EXHIBIT 1.1
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DISTRIBUTION AND MANAGEMENT AGREEMENT
DATED AS OF OCTOBER 25, 2002
METRIS COMPANIES INC.
AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LTD.
----------------------------
$150,000,000
RENEWABLE UNSECURED SUBORDINATED NOTES
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..............................................................1
Section 1.01 Defined Terms......................................................1
Section 1.02 Accounting Terms...................................................5
ARTICLE II APPOINTMENT OF AGENT AND RELATED AGREEMENTS..............................5
Section 2.01 Appointment; Exclusivity...........................................5
Section 2.02 Scope of Agency....................................................5
Section 2.03 Compensation to Agent..............................................6
Section 2.04 Brokers and Dealers................................................8
Section 2.05 Agent's Unrelated Activities.......................................8
Section 2.06 Best Efforts; Independent Contractor...............................8
Section 2.07 Issuance and Payment................................................8
ARTICLE III SERVICES; STANDARD OF CARE..............................................9
Section 3.01 Services for Notes.................................................9
Section 3.02 Maintenance of Files and Records..................................11
Section 3.03 Monthly Reports to the Company....................................13
ARTICLE IV REPRESENTATIONS AND COVENANTS OF THE COMPANY............................13
Section 4.01 Representations, Warranties and Agreements of the Company.........13
Section 4.02 Covenants of the Company..........................................18
ARTICLE V REPRESENTATIONS AND COVENANTS OF AGENT; CONDITIONS.......................21
Section 5.01 Representations and Warranties of Agent...........................21
Section 5.02 Covenants of Agent................................................23
ARTICLE VI CONDITIONS..............................................................25
Section 6.01 Conditions of the Agent's Obligations.............................25
Section 6.02 Conditions of the Company's Obligations...........................30
ARTICLE VII INDEMNIFICATION AND CONTRIBUTION.......................................30
Section 7.01 Company's Indemnification of Agent................................30
Section 7.02 Agent's Indemnification of the Company............................31
Section 7.03 Notice of Indemnification Claim...................................32
Section 7.04 Contribution......................................................33
Section 7.05 Notice of Contribution Claim......................................33
Section 7.06 Reimbursement.....................................................34
Section 7.07 Intellectual Property Infringement................................34
ARTICLE VIII TERM AND TERMINATION..................................................34
Section 8.01 Effective Date of this Agreement..................................34
Section 8.02 Termination Prior to Initial Closing Date.........................34
Section 8.03 Notice of Termination.............................................35
Section 8.04 Termination After Initial Closing Date............................35
Section 8.05 Termination Without Termination of Offering.......................36
ARTICLE IX MISCELLANEOUS...........................................................36
Section 9.01 Survival..........................................................36
Section 9.02 Notices...........................................................36
Section 9.03 Successors and Assigns; Transfer..................................37
Section 9.04 Cumulative Remedies...............................................37
Section 9.05 Attorneys' Fees...................................................37
Section 9.06 Entire Agreement..................................................37
Section 9.07 Choice of Law; Venue..............................................38
Section 9.08 Confidentiality...................................................38
Section 9.09 Rights to Investor Lists..........................................38
Section 9.10 Waiver; Subsequent Modification...................................38
Section 9.11 Severability......................................................39
Section 9.12 Joint Preparation.................................................39
Section 9.13 Captions..........................................................39
Section 9.14 Counterparts......................................................39
Section 9.15 Third Party Contractors...........................................39
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DISTRIBUTION AND MANAGEMENT AGREEMENT
THIS DISTRIBUTION AND MANAGEMENT AGREEMENT is entered into as of this
25th day of October, 2002 by and between Metris Companies Inc., a Delaware
corporation (the "Company"), and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd., a Minnesota corporation
(the "Agent").
RECITALS
WHEREAS, the Company proposes to register and publicly offer and sell an
aggregate principal amount of up to $150,000,000 of renewable, unsecured,
subordinated notes of the Company; and
WHEREAS, subject to the termination rights set forth herein, the Company
desires to appoint the Agent to act as the Company's exclusive selling agent in
connection with the offer, sale and renewal of such notes on a best effort basis
and as the Company's servicing agent to provide certain administrative services
with respect to the Notes, and Agent desires to accept such duties, all as
provided for by the terms of this Agreement.
