grant or award of any options, warrants,
conversion rights or other rights to acquire any shares of capital
stock of the Company or any of its Subsidiaries, except as
contemplated by this Agreement or except pursuant to employee
benefit plans, programs or arrangements in existence on the date
hereof, in the ordinary course of business consistent with past
practice;
(j) (a) any granting by the Company or any of its
Subsidiaries to any employee earning in excess of $100,000 per
year any increase in compensation, except in the ordinary course
of business consistent with prior practice or as was required
under employment agreements in effect as of the date of the most
recent audited financial statements included in the SEC Documents,
(b) any granting by the Company or any of its Subsidiaries to any
employee earning in excess of $100,000 per year of any increase in
severance or termination pay, except as was required under any
employment, severance, or termination agreements in effect as of
the date of the most recent audited financial statements included
in the SEC documents, or (c) any entry by the Company or any of
its Subsidiaries into any employment, severance, or termination
agreement with any employee earning in excess of $100,000 per
year; or
(k) any adoption, or amendment in any material respect,
by the Company or any of its Subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement, vacation,
severance, change of control, retention, disability, death
benefit, hospitalization, medical, or other plan, arrangement, or
understanding (whether or not legally binding) providing benefits
to any current or former employee, officer, or director of the
Company or any of its Subsidiaries (collectively, "Benefit
Plans").
Section 3.23 Year 2000. The Company has engaged in a
review of the hardware, software and firmware products used by the
Company and its Subsidiaries in its business (collectively, the
"Software") which it believes to be adequate to identify any
material deficiency in "Year 2000 Capabilities". "Year 2000
Capabilities" means the ability of the Software (i) to manage and
manipulate data involving dates, including single century formulas
and multi-century formulas, and to not generate incorrect values
or invalid results involving such dates, (ii) to provide that all
date-related user interface functionalities and data fields
include the indication of century, and (iii) to provide that all
date-related data interface functionalities include the indication
of century. The Company is taking appropriate steps to identify
exposure to deficiencies in Year 2000 Capabilities resulting from
the Year 2000 Capabilities of its vendors, and to address them on
a timely basis. In addition, the Company believes that it has
adequate resources to cause its Software to include Year 2000
Capabilities which currently may not contain them and that the
costs of causing its Software to include Year 2000 Capabilities
will not be material to the Company's consolidated financial
position, results of operations or cashflows.
Section 3.24. Full Disclosure. None of the statements made
by the Company in this Agreement (including, without limitation,
the representations and warranties made by the Company herein and
in the schedules and exhibits hereto which are incorporated by
reference herein and which constitute an integral part of this
Agreement) contains (or will contain on the Closing Date) any
untrue statement of a material fact, or omits (or will omit on the
Closing Date) to state any material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally as to itself (but not
jointly) represents and warrants and covenants to the Company as
follows:
Section 4.01. Organization and Standing. Each of the
Purchasers which is an entity represents and warrants that it is
duly organized, validly existing and in good standing under the
laws of the jurisdiction of its formation.
Section 4.02. Investment Representation. Each Purchaser
represents and warrants that it is an "Accredited Investor" within
the meaning of Rule 501(a) of Regulation D under the Securities
Act, and it is or will be acquiring the Issuable Securities for
its own account and not with a view to, or for sale in connection
with, any distribution thereof in violation of the Securities Act.
It understands that the Issuable Securities have not been
registered under the Securities Act by reason of a specific
exemption from the registration provisions thereof which depends
upon, among other things, the bona fide nature of their investment
intent as expressed herein. Each Purchaser hereby acknowledges
and agrees that upon the original issuance thereof, and until such
time as the same is no longer required under the applicable
requirements of the Securities Act and the rules and regulations
thereunder, the Issuable Securities may bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE LAWS REGULATING THE SALE OF
SECURITIES AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS REGISTERED OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
Section 4.03. Due Authorization; Execution and Delivery.
Each of the Purchasers represents and warrants that it has the
requisite right, power and authority to enter into this Agreement
and the Registration Rights Agreement, and to consummate the
transactions contemplated hereby and thereby, and that the
execution, delivery and performance of each of this Agreement and
the Registration Rights Agreement, and the consummation of the
transactions contemplated hereby and thereby, have been duly
authorized by all necessary action on its behalf, and this
Agreement constitutes, and when executed and delivered the
Registration Rights Agreement will constitute, the legal, valid
and binding obligation of it, enforceable against it in accordance
with the terms hereof and thereof, except that such enforcement
may be subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights, and the remedy of specific performance and
injunctive relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may
be brought.
Section 4.04. Absence of Breach; No Conflict. Each of the
Purchasers represents and warrants that the execution, delivery
and performance of this Agreement and the Registration Rights
Agreement, and the consummation of the transactions contemplated
hereby and thereby, will not (a) conflict with, or constitute a
default under, any agreement to which such Purchaser is a party or
by which any of the properties or assets of such Purchaser may be
bound; (b) violate or conflict with the governing organizational
instruments and documents (in each case, as amended and/or
restated through the date hereof) of such Purchaser or (c)
assuming that the Company is an "operating company" as such term
is defined in Department of Labor Regulation 2510.3-101, violate
any statute, rule, regulation, order, judgment, writ or decree of
any judicial public or governmental authority having jurisdiction
over such Purchaser, or any of the properties or assets of such
Purchaser, which violation would prevent, impair, hinder or delay
the consummation of the transactions contemplated by this
Agreement or the Registration Rights Agreement.
Section 4.05. No Consents. Each of the Purchasers
represents and warrants that no consent, authorization or approval
of, or filing with, any person or any federal, state or local
government department, commission, board, agency or
instrumentality is required to be made or obtained by such
Purchaser in connection with its execution and performance of this
Agreement or the Registration Rights Agreement except in
connection with the Exchange as may be required under the HSR Act
or pursuant to the laws, rules and regulations of the Office of
the Comptroller of the Currency (the "OCC"), and except for such
consents, authorizations, approvals and filings the absence of
which would not prevent, impair, hinder or delay the consummation
of the transactions contemplated by this Agreement or the
Registration Rights Agreement.
Section 4.06. Investment Company. Each Purchaser represents
and warrants that it is not (and immediately after consummation of
the transactions contemplated by this Agreement will not be) an
investment company, a company controlled by an investment company,
or otherwise subject to any provisions of the Investment Company
Act of 1940, as amended, and/or the rules and regulations of the
Commission promulgated thereunder.
Section 4.07. Ownership of Stock of the Company. Each of
the Purchasers represents and warrants that it does not own
beneficially or of record any shares of capital stock or other
securities of the Company and does not have any present intention
or plan to acquire shares of capital stock or other securities of
the Company except pursuant to this Agreement and the transactions
contemplated hereby.
4.08. Certain Regulatory Matters. Each Purchaser
represents and warrants that it is not aware of any facts or
circumstances regarding such Purchaser, including the record or
beneficial ownership of any securities by such Purchaser, which
can reasonably be expected to cause the OCC, the Department of
Justice or the Federal Trade Commission to prohibit such
Purchaser's acquisition of Securities contemplated hereunder or
the exercise by such Purchaser of its rights contained herein
pursuant to their regulatory authority over such matters.
4.09. Due Diligence. Without in any way affecting or
mitigating the representations and warranties of the Company
contained in Article III of this Agreement or affecting any rights
resulting from a breach thereof, each of the Purchasers
acknowledges that it has had an opportunity to engage in due
diligence on the Company and has had an opportunity to discuss the
Company and its business and prospects with management of the
Company.
ARTICLE V
COVENANTS
Section 5.01. Covenants of the Company
(a) Access and Confidentiality. Upon reasonable notice
prior to the Closing, the Company shall (and shall cause each of
its Subsidiaries to) afford the Purchasers and their respective
representatives reasonable access during normal business hours to
its properties, books, contracts and records and personnel and
advisors and the Company shall (and shall cause each of the
Subsidiaries to) furnish promptly to the Purchasers all
information concerning its business, properties and personnel as
the Purchasers or their respective representatives may reasonably
request, provided that any review will be conducted in a way that
will not interfere unreasonably with the conduct of the Company's
business.
(b) Announcements. No party or any Affiliate, officer or
agent of the parties hereto shall make any announcement concerning
the transactions contemplated hereby without the other parties'
written consent, which consent shall not unreasonably be withheld;
provided, however, that any party or such Affiliate, officer or
agent may make any announcements required by applicable law so
long as the text of such announcement shall have been provided to
the parties hereto prior to the making of such announcement. The
parties agree to consult with each other with respect to
announcements concerning the transactions contemplated hereby.
(c) Securities. The Company hereby covenants to each of the
Purchasers, that from and after the date hereof and so long as any
Purchaser owns any Issuable Securities, the Company shall:
(i) Unissued shares of Common Stock and Non-Voting
Stock; Securities. (A) Reserve and keep available out of its
authorized but unissued shares of Series C Preferred Stock, Common
Stock and Non-Voting Stock (including any shares held by the
Company in its corporate treasury), for the purpose of effecting
the Exchange and the exercise in full of those conversion rights
related to the Series C Preferred Stock, such number of its duly
authorized shares of Series C Preferred Stock, Common Stock and,
if applicable, shares of Non-Voting Stock, as shall be sufficient
to effect such exercise, and if at any time the number of
authorized but unissued shares of Series C Preferred Stock, Common
Stock or, if applicable, shares of Non-Voting Stock shall not be
sufficient to effect such exercise, subject to any required
approval by the holders of the Common Stock and as may otherwise
be required pursuant to the General Corporation Law of Delaware
and applicable federal and state securities laws, the Company
shall take all such corporate action as may be necessary (and
desirable in the reasonable discretion of the Purchasers) to
increase its authorized but unissued shares of Series C Preferred
Stock, Common Stock and, if applicable, shares of Non-Voting
Stock, to such number of shares as shall be sufficient for such
purposes, and (B) reserve and keep available out of its authorized
but unissued shares of Series B Preferred Stock, for the purpose
of issuing dividends on the Series B Preferred Stock, such number
of its duly authorized shares of Series B Preferred Stock as shall
be sufficient to effect any such dividend contemplated by the
Series B Preferred Stock, and if at any time the number of
authorized but unissued Series B Preferred Stock shall not be
sufficient to effect such dividends, subject to any required
approval by the holders of the Common Stock and as may otherwise
be required pursuant to the General Corporation Law of Delaware
and applicable federal and state securities laws, the Company
shall take all corporate action as may be necessary (and desirable
in the reasonable discretion of the Purchasers) to increase its
authorized but unissued Series B Preferred Stock to such number of
shares as shall be sufficient for such purposes.
(ii) Exchange of Certificates. Upon surrender by the
holder of any certificates representing Securities (or securities
issued upon exchange, conversion or exercise thereof) for exchange
or reissuance at the office of the Company, cause to be issued in
exchange therefor new certificates in such denomination or
denominations as may be requested for the same aggregate number of
Securities (or securities issued upon exchange, conversion or
exercise thereof) represented by the certificates so surrendered
and registered as such holder may request, subject to the
provisions hereof.
(iii) Replacement of Certificates. Upon receipt by
the Company of evidence reasonably satisfactory to it of loss,
theft, destruction or mutilation of any certificate evidencing any
of the Securities (or securities issued upon exchange, conversion
or exercise thereof), and (in case of loss, theft or destruction)
of indemnity reasonably satisfactory to the Company, and upon the
surrender and cancellation of such certificate, if mutilated, the
Company shall make and deliver in lieu of such certificate a new
certificate for the number of Securities (or securities issued
upon exchange, conversion or exercise thereof), as the case may
be, evidenced by such lost, stolen, destroyed or mutilated
certificate which remains outstanding. A Purchaser's (which term
does not include any successors or assigns of the initial
Purchasers) agreement of indemnity shall constitute indemnity
satisfactory to the Company for the purposes of this Section
5.01(c) without the need of any further surety or bond.
(iv) Government and Other Approvals. Promptly prepare,
submit and file with all public and governmental authorities, all
applications, notices, registrations, certificates, statements and
such other information, documents and instruments as may be
required pursuant to any federal, state, local or foreign Law or
rule or regulation of the NASD or any securities exchange, in
connection with the consummation of the transactions contemplated
by this Agreement, including the effect of any dividends, exchange
or conversion rights, anti-dilution provisions or Board control
contemplated by the terms of the Securities or other securities of
the Company which may be acquired by the Purchasers pursuant to
this Agreement. The Company shall use its best efforts to obtain
any necessary consents or approvals from any Authority in
connection with the consummation of the transactions contemplated
by this Agreement, including the effect of any dividends, exchange
or conversion rights, anti-dilution provisions or Board control
contemplated by the terms of the Securities or other securities of
the Company which may be acquired by the Purchasers pursuant to
this Agreement and shall amend in form reasonably satisfactory to
the Purchasers any and all agreements to which the Company is a
party or to which its assets are subject, including, without
limitation (A) that certain Rights Agreement, dated as of
September 10, 1998, among the Company and Norwest Bank Minnesota,
National Association, as Rights Agent, concerning the rights to
acquire Series A Junior Participating Preferred Stock of the
Company, (as in effect on the date hereof, the "Rights Agreement")
(provided, however, that in lieu of amending the Rights Agreement
the Company may, prior to the Closing, redeem all outstanding
rights issued pursuant thereto in accordance with the terms of the
Rights Agreement), (B) the following agreements among the Company
and Fingerhut or its subsidiaries and affiliates: Data Sharing
Agreement, dated October 31, 1996; Database Access Agreement,
dated October 31, 1996; Co-Brand Credit Card Agreement, dated
October 31, 1996; Card Registration Agreement, dated
February 5, 1998; Extended Service Plan Agreement, dated October
31, 1996; Administrative Service Agreement, dated October 31, 1996
(collectively, the "Fingerhut Agreements"), (C) the Amended and
Restated Credit Agreement, dated as of June 30, 1998, among the
Company, certain lenders party thereto and the Chase Manhattan
Bank, as Administrative Agent (the "Credit Agreement"), and (D)
the severance and stock option agreements entered into by and
between the Company and those persons listed on Schedule 5.03, so
as to exclude from the provisions thereof the effect of the
Purchasers' purchase of the Issuable Securities contemplated
hereby and the other transactions contemplated by this Agreement,
including the effect of any exchange or conversion rights,
dividends, anti-dilution provisions or Board control contemplated
by the terms of the Securities or other securities of the Company
which may be acquired by the Purchasers pursuant to this
Agreement; provided that the amendment to the Agreement described
in clause (D) shall not be applicable in the event the Purchasers
exercise their right to control the Company's Board of Directors.
(d) Operating Company; Bank Holding Company. The Company
will not take any action that would cause it to cease to be an
"operating company" within the meaning of Department of Labor
Regulation 2510.3-101 or become a "bank holding company" within
the meaning of the Bank Holding Company Act of 1956.
(e) Tax Matters. The Purchasers intend that no pay in
kind dividends on the Series B Preferred Stock or the Series C
Preferred Stock will, when paid or accrued, be includible in the
Purchasers' gross income for federal, state or local tax purposes.
Accordingly, unless the Company concludes in good faith that there
is no reasonable basis to make or file any Tax Return that is
consistent with such intention, the Company shall not make or file
any Tax Return that is inconsistent with such intention. Moreover,
the Company agrees that if for any reason the pay in kind
dividends which accrue or are paid with respect to the Series B
Preferred Stock or Series C Preferred Stock become taxable as
income for tax purposes when paid or accrued, the Company shall
pay to the holders of such securities such additional amount (the
"Gross Up Amount") as may be necessary to fund any federal, state
or local income tax payable with respect to such dividend. Such
Gross Up Amount shall also include an amount necessary to fund the
payment of any such income tax payable with respect to the Gross
Up Amount. Such Gross Up Amount shall be paid upon notice to the
Company at least ten (10) days before the date on which the
relevant income tax payment is due or made. Prior to receiving
any taxable distribution from the Company, each Purchaser shall
provide the Company with such documentation as may be reasonably
requested by the Company in order to make such distribution
without withholding for tax purposes. All amounts paid or accrued
on any Security shall be net of applicable withholding taxes.