NOW, THEREFORE, in consideration of the above and for other good and
valuable consideration, receipt of which is acknowledged, and in consideration
of the mutual promises, covenants, representations and warranties hereinafter
set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINED TERMS. Whenever used in this Agreement, the
following terms have the respective meanings set forth below. The definitions of
such terms are applicable to the singular as well as to the plural forms of such
terms.
(a) Accepted Note Practices. As applicable to the context in
which this term is used, those procedures and practices with respect to
the offering, marketing, selling, servicing and administration of the
Notes that satisfy the following: (i) meet at least the same standards
that Agent would follow in exercising reasonable care in offering,
marketing, selling, servicing and administering similar programs for
publicly offered notes or securities; (ii) comply with all Governmental
Rules; (iii) comply with the provisions of this Agreement and the
Indenture; and (iv) give due consideration to the accepted standards of
practice of prudent investment banking firms that offer, market, sell,
service or administer comparable programs for publicly offered notes or
securities and the reliance of the Company on the Agent for the
offering, marketing, selling, servicing and administration of the
Renewable Note Program.
(b) Agent. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd., a Minnesota corporation, or
its successors in interest or assigns, if approved by the Company as
provided in Sections 5.02(c) and 9.03, below.
(c) Agreement. This Distribution and Management Agreement,
including any exhibits or attachments hereto, as originally executed,
and as amended or supplemented from time to time in accordance with the
terms hereof.
(d) Business Day. Any day other than (a) a Saturday or Sunday or
(b) another day on which banking institutions in the State of New York
or the State of Minnesota are authorized or obligated by law, executive
order, or governmental decree to be closed.
(e) Commission or SEC. The Securities and Exchange Commission.
(f) Company. Metris Companies Inc., or its successors or
assigns, if approved by Agent as provided in Section 9.03, below.
(g) Due Period. The monthly, quarterly, semi-annual, or annual
periods, or the full term of the Note if interest is due at maturity,
for which scheduled payments of interest will be paid on any Note.
(h) Exchange Act. The Securities Exchange Act of 1934, as
amended, and as hereafter amended, and the rules and regulations
thereunder.
(i) Governmental Rules. Any law, rule, regulation, ordinance,
order, code, interpretation, judgment, decree, policy, decision or
guideline of any governmental agency, court or authority.
(j) Holder. The registered owner of any Note as it appears on
the records of the Registrar, including any purchaser or any subsequent
transferee or other holder thereof.
(k) Incorporated Documents. All documents that, on or at any
time after the effective date of the Registration Statement, are
incorporated by reference therein, in the Prospectus, or in any
amendment or supplement thereto.
(l) Indenture. That certain Indenture dated on or about October
25, 2002, by and between the Company and the Trustee (the "Base
Indenture"), as supplemented by that certain Supplemental Indenture
dated October 25, 2002, between the Company and the Trustee (the
"Supplemental Indenture") with respect to the Notes.
(m) Initial Closing Date. The first date on which any Notes are
issued and sold by the Company to any Investors.
(n) Investor. Any person who purchases Notes or who contacts the
Agent expressing an interest in purchasing the Notes or requesting
information concerning the Notes.
(o) Material Agreement. With respect to a person other than the
Company and its subsidiaries, any agreement, contract, joint venture,
lease, commitment, guaranty or other contractual arrangement or any
bond, debenture, indenture, mortgage, deed of trust, loan or security
agreement, note, instrument or other evidence of indebtedness,
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which in the case of any of the foregoing is material to the business,
assets, operations, condition or prospects, financial or otherwise, of
such person or which is material to the ability of such person to
perform its obligations under this Agreement. With respect to the
Company and its subsidiaries, "Material Agreements" means any document
that has been filed as an exhibit to the Registration Statement or, as
of a particular date, to the Incorporated Documents filed with the
Commission on or prior to such date.
(p) NASD. The National Association of Securities Dealers, Inc.
(q) Note Confirmation. With respect to the issuance and
ownership of the Notes in book-entry form, an appropriate written
confirmation of the issuance and ownership or transfer of ownership of a
Note to a Holder, the format of which shall comply with the provisions
of the Indenture.
(r) Note Portfolio. The aggregate of individual Notes, as it
exists from time to time, which, unless the context otherwise requires
or provides, will be determined or evaluated based upon the principal
balances of the Notes.
(s) Notes. The renewable, unsecured, subordinated notes of the
Company that are being offered and sold pursuant to the Registration
Statement and that have an aggregate principal amount up to $150,000,000
and such other terms as described in the Prospectus, and any additional
principal amount of the same or similar notes as may be registered from
time to time pursuant to the Registration Statement.
(t) Offering. The offer and sale of the Notes in accordance with
the terms and subject to the conditions set forth in the Registration
Statement.
(u) Paying Agent. U.S. Bank National Association or its
successors or assigns, or such other paying agent with respect to the
Notes as may be subsequently appointed by the Company pursuant to the
Indenture, which may include, without limitation, the Company.
(v) Paying Agent Agreement. That certain agreement by and
between the Company and Paying Agent relating to the Company's
engagement of the Paying Agent to act as the paying agent for the Notes
in the event a third party acts as Paying Agent.
(w) Paying Agent Fees. All fees and expenses payable to the
Paying Agent in accordance with the Paying Agent Agreement.
(x) Proposal. That certain proposal between the Company and the
Agent dated September 20, 2002 with respect to the Renewable Note
Program.
(y) "Proprietary Rights" means all rights worldwide in and to
copyrights, rights to register copyrights, trade secrets, inventions,
patents, patent rights, trademarks, trademark rights, confidential and
proprietary information protected under contract or otherwise under law,
and other similar rights or interests in intellectual or industrial
property.
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(z) Prospectus. The prospectus included in the Registration
Statement at the time it was declared effective by the Commission, as
supplemented by the Prospectus Supplement and all other prospectus
supplements (including interest rate supplements) related to the Notes
that are filed with the Commission pursuant to Rules 424(b) or (c) under
the Securities Act. References to the Prospectus shall be deemed to
refer to and include the Incorporated Documents to the extent
incorporated by reference therein.
(aa) Prospectus Supplement. The form of Prospectus Supplement
related to the Offering and the Notes filed with the Commission on
October 25, 2002.
(bb) Redemption Payment. The payment of principal plus any
accrued and unpaid interest, that is being made at the discretion of the
Company in accordance with the Indenture.
(cc) Registration Statement. That certain Registration Statement
on Form S-3 (File No. 333-47066) of the Company filed with the
Securities and Exchange Commission under the Securities Act on or about
September 29, 2000. References to the Registration Statement shall be
deemed to refer to and include the Incorporated Documents to the extent
incorporated by reference therein.
(dd) Renewable Note Program. The marketing, subscription and
sale, administration, customer service and investor relations,
registration of ownership, reporting, payment, repurchase, redemption,
renewal and related activities associated with the Notes.
(ee) Repurchase Payment. The payment of principal plus any
accrued and unpaid interest, less any penalties upon the repurchase of
any Note, that is being made at the request of the Holder in accordance
with the Indenture.
(ff) Scheduled Payment. For any Due Period and any Note, the
amount of interest and/or principal indicated in such Note as required
to be paid by the Company under such Note for the Due Period and giving
effect to any rescheduling or reduction of payments in any insolvency or
similar proceeding and any portion thereof.
(gg) Securities Act. The Securities Act of 1933, as amended, and
as hereafter amended, and the rules and regulations thereunder.
(hh) "Subscription Agreement" means a subscription agreement
entered into by a Person under which such Person has committed to
purchase certain Notes as identified thereby and which is in
substantially the form filed as Exhibit 4.3 to the Company's Form 8-K,
dated October 25, 2002.
(ii) Trust Account. The trust account established by the Trustee
pursuant to the Indenture.
(jj) Trust Indenture Act. The Trust Indenture Act of 1939, as
amended, and as hereafter amended, and the rules and regulations
thereunder.
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(kk) Trustee. U.S. Bank National Association, or its successors
or assigns.
(ll) Trustee's Fees. All fees and expenses payable to the
Trustee in accordance with the Indenture.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise specified in this
Agreement, all accounting terms used in this Agreement shall be interpreted, all
accounting determinations under this Agreement shall be made, and all financial
statements required to be delivered by any person pursuant to this Agreement
shall be prepared, in accordance with U.S. generally accepted accounting
principles, as in effect from time to time and as applied on a consistent basis.