(f) OCC Authorization. The Company and the Purchasers shall
use their reasonable best efforts to obtain the consent of the OCC
and any other applicable Authority for the Purchasers' investment
contemplated hereby, including without limitation, the Purchasers'
exercise of all rights set forth in Section 5.04 hereof and in the
terms of the Series C Preferred Stock relating to conversion of
the Series C Preferred Stock, anti-dilution and Board election
rights. The Company and the Purchasers shall use their reasonable
best efforts to cause their representatives to meet with
representatives of the OCC as soon as practicable following the
signing of this Agreement, and in any event prior to November 20,
1998, for the purpose of obtaining assurance that the OCC would
permit the Purchasers' investment contemplated hereby, including
without limitation the Purchasers' exercise of all rights set
forth in the Series C Preferred Stock relating to the conversion
of the Series C Preferred Stock, anti-dilution and Board election
rights.
(g) Equity Purchase Rights. The Company hereby grants to
each Significant Purchaser, the right to purchase all or part of
its Pro Rata Share of New Securities (as defined herein) which the
Company, from time to time, proposes to sell and issue. For
purposes of this purchase right, the term "Pro Rata Share" shall
mean the ratio of the number of shares of Common Stock and Non-
Voting Stock which such shareholder owns or has the right to
acquire (after giving effect to full conversion of the Securities
as if all approvals regarding conversion had been received) to the
total number of shares of Common Stock and Non-Voting Stock of the
Company outstanding (after giving effect to full conversion of the
Securities as if approvals regarding conversion had been
received). The Significant Purchasers shall have a right of over-
allotment pursuant to this Section 5.01 such that to the extent a
Significant Purchaser does not exercise its purchase right in full
hereunder, such additional shares of New Securities which such
Significant Purchaser does not purchase may be purchased by the
other Significant Purchasers in proportion to their Pro Rata
Share. "New Securities" shall mean any capital stock of the
Company or its Subsidiaries or indebtedness convertible into
equity of the Company or any of its Subsidiaries whether now
authorized or not, and rights, options or warrants to purchase any
of the foregoing, and securities of any type whatsoever that are,
or may become convertible into or exchangeable for capital stock
or debt securities of the Company or its Subsidiaries issued on or
after the date hereof; provided that term "New Securities" does
not include (a) securities owned as of the date of this Agreement
or securities issued upon conversion thereof in accordance with
their terms as in effect on the date hereof, (b) Common Stock
issued as a stock dividend to holders of Common Stock or upon any
stock split, subdivision or combination of shares of Common Stock,
(c) shares (or options or rights to acquire such shares) of the
Company's Common Stock reserved for issuance upon exercise of
options pursuant to the Company's Long-Term Incentive and Stock
Option Plan and Non-Employee Director Stock Option Plan in effect
on the date hereof that have been or may be granted by the
Company's Board of Directors, and (d) securities issued in a
public offering registered pursuant to the Securities Act of 1933,
as amended or offerings exempt therefrom pursuant to Rule 144A
promulgated under such Act which contemplate the registration of
such securities or securities exchangeable for such securities
pursuant to said Act. In the event the Company or any of its
Subsidiaries proposes to undertake an issuance of New Securities,
the Company shall give each Significant Purchaser written notice
of its intention, describing the type of New Securities and the
price and the terms upon which the Company or its Subsidiary
proposes to issue the same. Each Significant Purchaser shall have
ten (10) business days from the date of receipt of any such notice
to agree to purchase up to its Pro Rata Share of such New
Securities (and any over-allotment amount pursuant to the
operation of this Section 5.01) for the price and upon the terms
specified in the notice by giving written notice to the Company
and stating therein the quantity of New Securities to be
purchased. In the event any Significant Purchaser fails to
exercise in full its purchase right (after giving effect to the
over-allotment provision of this Section 5.01), the Company shall
have ninety (90) days thereafter to sell the New Securities with
respect to which such Significant Purchaser's Purchase Right was
not exercised, at a price not more favorable to the purchasers
thereof than that specified in the Company's notice and upon terms
not materially more favorable to the purchasers thereof than those
specified in the Company's notice. To the extent the Company or
its Subsidiary does not sell all the New Securities offered within
said ninety (90) day period, the Company or its Subsidiary shall
not thereafter issue or sell such New Securities without first
again offering such securities to each Significant Purchaser in a
manner provided above. Notwithstanding the foregoing, if the
Board of Directors determines in good faith for legal, tax or
regulatory reasons or other good reason that it is inappropriate
or inadvisable to permit the Significant Purchasers to exercise
their equity purchase rights contained herein, the Board of
Directors of the Company, by a vote of 80% of the members of the
Board of Directors (which 80% must include one director elected by
the holders of the Securities or securities of the Company which
they have the right to acquire hereunder if there is such a
director so elected), then the Company may issue such New
Securities as if all of the Significant Purchasers waived their
rights under this paragraph (g).
Section 5.02 Proxy Matters; Standstill
(a) Each of the Purchasers hereby agrees that during
the Standstill Period (hereinafter defined) it will not, nor will
it permit any of its Affiliates (any such Purchaser together with
its Affiliates being hereinafter referred to as a "Purchaser
Group") to, directly or indirectly, unless in any such case
specifically requested in advance to do so by the Board of
Directors of the Company:
(i) acquire, offer to acquire, or agree to acquire
by purchase, by joining a partnership, limited partnership,
syndicate or other "group" (as such term is used in Section
13(d)(3) of the Exchange Act, hereinafter referred to as "13D
Group"), any securities of the Company entitled to vote generally
in the election of directors, or securities convertible into or
exercisable or exchangeable for such securities (collectively,
"Restricted Securities") or any material portion of the assets or
businesses of the Company and its Subsidiaries if and to the
extent that (a) such action would trigger a Change of Control
provision in one of the contracts described in Section
5.01(c)(iv), (b) such action would trigger indemnity by the
Company under its Tax Sharing Agreement or (c) such action has not
received any requisite approval from governmental authorities;
provided, however, that nothing contained herein shall prohibit
any member of a Purchaser Group from acquiring any Restricted
Securities (w) upon conversion of convertible securities of the
Company acquired pursuant to this Agreement or otherwise
contemplated hereby, (x) as a result of a stock split, stock
dividend or similar recapitalization by the Company, (y) upon the
execution of unsolicited buy orders by any member of a Purchaser
Group which is a registered broker-dealer for the bona fide
accounts of its brokerage customers unaffiliated and not acting in
concert with any member of such Purchaser, or (z) pursuant to the
exercise of any warrant, option or other right to acquire
Restricted Securities ("Rights"), which it receives directly from
the Company. Prior to acquiring any shares of capital stock of
the Company, other than upon exercise of its rights under the
Agreement, the Related Agreements and the Securities, the
Purchasers will give written notice of their intent to do so to
the Company. If within ten (10) days after receipt of such
notice, the Company advises the Purchasers in writing that, based
on the advice of its advisors, it believes that the proposed
acquisition would be prohibited by this paragraph, the parties
shall thereafter discuss in good faith whether such acquisition
would in fact be so prohibited;
(ii) participate in, or encourage, the formation of
any 13D Group which owns or seeks to acquire beneficial ownership
of, or otherwise acts in respect of, Restricted Securities, other
than any 13D Group which is comprised exclusively of the Purchaser
or a Purchaser Group and any other permitted transferee or
transferees of securities from a Purchaser in accordance with
Section 5.03;
(iii) make, or in any way participate in,
directly or indirectly, any "solicitation" of "Proxies" (as such
terms are defined or used in Regulation 14A under the Exchange
Act) or become a "participant" in any "election contest" (as such
terms are defined or used in Rule 14a-11 under the Exchange Act)
with respect to the Company, or initiate, propose or otherwise
solicit stockholders for the approval of one or more stockholder
proposals with respect to the Company or induce or attempt to
induce any other person to initiate any stockholder proposal,
provided, however, that the limitation contained in this clause
(iii) shall not apply to (y) the election of any directors to be
elected by the holders of Securities or (z) any matter to be voted
on by the Company's stockholders that is not initiated or proposed
by any member of a Purchaser Group or any Affiliate thereof; or
(iv) call or seek to have called any meeting of the
stockholders of the Company, provided, however, that the
limitation contained in this clause (iv) shall not apply to any
meeting of the stockholders of the Company called for the purpose
of voting on any matter described in the proviso of clause (iii)
above.