To the extent such principles do not apply to certain reports or accounting
practices of Agent, the parties will mutually agree on the accounting practices
and assumptions.
ARTICLE II
APPOINTMENT OF AGENT AND RELATED AGREEMENTS
SECTION 2.01 APPOINTMENT; EXCLUSIVITY. On the basis of the
representations, warranties and agreements herein contained, and subject to the
terms and conditions set forth herein and in the Prospectus during the term of
this Agreement, the Company appoints the Agent as its exclusive agent (unless
otherwise agreed by the parties (with the Agent's consent not to be unreasonably
withheld)) for purposes of selling, including the offer and sale of the Notes,
and servicing, including the servicing and administration of the Notes, in each
case, under the Renewable Note Program upon the terms and conditions set forth
herein, including, without limitation, compliance and conformity with Accepted
Note Practices and Governmental Rules, and the Agent agrees to use its best
efforts as such agent to offer and sell the Notes to Investors until the later
of the termination of the Offering or the payment in full of all outstanding
Notes, or until the termination of this Agreement, if earlier. In connection
with the administration of the Renewable Note Program, the Agent will carry out
the duties provided for herein and as described in the Prospectus as being
carried out by the Agent, including, but not limited to, acting as the Company's
agent for purposes of sending Notices of Maturity in accordance with the
provisions of Section 3.4(b) of the Supplemental Indenture; sending Note
Confirmations in accordance with the provisions of Section 3.12(b) and 3.13(a)
of the Supplemental Indenture; receiving and processing Repurchase Requests,
including establishing the Repurchase Date and calculating limitations to such
Repurchase Requests, in accordance with the provisions of Section 3.15 of the
Supplemental Indenture; and sending notices and payment instructions to the
Company and the Trustee in accordance with the provisions of the Paying Agent
Agreement. During the term of this Agreement, the Company agrees to direct to
the Agent all inquiries it receives with respect to sales of the Notes or
administration of the Renewable Notes Program, as applicable.
SECTION 2.02 SCOPE OF AGENCY. In the performance of its duties
hereunder, Agent shall have full power and authority to take any and all actions
for purposes of selling, including the offer and sale of Notes, and servicing,
including the servicing and administration of the Notes, in each case, under the
Renewable Note Program that Agent, in its discretion, deems necessary or
appropriate, subject in all respects to compliance and conformity with Accepted
Note Practices and Governmental Rules. Such discretion shall include, without
limitation, the right to accept or reject Subscription Agreements, waive or
reduce early repurchase penalties when appropriate,
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change interest payment dates, enforce early repurchase penalties and allow
prepayment of Notes, with or without penalty, subject, in each case to such
limitations or conditions as may be provided in the Indenture. Notwithstanding
the foregoing, Agent's authority to take any action on the Company's behalf,
other than the rejection of Subscription Agreements, which has an immediately
discernable, direct, financial impact of $500 or more shall be subject to
receiving the prior written consent of the Company. In the performance of its
duties hereunder, the Agent shall (i) act as the agent and the bailee of the
Company in connection with the Renewable Note Program; (ii) hold, in trust and
as custodian, all Subscription Agreements, notices or other documents and all
purchase proceeds or other payments received by it in connection with the
Renewable Note Program for the sole and exclusive use and benefit of the
Company; and (iii) make dispositions of the items in clause (ii) only in
accordance with this Agreement or at the written direction of the Company.
Except as set forth herein with respect to the Renewable Note Program, the Agent
shall have no authority, express or implied, to act in any manner or by any
means for or on behalf of the Company.
SECTION 2.03 COMPENSATION TO AGENT.
(a) Agent's Fees and Commissions. In consideration of the
agreement of the Agent to provide its services as set forth in this
Agreement, the Company will pay the Agent the following amounts:
(i) a commission as set forth in Exhibit B to the
Proposal (which exhibit is hereby incorporated by reference),
which shall be payable in consideration for the Agent's selling
and marketing of Notes; and
(ii) commencing January 1, 2004, an annual portfolio
management fee equal to 0.25% of the weighted average daily
principal balance of the Note Portfolio, to be invoiced monthly
as provided below, which shall be payable in consideration for
the administrative services provided by the Agent.
(b) Agent's Expenses. The Company agrees with the Agent that
whether or not this Agreement is terminated or cancelled or the sale of
the Notes hereunder is consummated, and regardless of the reason for or
cause of any such termination, cancellation, or failure to consummate,
the Company will pay or cause to be paid to the applicable persons the
following, whether incurred prior or subsequent to the date of this
Agreement:
(i) subject to the prior written approval by the Company
and in addition to such other costs specifically provided for
below, all reasonable out-of-pocket costs of the Agent or its
affiliates incurred in connection with the Offering, including,
but not limited to, designing, printing and mailing all offering
and advertising materials (including document fulfillment
services), advertisements in newspapers, on the radio, on the
internet and through direct mail, operating a toll-free
telephone number,
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and assisting the Company with creating a web site, including
any costs of a web developer or other third party consultants;
(ii) all reasonable fees and expenses of persons (other
than the Agent and its affiliates), including, without
limitation, fees and expenses of the Company's auditors and
legal counsel, in connection with the preparation, printing,
filing, and delivery of the Registration Statement (including
the financial statements therein and all amendments, schedules,
and exhibits thereto), the Prospectus, and any amendment thereof
or supplement thereto;
(iii) to the extent applicable, all reasonable fees and
expenses incurred in connection with the qualification of the
Notes for offer and sale under the securities or Blue Sky laws
of the states and other jurisdictions which the Company may
designate in accordance with the terms herewith;
(iv) all reasonable out-of-pocket costs incurred by the
Agent or any other contractor in connection with the
preparation, printing, filing, and delivery of notices,
quarterly statements, newsletters and any other materials to be
sent to Holders in connection with the Notes or the Offering;
(v) all reasonable fees and expenses of the Agent's
legal counsel related to the Offering and the ongoing servicing
and administration of the Renewable Note Program as provided
herein and not incurred due to the Agent's own negligence,
willful misconduct or breach of this Agreement;
(vi) all fees and expenses of the Trustee and Paying
Agent in connection with the Notes, and
(vii) all reasonable out-of-pocket costs directly
related to the performance of the Agent's obligations hereunder
with respect to the ongoing servicing and administration of the
Renewable Note Program that are not otherwise specifically
described herein and not incurred due to the Agent's own
negligence, willful misconduct or breach of this Agreement.
The provisions of this Section are intended to relieve the Agent from
the payment of reasonable fees, expenses and out-of-pocket costs which
the Company hereby agrees to pay and shall not impair or limit any of
the other obligations of the Company hereunder to the Agent.
(c) Payment of Fees and Commissions. On the last Business Day of
each month, or as soon thereafter as practicable, Agent shall provide
the Company with a written invoice for such month's fees and commissions
that are payable with respect to Notes issued up to the last five
Business Days of such month, and Notes issued in the last five Business
Days of the immediately preceding month that are not rescinded. Such
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commissions and fees will be due and payable by the later of the
fifteenth (15th) day of every month or fifteen (15) days after the date
such invoice is received.
(d) Prior Payments. The parties hereby acknowledge prior payment
of $50,000 to Agent as a deposit against its due diligence costs, which
amount was paid upon execution of the Proposal. Agent will provide a
written accounting of this deposit to the Company within sixty (60) days
after the earlier of (i) the execution of this Agreement; and (ii) March
31, 2003. Any remaining funds from this deposit will be applied against
Agent's expenses related to marketing and administering the Notes. To
the extent that this Agreement is terminated, the Agent will promptly
refund the excess of any unused portion of such funds over amounts
otherwise owed hereunder.
SECTION 2.04 BROKERS AND DEALERS. The Agent may, with the Company's
prior written consent (not to be unreasonably withheld) and at no additional
obligation or expense to the Company, use the services of other brokers or
dealers who are members of the NASD in connection with the offer and sale of the
Notes. The Agent may enter into agreements with any such broker or dealers to
act as its sub-agents for the sale of the Notes and shall be solely responsible
for the payment of any portion of the Agent's compensation hereunder to such
brokers or dealers. In the event that the Agent elects to use the services of
other brokers or dealers pursuant to the provisions of this Section 2.04, for
purposes of determining the Agent's compliance or non-compliance with the terms
and conditions of this Agreement, the actions and inactions of such other
brokers and dealers shall be deemed to be the actions or inactions of the Agent.