(b) Nothing in this Section 5.02 shall preclude members
of a Purchaser Group from exercising the voting and other rights,
(i) granted to the Purchasers pursuant to this Agreement, the
Related Agreements, the Rights Agreement, the Certificates of
Designations or (ii) in connection with any proposed merger, sale
of assets or similar transaction, or tender or exchange offer
proposed by any person who is not part of a Purchaser Group or any
of its Affiliates.
(c) As used herein, the term "Standstill Period" shall
mean the period from the date of this Agreement until the earlier
to occur of:
(i) the date which is the second anniversary of
the Closing Date; provided, however, that the period described in
this clause (i) shall continue with respect to any acquisition or
other action which would trigger a Change of Control provision in
one of the contracts described in Section 5.01(c)(iv) or in the
indenture pursuant to which the 10% Senior Notes due 2004 were
issued until expiration of such agreements or Indenture; or
(ii) the designation of any date as the termination
date of the Standstill Period by a majority of the directors of
the Company at a duly convened meeting thereof or by all of the
directors of the Company by written consent; or
(iii) the Company's material breach of any of
its obligations contained in this Agreement or the Registration
Rights Agreement; or
(iv) the occurrence of a Material Default (as
defined in the Series C Preferred Stock Certificate of
Designation); or
(v) the Company or any of its Subsidiaries shall
commence a voluntary case concerning itself under Title 11 of the
United States Code entitled "Bankruptcy" as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"), which,
in the case of a Subsidiary of the Company, has had or would have
a Material Adverse Effect; or an involuntary case is commenced
against the Company or any of its Subsidiaries and the petition
not controverted within 10 days, or is not dismissed within 60
days after commencement of the case, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or a custodian (as defined in the Bankruptcy Code)
is appointed for, or takes charge of, all or any substantial part
of the property of the Company or any of its Subsidiaries, which,
in the case of a Subsidiary of the Company, has had or would have
a Material Adverse Effect; or the Company or any of its
Subsidiaries commences any other proceeding under any
reorganization, arrangement, adjustment of debt, relief of
debtors, rehabilitation, dissolution, insolvency or liquidation or
similar law of any jurisdiction, whether now or hereafter in
effect, relating to the Company or such Subsidiary, or there is
commenced against the Company or any of its Subsidiaries any such
proceeding which remains undismissed for a period of 60 days,
which, in the case of a Subsidiary of the Company, has had or
would have a Material Adverse Effect; or the Company or any of its
Subsidiaries is adjudicated insolvent or bankrupt, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or any order of relief or other order
approving any such case or proceeding is entered, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or the Company or any of the Subsidiaries
suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or
unstayed for a period of 60 days, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries makes a
general assignment for the benefit of creditors, which, in the
case of a Subsidiary of the Company, has had or would have a
Material Adverse Effect; or the Company shall fail to pay, or
shall state that it is unable to pay, or shall be unable to pay,
its debts, generally as they become due, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries shall
call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or the Company or any of its Subsidiaries shall by
any act or failure to act indicate its consent to, approval of or
acquiescence in any of the foregoing, which, in the case of a
Subsidiary of the Company, has had or would have a Material
Adverse Effect; or any corporate action is taken by the Company or
any of its Subsidiaries for the purpose of effecting any of the
foregoing, which, in the case of a Subsidiary of the Company, has
had or would have a Material Adverse Effect; or
(vi) without encouragement by or the participation
of a Purchaser or any of its Affiliates, the acquisition by any
person or 13D Group (other than members of a Purchaser Group or
Affiliates thereof) of, the commencement of a tender offer by such
person or 13D Group for, or the public announcement of an
intention to acquire, Restricted Securities which, if added to the
Restricted Securities (if any) already owned by such person or 13D
Group, would represent twenty-five percent (25%) or more of the
total voting power (including rights to acquire voting power) of
the Company's Restricted Securities, or the receipt by such person
or 13D Group of the Company's agreement or consent to make such
acquisition; or
(vii) the date this Agreement is terminated in
accordance with its terms.
(d) In the event the Purchasers of Series C Preferred
Stock, while they retain the right as a class to elect any
directors, intend to acquire additional shares of voting capital
stock of the Company (through conversion or otherwise), sell any
of their shares of Series C Preferred Stock or shares of Common
Stock issuable upon conversion thereof, or take any other action
which, in the reasonable judgment of the Company, may cause more
than an insubstantial risk that the distribution of the Company's
Common Stock by Fingerhut on September 25, 1998 or the
transactions related thereto would be taxable or that any
statement or representation in the IRS ruling request related
thereto would be incorrect or incomplete in any material respect,
such holders of Series C Preferred Stock agree that they will
provide written notice to the Company of their proposed action and
discuss with the Company in good faith the potential consequences
of their action before proceeding.
Section 5.03. Restrictions on Transfer. No Purchaser shall
transfer any Securities or any shares of Common Stock issued upon
conversion thereof to any person if such transfer would violate
the HSR Act or applicable rules and regulations of the OCC or
would constitute a "Change of Control" under the Fingerhut
Agreements (as amended pursuant to Section 5.01(c)(iv)), the
indenture pursuant to which the Company's 10% Senior Notes due
2004 were issued or the Credit Agreement (as amended pursuant to
Section 5.01(c)(iv)).
Section 5.04 Board Nominations. From and after the date
upon which the Purchasers shall have obtained all necessary
approvals from the OCC, and for so long as the Purchasers shall
continue to own 25% of the Series B Preferred Stock purchased by
them on the Closing Date, the Company shall nominate for election
to the Board of Directors of the Company, and shall recommend
voting in favor of, two (2) designees of the Purchasers; provided,
however, that if the Company shall fail to redeem the Series B
Preferred Stock in accordance with its terms, such number of
designees shall be increased to four (4).
Section 5.05. Stockholder Meeting. The Company shall cause
a special meeting of its stockholders to be held as soon as
practicable but in no event later than March 15, 1999, for the
purpose of voting on (i) the Exchange contemplated by Section 5.06
hereof (the "Exchange Approval"), (ii) an amendment to the
Certificate of Incorporation of the Company providing for a class
of Non-Voting Common Stock (the "Charter Amendment Approval" and,
together with the Exchange Approval, the "Stockholder Approval"),
and (iii) transacting such other business as may properly come
before the meeting or any adjournment thereof, including any item
reasonably acceptable to the Company which the Purchasers may
request be included in such meeting (the "Stockholder Meeting").
In connection with the Stockholder Meeting, the Company (a) shall
prepare and file with the Commission in accordance with the
Exchange Act a Proxy Statement of the Company on Schedule 14A (as
amended or supplemented, including all exhibits and schedules
thereto and the documents incorporated by reference therein, the
"Proxy Statement") and shall use its reasonable best efforts to
have the Proxy Statement cleared by the Commission and timely
mailed to its stockholders in accordance with the rules and
regulations of the Exchange Act, and (b) shall use its reasonable
best efforts to obtain the necessary votes of its stockholders to
obtain the Stockholder Approval. The Company shall consult with
the Purchasers and provide reasonable opportunity for the
Purchasers to comment on drafts of the Proxy Statement before it
is originally filed with the Commission, and with respect to each
amendment thereto or modifications thereof, prior to filing with
the Commission and mailing to stockholders.
Section 5.06. Exchange. In the event the Company shall have
obtained the Exchange Approval, on the first business day
following the last to occur of (i) delivery to the Purchasers of a
Certificate of the Chief Executive Officer or other executive
officer of the Company certifying that the Exchange Approval had
been obtained, which Certificate shall be delivered within one
business day of obtaining the Exchange Approval, (ii) the Approval
Date, and (iii) termination of any applicable waiting period under
the HSR Act, then the Bridge Securities shall, without any further
action on the part of the Company or the holders thereof, be
exchanged for shares of Series C Preferred Stock (the "Exchange").
If the Exchange Date has not occurred prior to March 31, 1999, or
such later date agreed to by holders of a majority in interest of
the Bridge Securities, but in no event later than June 30, 1999,
then the Exchange shall not take place. In connection with the
Exchange, the holders of Bridge Securities shall receive the
number of shares of Series C Preferred Stock such holders would
have been entitled to on the Exchange Date (including any and all
dividends that would have been paid or accrued) if they had
acquired a number of shares of Series C Preferred Stock on the
Closing Date equal to (i) the original principal or face amount of
the Bridge Securities owned by them on the Exchange Date (without
giving effect to any accrued dividends or interest), divided by
(ii) 372.50. After the consummation of the Exchange, the Warrants
shall be canceled by the Company. From and after the Exchange
Date all of the Bridge Securities shall be deemed to have been
exchanged for the Series C Preferred Stock into which they were
exchangeable. Holders of Securities shall be entitled to obtained
certificates representing the Series C Preferred Stock to which
they are entitled pursuant to the Exchange by delivering to the
Company certificates representing the Series B Preferred Stock,
the Senior Notes and any certificates representing the Warrants.
The Company shall not take any action between the date hereof and
the earlier of (i) the Exchange Date and (ii) June 30, 1999, that
would have caused the Conversion Price (as defined in the Series C
Certificate of Designation) to be any amount other than $372.50
per share if shares of Series C Preferred Stock were outstanding
on the date hereof.
ARTICLE VI
FINANCIAL STATEMENTS; ACCESS TO INFORMATION
Section 6.01. Financial Statements. The Company covenants
that it will deliver to each Purchaser who owns any Issuable
Securities those items set forth in paragraphs (a), (b) and (d)
and that, upon request, it will deliver to each original Purchaser
(but not their transferees) those items set forth in paragraphs
(c), (e) and (f):
(a) As soon as practicable and in any event within 45
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, a consolidated statement of
income and consolidated statements of changes in financial
position and cash flows of the Company and its Subsidiaries for
such quarterly period and for the period from the beginning of the
current fiscal year to the end of such quarterly period, and a
consolidated balance sheet of the Company and its Subsidiaries as
at the end of such quarterly period, setting forth in each case in
comparative form figures for the corresponding periods in the
preceding fiscal year, all in reasonable detail and certified by
an authorized financial officer of the Company, subject to changes
resulting from year-end adjustments; provided, however, that
delivery pursuant to clause (d) below of a copy of the Quarterly
Report on Form 10-Q of the Company for such quarterly period filed
with the Commission shall be deemed to satisfy the requirements of
this clause (a);
(b) As soon as practicable and in any event within 120
days after the end of each fiscal year, a consolidated statement
of income and consolidated statements of changes in financial
position and cash flows of the Company and its Subsidiaries for
such year, and a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such year, setting forth in each
case in comparative form corresponding consolidated figures from
the preceding annual audit, all in reasonable detail together with
an opinion directed to the Company of independent public
accountants of recognized standing selected by the Company;
provided, however, that delivery pursuant to clause (d) below of a
copy of the Annual Report on Form 10-K of the Company for such
fiscal year filed with the Commission shall be deemed to satisfy
the requirements of this clause (b);
(c) As soon as practicable and in any event within 20
days after the end of each month, a consolidated statement of
income of the Company and its Subsidiaries for such month, and a
consolidated balance sheet of the Company and its Subsidiaries as
of the end of such month, together with consolidating statements
of income and balance sheets for each Subsidiary, all in
reasonable detail;
(d) Promptly upon transmission thereof, copies of all
such financial statements, proxy statements, notices and reports
as it shall send to its public stockholders and copies of all
registration statements (without exhibits), other than on Form S-8
or any similar successor form, and all reports which it files with
the Commission (or any governmental body or agency succeeding to
the functions of the Commission);
(e) Promptly upon receipt thereof, a copy of each other
report submitted to the Company or any of its Subsidiaries by
independent accountants in connection with any annual, interim or
special audit made by them of the books of the Company or any of
its Subsidiaries; and
(f) With reasonable promptness, such other financial
data as any Purchaser may reasonably request.
Section 6.02. Access to Information. The Company shall
permit each Significant Purchaser (and its designated
representatives) to visit and inspect any of the properties of the
Company and its Subsidiaries, including the books and records of
the Company and its Subsidiaries (and to make extracts and copies
therefrom), and to consult with respect to and discuss the
affairs, businesses, finances, operations and accounts of the
Company and its Subsidiaries with the officers, directors and
employees of such entities, all at such reasonable times and as
often as such Significant Purchaser may reasonably request. Each
Purchaser agrees, except as otherwise required by law, to keep any
confidential information obtained pursuant to this Article VI
confidential.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF EACH PARTY
TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY
The respective obligation of each party hereto to consummate
the transactions contemplated hereby is subject to the
satisfaction, at or before the Closing, of each of the following
conditions set forth in Section 7.01 through Section 7.04 below.
These conditions may be waived by each party (in whole or in part)
at any time in its sole discretion.
Section 7.01. No Adverse Action or Decision. There shall be
no action, suit, investigation or proceeding pending with, or to
the knowledge of the Company threatened against or affecting the
Company, any of its Subsidiaries or any of their respective
properties or rights, before any court, arbitrator or
administrative or governmental body which (a) seeks to restrain,
enjoin or prevent the consummation of the issuance, sale and
delivery of the Bridge Securities to each of the Purchasers, the
Exchange, or the issuance of the securities into which the Series
C Preferred Stock is convertible or (b) challenges the validity or
legality of the issuance, sale and delivery of the Bridge
Securities to each of the Purchasers, the Exchange or the issuance
of the securities into which the Series C Preferred Stock is
convertible or seeks to recover damages or to obtain other relief
in connection therewith, which in any single case or in the
aggregate (i) the Company or the Purchasers shall reasonably
determine is reasonably likely to result in a Material Adverse
Effect, or (ii) the Purchasers shall reasonably determine is
reasonably likely to result in a material impairment to the
Purchasers' rights hereunder.
Section 7.02. No Injunction. No temporary, preliminary or
permanent injunction or any order by any federal or state court of
competent jurisdiction shall have been issued which prohibits or
otherwise seeks to prohibit, restrain, enjoin or delay the
consummation of the issuance, sale and delivery of the Issuable
Securities to each of the Purchasers.
Section 7.03 Acquisition of PNC Assets. Simultaneously with
the Closing, the Company shall complete the acquisition of assets
contemplated by the PNC Agreement and the contemplated
securitization of such assets, and the Company shall not have
waived any material conditions to closing contained in the PNC
Agreement unless such waiver is ratified or approved by the
Purchasers, which waiver or approval shall not be unreasonably
withheld.
Section 7.04. Consents of Third Parties; Modification of
Agreements. The Company shall have duly obtained modifications of
or waivers under the agreements described in Section 5.01(c)(iv)
amending or waiving any right to acceleration, redemption or
increase of any payment or obligation of the Company or its
Subsidiaries which could arise as a result of the transactions
contemplated hereby, including without limitation the effect of
any dividends, anti-dilution provisions or board control
contemplated by the terms of the Bridge Securities, which
modifications or waivers shall be in a form reasonably
satisfactory to the Purchasers.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
TO ISSUE, SELL AND DELIVER THE BRIDGE SECURITIES
The obligations of the Company to issue, sell and deliver the
Bridge Securities are subject to the satisfaction, at or before
the Closing, of each of the following additional conditions set
forth in Sections 8.01 and 8.02 below. These conditions are for
the Company's sole benefit and may be waived by the Company (in
whole or in part) at any time in its sole discretion.
Section 8.01. Accuracy of the Purchasers' Representations
and Warranties. The representations and warranties of the
Purchasers contained in Article IV hereof shall be true and
correct as of the date when made and as of the Closing Date, as
though made on such date, and the Company shall have received a
certificate attesting thereto signed by a duly authorized officer
or agent of each of the Purchasers.
Section 8.02. Performance by the Purchasers. The Purchasers
shall have performed, satisfied and complied with, in all material
respects, all covenants, agreements, and conditions required by
this Agreement to be performed, satisfied or complied with by them
on or prior to the Closing Date, and the Company shall have
received a certificate attesting thereto signed by a duly
authorized officer or agent of each of the Purchasers.
ARTICLE IX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASERS TO PURCHASE AND ACCEPT DELIVERY
OF THE BRIDGE SECURITIES
The obligations of the Purchasers hereunder to acquire and
pay for, and accept delivery of, the Bridge Securities are subject
to the satisfaction, at or before the Closing, of each of the
following additional conditions set forth in Section 9.01 through
Section 9.13 below. These conditions are for the Purchasers' sole
benefit and may be waived (in whole or in part) by the Purchasers.