SECTION 2.05 AGENT'S UNRELATED ACTIVITIES. Notwithstanding any other
provision hereof, the Company agrees that Agent may sell other notes or
securities in offerings similar to the Offering for other issuers during the
course of the Offering, may advertise other notes or securities of other issuers
on its website or on the website of such other issuers, and shall have the right
to advertise or otherwise disclose to unrelated prospective issuers, at its own
expense, its relationship with the Company, the services it provides in
connection with the Notes and the amount of Notes sold through the Offering.
SECTION 2.06 BEST EFFORTS; INDEPENDENT CONTRACTOR. Anything to the
contrary notwithstanding, Agent shall have no obligation to sell any minimum
principal amount of Notes or to purchase Notes for its own account, for resale
or for any other purpose, but rather Agent shall use its best efforts as selling
agent in connection with the Offering of the Notes. During the term of this
Agreement, all actions taken by Agent pursuant to this Agreement shall be in the
capacity of an independent contractor, all sales of Notes conducted by Agent
shall be solely for the account and at the risk of the Company, and in no event
shall the Agent have any obligations under the Notes.
SECTION 2.07 ISSUANCE AND PAYMENT. The Notes shall be issued pursuant to
the Indenture and all Scheduled Payments, Redemption Payments and Repurchase
Payments shall be made by electronic funds transfer or automated clearing house
(i.e., ACH) remittance from the Trust Account by the Paying Agent in accordance
with the Paying Agent Agreement and the Indenture.
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ARTICLE III
SERVICES; STANDARD OF CARE
SECTION 3.01 SERVICES FOR NOTES. The services to be provided to the
Company by the Agent pursuant to and during the term of this Agreement shall
include the following:
(a) Note Mix and Interest Rates. Throughout the Offering, Agent
shall assist the Company in determining appropriate Note terms and
interest rates based on current market conditions and the Company's
capital goals.
(b) Marketing and Advertising. During the term of this
Agreement, Agent shall develop and execute a direct response marketing
strategy for the Notes designed to meet the Company's capital goals in a
timely manner, which shall be subject to the prior approval of the
Company. Agent shall also oversee designing and printing all marketing
materials, in accordance with the Securities Act and any other
requirements of the SEC and NASD or other Governmental Rules.
(i) For purposes of this Section 3.01 only, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ Agency, Inc., a wholly-owned subsidiary of Agent
("Agency") is hereby made a party to this Agreement. During the
term of Agent's activities to market and sell the Notes
hereunder, Agency will provide Company with media planning,
media buying and other marketing services related to the
Offering as provided on Exhibit A hereto, and the terms of which
shall be binding upon Company and Agency.
(ii) Notwithstanding the foregoing, the authority of
Agent and Agency with respect to all ad placements and use of
all marketing materials shall be subject to receiving the prior
written approval of the Company.
(iii) In order to minimize advertising costs, Agent
and/or Agency may recommend that the Company enter into long
term contracts (not to exceed one year) with various newspapers
and radio stations, and in such event, in addition to the direct
cost of the advertisements themselves, the Company shall be
responsible for any termination fees that result from the early
cancellation of such contracts if approved by Company.
(iv) During the term of this Agreement, Company shall
allow Agent and Agency to use the Company's logo, corporate
colors, trademarks, trade names, fonts, and other aspects of
corporate identity in advertisements and marketing materials
related to the Notes and on Agent's website, subject to the
Company's prior written approval of the specific use of these
items in writing in each instance (which shall not be
unreasonably withheld). The Agent will not make use of the
Company's logo, corporate colors, trademarks or trade names in
any manner that would reasonably be expected to disparage or
damage such marks, the
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reputation of the Company or diminish the Company's goodwill. It
is expressly agreed that the Agent is not acquiring any right,
title or interest in the Company's logo, corporate colors,
trademarks or trade names.