Section 9.01. Accuracy of the Company's Representations and
Warranties. The representations and warranties of the Company
contained in Article III hereof which are not subject to a
qualification regarding materiality shall be true and correct in
all material respects as of the date when made and as of the
Closing Date, as though made on such date, the representations and
warranties of the Company contained in Article III hereof, which
are subject to a qualification regarding materiality shall be true
and correct in all respects as of the date when made and as of the
Closing Date, as though made on such date, and each Purchaser
shall have received a certificate attesting thereto signed by the
Chief Executive Officer of the Company, on behalf of the Company.
Section 9.02. Performance by the Company. The Company shall
have performed, satisfied and complied with, in all material
respects, all covenants, agreements and conditions required by
this Agreement to be performed, satisfied or complied with on or
prior to the Closing Date, and the Purchasers shall have received
a certificate attesting thereto signed by the Chief Executive
Officer of the Company.
Section 9.03. No Material Adverse Effect. There shall not
have occurred and there shall not otherwise exist any condition,
event or development having, or likely to have (in the reasonable
judgment of the Purchasers), a Material Adverse Effect.
Section 9.04. Registration Rights Agreement. The
Registration Rights Agreement substantially in the form of Exhibit
E attached hereto shall have been executed and delivered by the
parties thereto other than the Purchasers.
Section 9.05. Certificate of Designation; By-laws. The
Company shall have filed with the Secretary of State of the State
of Delaware the Certificates of Designation and such instruments
shall have become effective. The By-laws of the Company shall
have been amended so as to permit the Purchasers to exercise their
rights contemplated hereby, which amendment shall be in form
reasonably satisfactory to the Purchasers.
Section 9.06. Governmental Approvals and Consents. The
Company shall have duly obtained, received or effected (and all
applicable waiting and termination periods, if any, including any
extensions thereof, under any applicable law, statute, regulation
or rule, shall have expired or terminated) all authorizations,
consents, approvals, licenses, franchises, permits and
certificates by or of, and shall have made all filings and
effected all notifications, registrations and qualifications with,
all federal, state and local governmental and regulatory
Authorities necessary for the issuance, sale and delivery of the
Bridge Securities being issued and sold at the Closing and, to the
extent required at Closing, the consummation of the other
transactions contemplated hereby.
Section 9.07. Opinion. The Purchasers shall have received
from Sidley & Austin, counsel to the Company, an opinion dated the
Closing Date covering those matters set forth on Exhibit B
attached hereto and in form reasonably satisfactory to the
Purchasers.
Section 9.08. Secretary's Certificate. The Secretary or an
Assistant Secretary of the Company shall have delivered to the
Purchasers at the Closing Date a Certificate dated as of the
Closing certifying: (a) that attached thereto is a true and
complete copy of the By-Laws of the Company as in effect on the
date of such certification; (b) that attached thereto is a true
and complete copy of all resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and
performance of the Agreement, the issuance, sale and delivery of
the Issuable Securities, and that all such resolutions are in full
force in effect and are all the resolutions adopted in connection
with the transactions contemplated by this Agreement; (c) that
attached thereto is a true and complete copy of the Certificate of
Incorporation as in effect on the date of such certification; and
(d) to the incumbency and specimen signature of certain officers
of the Company.
Section 9.09. Proceedings. All corporate and other
proceedings to be taken by the Company in connection with the
transactions contemplated by this Agreement and the Registration
Rights Agreement and all documents reflecting or evidencing such
proceedings shall be reasonably satisfactory in scope, form and
substance to the Purchasers and their legal counsel, and the
Purchasers and their legal counsel shall have received all such
duly executed counterpart originals or certified or other copies
of such documents and instruments as they may reasonably request.
Section 9.10. Rights Agreement. Either (i) the Rights
Agreement shall have been amended so that the Purchasers are not
deemed to become an "Acquiring Person" and the Purchasers shall be
reasonably satisfied that the consummation of the transactions
contemplated hereby, including, without limitation, the issuance
of Common Stock upon conversion of the Securities and the exercise
by the Purchasers of their rights hereunder, shall not constitute
a Section 11(a)(ii) Event, as defined therein, or (ii) the Rights
(as defined in the Rights Agreement) shall have been redeemed
pursuant to Section 23 thereof.
Section 9.11. Board Election. Prior to or concurrently with
the Closing, the Board of Directors of the Company shall have been
expanded to nine members, two of whom shall be designees of the
Purchasers.
Section 9.12. Securities. The sale of the Bridge Securities
to the Purchasers hereunder, the shares of Series C Preferred
Stock for which the Bridge Securities are exchangeable, and any
securities of the Company into which such Series C Preferred Stock
is convertible, shall have been exempted from the provisions of
Section 203 of the Delaware General Corporation Law.
Section 9.13. Indenture. The Indenture substantially in the
form of Exhibit C shall have been executed and delivered.
Section 9.14 Warrant Agreement. The Warrant Agreement
substantially in the form of Exhibit D shall have been executed
and delivered.
ARTICLE X
TERMINATION
Section 10.01. Termination by Mutual Written Consent. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned, for any reason, at any time prior to the
Closing Date, by the mutual written consent of the Company and the
Purchasers purchasing a majority of the Bridge Securities (the
"Required Purchasers").
Section 10.02. Termination by the Company or the Purchasers.
This Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of Company or the Required
Purchasers if and to the extent that (a) the Closing shall not
have occurred at or prior to 5:00 p.m., Eastern time, on December
31, 1998; provided, however, that the right to terminate this
Agreement under this Section 10.02 shall not be available to any
party whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the Closing
Date to occur on or before such date; or (b) any court or
governmental authority of competent jurisdiction shall have issued
an order, decree writing or ruling or taken any other action, or
there shall be in effect any statute, rule or regulation,
permanently restraining, enjoining or otherwise prohibiting the
purchase of the Securities hereunder, or the consummation of the
transactions contemplated by this Agreement.
Section 10.03. Termination by the Purchasers. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Required Purchasers, at
any time prior to the Closing Date, if (a) the Company shall have
failed to comply in any material respect with any of the covenants
or agreements contained in this Agreement to be complied with or
performed by the Company at or prior to such date of termination,
and the Company shall not, within a reasonable period of time
after notice of such failure, have cured or commenced prompt and
diligent measures which would promptly cure such failure, (b)
there shall have been a material misrepresentation or material
breach by the Company with respect to any representation or
warranty made by it in this Agreement and such misrepresentation
or breach cannot be cured prior to the Closing Date, (c) there
shall have occurred and be continuing any condition, event or
development having, or reasonably likely to have, a Material
Adverse Effect, or (d) the Required Purchasers shall determine
that, after meeting with representatives of the OCC pursuant to
Section 5.01(f) herein, a reasonable likelihood exists that the
OCC will not consent to the Purchasers' investment in the Company
contemplated by this Agreement, including without limitation the
Purchasers' exercise of all voting and economic rights set forth
in the terms of the Series C Preferred Stock, including those
relating to the conversion of the Series C Preferred Stock, anti-
dilution and Board election rights.
Section 10.04. Termination by the Company. This Agreement
may be terminated and the transactions contemplated hereby may be
abandoned by action of the Company, at any time prior to the
Closing Date, if (a) any of the Purchasers shall have failed to
comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or
performed by the Purchasers at or prior to such date of
termination and such Purchaser shall not, within a reasonable
period of time after notice of such failure, have cured or
commenced prompt and diligent measures which would promptly cure
such failure, or (b) there shall have been a material
misrepresentation or material breach by any of the Purchasers with
respect to any representation or warranty made by any of such
Purchasers in this Agreement and such misrepresentation or breach
cannot be cured prior to the Closing Date.
Section 10.05. Effect of Termination. If this Agreement is
terminated pursuant to this Article X, this Agreement shall become
void and of no effect with no liability on the part of any party
hereto, except (a) to the extent such termination results from the
breach by a party hereto of any of its representations,
warranties, covenants or agreements set forth in this Agreement,
and (b) that the covenants and agreements contained in Article
XIII shall survive termination hereof.
ARTICLE XI
CONDITIONS TO CLOSING THE EXCHANGE
The Exchange shall be subject to the condition that no
temporary, preliminary or permanent injunction or any order by any
federal or state court of competent jurisdiction shall have been
issued which prohibits or otherwise seeks to prohibit, restrain or
enjoin the consummation of the Exchange.
ARTICLE XII
DEFINITIONS
"Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated by the Commission under the Exchange Act.
"Approval Date" shall mean the date (i) on which the
Purchasers shall have obtained all necessary approvals from the
OCC and other banking and regulatory authorities with jurisdiction
over the acquisition of the Series C Preferred Stock and (ii) on
which all applicable notice and comment periods shall have expired
without disapproval by the OCC or such other authorities. Such
approval of the OCC and such other authorities shall mean
approvals with respect to the Purchasers' acquisition of the
Series C Preferred Stock and the exercise of rights contemplated
thereby including, without limitation, the voting, dividend, anti-
dilution and conversion rights contained therein, which approval
shall be reasonably acceptable to the Purchasers.
"Authorities" shall mean approvals, consents, rights,
certificates, orders, franchises, determinations, permissions,
licenses, authorities or grants issued, declared, designated or
adopted by any nation or government, any federal, state, municipal
or other political subdivision thereof or any department,
commission, board, bureau, agency or instrumentality exercising
executive, legislative, judicial, regulatory or administrative
functions pertaining to government.
"Balance Sheet" shall have the meaning set forth in Section
3.07 of this Agreement.
"Balance Sheet Date" shall have the meaning set forth in
Section 3.07 of this Agreement.
"Benefit Plans" shall have the meaning set forth in Section
3.22 of this Agreement.
"Bridge Securities" shall mean the Series B Preferred Stock,
the Senior Notes and the Warrants.
"Business Day" shall mean any day except a Saturday, Sunday
or other day on which commercial banks in the City of New York are
not open for the transaction of business.
"CERCLA" shall mean Comprehensive Environmental Response,
Compensation, and Liability Act.
"Certificates of Designation" shall mean the Series B
Certificate of Designation, the Series C Certificate of
Designation and the Series D Certificate of Designation, each in
the form attached hereto as Exhibit X-0, X-0 and A-3,
respectively.
"Charter Amendment Approval" shall have the meaning set forth
in Section 5.05 of this Agreement.
"Closing" shall have the meaning set forth in section 2.02 of
this Agreement.
"Closing Date" shall have the meaning set forth in Section
2.02 of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commission" shall mean the Securities and Exchange
Commission.
"Company" shall mean Metris Companies Inc., a Delaware
corporation.
"Credit Agreement" shall have the meaning set forth in
Section 5.01(c)(iv).
"Employee Benefit Plans" shall have the meaning set forth in
Section 3.14.
"Environmental Claim" shall have the meaning set forth in
Section 3.16.
"Environmental Laws" shall mean any applicable Law concerning
releases into any part of the natural environment, or protection
of natural resources, the environment and public and employee
health and safety including, without limitation, CERCLA, the
Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq
.), the Resource Conservation and Recovery Act (42 U.S.C. 6901
et seq.), the Clean Water Act (33 U.S.C. 1251 et seq.), the
Clean Air Act (33 U.S.C. 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act 17 U.S.C. 136 et seq.), and
OSHA, as such laws have been and may be amended or supplemented
through the Closing Date, and the regulations promulgated pursuant
thereto, and any applicable state or local statutes, and the
regulations promulgated pursuant thereto.
"Exchange" shall have the meaning set forth in Section 5.06
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
"Exchange Approval" shall have the meaning set forth in
Section 5.05 of this Agreement.
"Exchange Date" shall mean the date on which the Exchange
occurs.
"GAAP" shall mean United States generally accepted accounting
principles.
"HSR Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976.
"Indenture" shall mean the Indenture pursuant to which the
Senior Notes are issued substantially in the form of Exhibit C
attached hereto.
"IRS" shall mean the United States Internal Revenue Service.
"Liens" shall mean any lien, claim, charge, pledge, mortgage,
security interest or other encumbrance.
"Liquidation Preference" shall have the meaning set forth in
the Certificates of Designation.
"Majority Interests" shall have the meaning assigned to such
term in Section 3.01 of this Agreement.
"Material Adverse Effect" shall mean a material adverse
effect on the business, prospects, condition (financial or
otherwise), assets or results of operations of the Company and the
Subsidiaries taken as a whole.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NLRB" shall mean the National Labor Relations board.
"Non-Voting Common Stock" shall mean the Non-Voting Common
Stock of the Company described in Section 5.05, which stock shall
be convertible into Common Stock in the same manner as the Series
D Preferred Stock.
"Non-Voting Stock" shall mean the Series D Preferred Stock
prior to the Charter Amendment Approval and the Non-Voting Common
Stock after the Charter Amendment Approval.
"OSHA" shall mean Occupational Safety and Health Act.
"Permits" shall mean, collectively, each permit, license,
order or authorization from any public or governmental authority
which is material to or necessary for the conduct of the business
of the Company or any of the Subsidiaries.
"Person" shall mean any individual, firm, corporation,
partnership, limited liability company or partnership, trust,
incorporated or unincorporated association, joint venture,
government (or any agency or political subdivision thereof) or
other entity of any kind.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement to be dated as of the Closing Date by and among
the Company and the Purchasers, substantially in the form attached
hereto as Exhibit E.
"Related Agreements" shall mean the Warrant Agreement, the
Indenture and the Registration Rights Agreement.
"SEC Documents" means all reports, schedules, registration
statements and other documents (including all exhibits and
schedules thereto) filed by the Company with the Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Series D Preferred Stock" shall mean the Series D Junior
Participating Convertible Preferred Stock of the Company.
"Significant Purchaser" shall mean (i) THL Equity Fund and
its Affiliates for so long as THL Equity Fund and its Affiliates
own in the aggregate at least ten percent of the Bridge Securities
purchased by them hereunder or the Series C Preferred Stock for
which such Securities are exchangeable or the securities issuable
upon conversion thereof, and (ii) any other holder of at least 15%
of the Bridge Securities or the Series C Preferred Stock for which
such securities are exchangeable or the securities issuable upon
conversion thereof.
"Subsidiary" shall mean each corporation or other entity of
which a majority of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly by
the Company.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including, without limitation, all net income, gross
receipts, capital, sales, use, ad valorem, value added, transfer,
franchise, profits, inventory, capital stock, license,
withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated
taxes, customs, duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines,
additions to tax or additional amounts imposed by any public or
governmental taxing authority (domestic or foreign) and shall
include any transferee liability in respect of Taxes.
"Tax Return" shall mean all returns, declarations, reports,
estimates, information returns and statements required to be filed
in respect of any Taxes.
"Warrant Agreement" shall mean the Warrant Agreement
substantially in the form of Exhibit D attached hereto pursuant to
which the Company will grant the Warrants to the Purchasers.
ARTICLE XIII
MISCELLANEOUS
Section 13.01. Notices. Except as otherwise provided
herein, whenever it is provided herein that any notice, demand,
request, consent, approval, declaration or other communication
shall or may be given to or served upon any of the parties by any
other party, or whenever any of the parties desires to give or
serve upon any other communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration
or other communication shall be in writing and either shall be
delivered in person with receipt acknowledged or sent by
registered or certified-mail, return receipt requested, postage
prepaid, or by overnight mail or courier, or delivery service or
by telecopy and confirmed by telecopy answer back, addressed as
follows:
(a) If to the Company to:
000 Xxxxx Xxxxxxx 000, Xxxxx 0000
Xx. Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Z. Xxxx Xxxxxxxx, Esquire
With a copy to:
Sidley & Austin
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attn: Xxxxxxx Xxxxxxx, Esquire
(b)(i) If to the Purchasers to:
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: X. Xxxxxx Xxxx
With a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: Xxxxx Xxxxxx, Esquire
or at such other address as may be substituted by notice given as
herein provided. The furnishing of any notice required hereunder
may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval,
declaration or other communication hereunder shall be deemed to
have been duly given or served on (A) the date on which personally
delivered, with receipt acknowledged, (B) the date on which
telecopied and confirmed by telecopy answer back, (C) the next
Business Day if delivered by overnight or express mail, courier or
delivery service, or (D) three Business Days after the same shall
have been deposited in the United States mail, as the case may be.
Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to
the persons designated above to receive copies shall in no way
adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
Section 13.02. Fees and Expenses. The Company agrees,
whether or not the transactions hereby contemplated shall be
consummated, to pay, and save each Purchaser harmless against
liability for the payment of, all reasonable out-of-pocket fees
and expenses arising in connection with this Agreement (including
the payment in advance of any filing fees under the HSR Act), the
Securities being purchased hereunder, the Registration Rights
Agreement, and the transactions hereby and thereby contemplated,
including, without limitation, all such fees and expenses incurred
with respect to the enforcement of any provision of any such
agreement or instrument and the reasonable fees and expenses of
counsel to the Purchasers retained in connection with such
agreements and instruments, and the transactions hereby and
thereby contemplated. The Company further agrees to indemnify and
save harmless the Purchasers and their respective officers,
trustees, directors, partners, employees and agents from and
against any and all actions, causes of action, suits, losses,
liabilities and damages, and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) in
connection therewith (herein called the "indemnified liabilities")
incurred by any Purchaser or any of its officers, trustees,
directors, partners, employees or agents as a result of, or
arising out of, or relating to any of the transactions
contemplated hereby, except for any indemnified liabilities
arising (i) on account of the gross negligence or willful
misconduct of such Purchaser or any of its officers, directors,
partners, employees or agents, (ii) on account of any breach of a
material term or provision of this Agreement by the Purchasers
hereunder or (iii) on account of Taxes based on income in respect
of securities of the Company, except as otherwise expressly
provided herein; provided that, if and to the extent such
agreement to indemnify may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and
satisfaction of each of the indemnified liabilities which shall be
permissible under applicable law. The obligations of the Company
under this Section 13.02 shall survive the transfer, redemption or
conversion of any Securities. At the Closing, the Company shall
pay to one or more designees of the Xxxxxx X. Xxx Company, in
cash, an amount equal to 5.0% of the aggregate purchase price for
the Securities set forth on Schedule 1 hereto. In addition, in
the event that the sale and purchase of Securities shall not be
consummated prior to December 31, 1998 as a result of (i) a breach
by the Company of any representation, warranty, covenant or
agreement of the Company contained herein (other than a failure to
meet the condition contained in Section 9.03 hereof due to any
condition, development or event arising after the date hereof
which is not the result of any breach of the Company's obligations
contained in this Agreement), (ii) the failure to amend or redeem
the rights under the Rights Agreement as contemplated by Section
9.10, or (iii) the failure to obtain any consent to the
transactions contemplated hereby in accordance with
Section 5.01(c)(iv) herein, or (iv) the failure to consummate the
transactions contemplated by the PNC Agreement as contemplated by
Section 7.03, in addition to the indemnity for expenses herein and
above provided, the Company shall pay to one or more designees of
the Xxxxxx X. Xxx Company in cash, in addition to any and all
other rights which may be available to Purchasers due to breach of
this Agreement by the Company, a fee in the amount of 3.0% of the
aggregate purchase price for the Securities set forth on Schedule
1 hereto, payable in cash on demand. In addition, in the event
the Company shall be required to pay a fee pursuant to clause (i)
of the preceding sentence and, prior to the date which is ninety
days following the termination of this Agreement, the Company
shall acquire all or substantially all of the assets subject to
the PNC Agreement, the Company shall pay to one or more designees
of the Xxxxxx X. Xxx Company, on demand in cash, $25,000,000.
Section 13.03. Survival of Representations and Warranties.
All representations and warranties contained herein or made in
writing by the Company in connection herewith shall survive the
execution and delivery of this Agreement, the sale and purchase of
the Securities and any disposition thereof for a period ending
thirty days following the filing with the Commission of the
Company's Annual Report on Form 10-K covering the fiscal year
ending December 31, 1999, except that the representations and
warranties contained in Section 3.10 and Section 4.07 shall
survive until the expiration of the applicable statute of
limitations for Taxes.
Section 13.04. Entire Agreement. This Agreement, together
with the schedules and exhibits hereto which are incorporated by
reference herein, represent the entire agreement and understanding
among the parties hereto with respect to the subject matter hereof
and supersedes any and all prior oral and written agreements,
arrangements and understandings among the parties hereto with
respect to such subject matter, and can be amended, supplemented
or changed, and any provision hereof can be waived, only by a
written instrument making specific reference to this Agreement
signed by the party against whom enforcement of any such
amendment, supplement, modification or waiver is sought.
Notwithstanding the foregoing, any document which is contemplated
to be executed or delivered at Closing or the Exchange Date in the
form attached as an Exhibit hereto may be delivered in
substantially the form attached, together with any changes thereto
reasonably acceptable to the parties hereto.
Section 13.05. Successors and Assigns. This Agreement shall
be binding upon the parties hereto and their respective successors
and assigns, including any person to whom the Purchaser may assign
its right and obligations to purchase Bridge Securities and shall
inure to the benefit of the parties hereto and, their respective
successors and assigns.
Section 13.06. Paragraph Headings. The paragraph headings
contained in this Agreement are for general reference purposes
only and shall not affect in any manner the meaning or
interpretation of the terms or other provisions of this Agreement.
Section 13.07. Applicable Law. This Agreement shall be
governed by, construed and enforced in accordance with the laws of
the State of Delaware, applicable to contracts to be made,
executed, delivered and performed wholly within such state, and in
any case, without regard to the conflicts of law principles of
such state.
Section 13.08. Severability. If at any time subsequent to
the date hereof, any provision of this Agreement shall be held by
any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but
the illegality or unenforceability of such provision shall have no
effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 13.09. Equitable Remedies. The parties hereto agree
that irreparable harm would occur in the event that any of the
covenants contained in this Agreement were not performed in all
material respects by the parties hereto in accordance with their
specific terms or conditions or were otherwise breached, and that
money damages are an inadequate remedy for breach thereof because
of the difficulty of ascertaining and quantifying the amount of
damage that will be suffered by the parties hereto in the event
that such covenants are not performed in accordance with their
terms or are otherwise breached. It is accordingly hereby agreed
that the parties hereto shall be entitled to seek an injunction or
injunctions to restrain, enjoin and prevent breaches and
violations of any of the covenants, contained in this Agreement by
the other parties and to enforce specifically the terms and
provisions hereof in any court of the United States or any state
having competent jurisdiction, such remedy being in addition to
and not in lieu of, any other rights and remedies to which the
other parties are entitled to at law or in equity.
Section 13.10. No Waiver. The failure of any party at any
time or times to require performance of any provision hereof shall
not affect the right at a later time to enforce the same. No
waiver by any party of any condition, and no breach of any
provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or
more instances, shall be deemed to be construed as a further or
continuing waiver of any such condition or of the breach of any
other provision, term, covenant, representation or warranty of
this Agreement.
Section 13.11. Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute but one and
the same original instrument.
Section 13.12. Brokers. The Company, on the one hand, and
each Purchaser as to itself, on the other hand, represents and
warrants to the other parties hereto that neither it nor any of
its officers, directors, general partners, agents, employees,
Affiliates or associates, has engaged or authorized any broker or
finder to act, directly or indirectly, on its behalf, in
connection with the transactions contemplated by this Agreement,
or has consented to or acquiesced in anyone so acting, and it
knows of no claim by any person for compensation from it for so
acting or of any basis for such a claim except, (i) in the case of
the Company, for Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities
Corporation pursuant to the terms of the Engagement Letter
previously provided to the Purchasers, and (ii) in the case of the
Purchasers, for Solomon Xxxxx Xxxxxx.
Section 13.13. Certain Assignment of Rights. Prior to
Closing, THL Equity Fund shall be entitled to assign any of its
rights hereunder to any Affiliates of THL Equity Fund or Xxxxxx X.
Xxx Company, or any employees thereof, who shall sign a
counterpart signature page agreeing to be bound by this Agreement
and to be entitled to the rights and obligations hereunder as if
it were an initial Purchaser hereunder.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the parties hereto have duly executed
and delivered this Agreement, as of the day and year first above
written.
METRIS COMPANIES INC.
By:/s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: President
XXXXXX X. XXX EQUITY FUND IV, L.P.
By: THL Equity Advisors IV, LLC, its
General Partner
By:/s/ Xxxxxx X. Xxxxxxx
Name: Xxxxxx X. Xxxxxxx
Title: Managing Director