(c) Subscription, Sale and Ownership. During the term of this
Agreement, Agent shall review and process each Subscription Agreement
for the Notes received from an Investor with the objective of
determining whether (i) such agreement is complete and accurate in all
material respects, including without limitation the execution thereof by
such Investor, (ii) such Investor timely remits the proper purchase
price for the Notes in accordance with the Subscription Agreement, and
(iii) the principal amount, interest rate and term to maturity and any
other material terms of the Notes are verified for accuracy and
completeness. Upon delivery by each Investor of a completed Subscription
Agreement for Notes and full payment of the principal amount of such
Notes in accordance with the Investor's Subscription Agreement, the
Agent shall promptly (i) accept or reject such Subscription Agreements
on the Company's behalf, (ii) verify that the payment of the principal
amount of such Investor's accepted subscription for the Notes is being
remitted to the Company in accordance with the Subscription Agreement in
an account established by the Company for such purpose or in such other
manner as may be directed by the Company from time to time, and (iii)
remit to the Trustee electronic or hard copies of all accepted
Subscription Agreements and related records as may be reasonably
requested by the Trustee, including without limitation, a record of each
deposit relating to the payment of the subscription amount of the Notes.
Pursuant to the preceding sentence and in accordance with Section 3.12
of the Supplemental Indenture, Notes shall be issued by Agent on the
Company's behalf in book-entry form only and Agent shall cause to be
sent, within one Business Day of acceptance of the Subscription
Agreement, a Note Confirmation to each Holder with respect to such
Holder's respective accepted Subscription Agreement and the receipt of
full payment for such Holder's Notes. The Company hereby appoints the
Agent, and the Agent hereby accepts such appointment, as its initial
Registrar (as such term is defined in the Indenture) for the Notes
pursuant to Section 3.05 of the Base Indenture. For so long as Agent
shall serve as the Registrar for the Notes, Agent shall perform, in
accordance with the terms of the Indenture, all of the duties and
obligations of the Registrar under the Indenture, including without
limitation the obligation to maintain a book-entry registration and
transfer system for the ownership of the Notes in accordance with the
terms of the Indenture.
(d) Investor Relations and Reporting. During the term of this
Agreement, Agent, in conjunction with the Trustee, shall manage all
aspects of the customer service and investor relations functions with
respect to the Offering, including, but not limited to, handling all
inquiries from Investors, mailing investment kits, delivering to each
Investor the Prospectus and Subscription Agreement, meeting with
Investors, processing Subscription Agreements, responding to all written
or telephonic questions by Investors and Holders relating to the Notes,
recording changes in Holders' addresses or accounts, issuing quarterly
statements and newsletters to Holders, directing the Paying Agent to
make Scheduled Payments, Repurchase Payments and Redemption Payments to
Holders in a timely manner, and directing the Paying Agent to issue Form
1099's to Holders as required by law. In addition, Agent shall provide
the Trustee (and copy the Company)
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with management reports regarding the Notes as required under Section
4.3 of the Indenture.
(e) Web Site Development. Subject to compliance and conformity
with Accepted Note Practices by Agent, Agent (or a third party service
provider working at Agent's direction) shall assist the Company in
developing a dedicated Internet web site separate from the Company's
corporate site to allow Investors to view online and download copies of
the Offering documents (including the Prospectus and Subscription
Agreement) and marketing materials that are included in the investment
kit or comparable information.
(f) Ownership of Web Pages. Any and all web pages developed or
maintained by the Agent in connection with the marketing and selling of
the Notes (the "Web Pages"), and all associated Proprietary Rights,
shall be owned exclusively by the Agent; provided, however, it is
expressly acknowledged and agreed that the Company shall retain, and the
Agent shall not hereby acquire, any Proprietary Rights in the Company's
logos, corporate colors, trademarks, trade names, and slogans, any
descriptions of the Company's business, and the URL "▇▇▇▇▇▇▇▇▇▇▇.▇▇▇."
Agent hereby grants the Company a nonexclusive, perpetual, worldwide
license to use the Web Pages for the purpose of marketing and selling
the Notes.
SECTION 3.02 MAINTENANCE OF FILES AND RECORDS. Agent shall establish and
maintain at all times during the term of this Agreement files and records
(including, without limitation, computerized records) regarding the Notes and
the Note Portfolio, with full and correct entries of all transactions or
modifications in a reasonably secure, up-to-date manner and in accordance with
the following:
(a) Location. All Note and Note Portfolio files and records
shall be stored and maintained at Agent's principal place of business,
or other location as designated by the Agent, with the Company's prior
written consent, which shall not be unreasonably withheld. Agent shall
keep in its files all correspondence received or sent regarding each
Note, each Investor, and each Holder, whether upon any purchase or
transfer of a Note.
(b) Original Documents. Agent will store all original
Subscription Agreements, Note Confirmations, correspondence from
Investors and Holders and other materials relating to the Renewable Note
Program in a secure manner at the Agent's principal offices or such
other location as may be agreed upon with the Company. Agent shall
exercise due care in handling and delivering the original documents and
the other documents in the Note files and records. Agent shall not grant
or allow any person an interest in original documents or rights
thereunder, and all original documents in the possession of Agent shall
be deemed to be in the possession of the Company. In the event that
Agent transfers such originals offsite, it will scan and make an
electronic copy of such documents to be retained at its offices.
(c) Examination. At any time during Agent's normal business
hours: (i) the Company and its agents and representatives may physically
inspect any documents, files or other records relating to the Renewable
Note Program and discuss the same with
11
Agent's officers and employees; and (ii) the Company and its agents and
representatives may examine and audit all such books, records, and
documents of Agent, in order to determine the reasonableness of
compliance with, and adequate performance of this Agreement. Such audit
may include, but may not be limited to, financial documents, billing
records, information system security, and processing control measures.
Pursuant to any examination, Agent shall supply copies of any such
documents, files, or other records upon request of the Company, as soon
as is reasonably and commercially practicable at the Company's cost and
expense, unless Agent is in material breach of the provisions of this
Agreement, in which case all expenses shall be borne by Agent and shall
not be reimbursable.
(d) Retention. Unless otherwise requested by the Company, or
unless otherwise required by Governmental Rules, Agent shall retain,
with respect to each Note, for a period of 24 months from the date the
Note is fully paid, all records, files and documents related to each
such Note. At the end of such 24-month period, all such items shall be
transferred to the Company, or to a third party as designated by the
Company, at the Company's sole cost and expense. Agent shall be
permitted to retain copies of any such documents for its own files for
its own account and at its own expense. Agent shall maintain the privacy
of the Investors and Holders in accordance with all applicable
Governmental Rules.
(e) Return. If this Agreement is terminated, the Agent shall
promptly deliver to the Company or its designee, as the case may be, all
Note files and records related to the selling and servicing of the Notes
and all monies collected by it relating to the Renewable Note Program
(less any fees or expenses due to the Agent). Agent shall be entitled to
make and keep copies of such records, at its cost and expense. In
addition to delivering such data and monies, the Agent shall use its
best efforts to effect the orderly and efficient transfer of the selling
and servicing of the Notes to the Company or other party designated by
the Company to assume responsibility for such selling and servicing,
including, without limitation, directing Holders to remit all repurchase
or other notices to the address designated by the Company. All costs of
conversion and transfer of such records to the Company or another agent
shall be paid by the Company, unless Agent is in material breach of the
provisions of this Agreement, in which case all expenses shall be borne
by Agent and shall not be reimbursable. Notwithstanding any other
provision of this Agreement, unless otherwise agreed, Agent will not be
required to transfer or provide access to any servicing or other
software used in connection with the Renewable Note Program, whether
proprietary to Agent or licensed from any third party.
(f) Security. The parties shall take appropriate security
measures to protect customer nonpublic personal information ("NPI"), as
defined in the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act of 1999, Title V, and its
implementing regulations, against accidental or unlawful destruction and
unauthorized access, tampering, and copying during storage in either
party's computing or paper environment. Access to NPI must be restricted
to only the personnel that have a business need. NPI must be stored in a
secured format within all systems at both parties' location and any
other locations where the data may reside. Transmission of such NPI
between the parties or vendors must be done in a secure manner, in a
method mutually agreed upon by both parties. Both parties agree that
each
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will engage appropriate and industry-standard measures necessary to meet
information security guidelines as required by the ▇▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Act, Title V and its implementing regulations as applicable to such
party to effectuate this Agreement.
SECTION 3.03 MONTHLY REPORTS TO THE COMPANY. Agent shall provide the
Company with monthly reports and analysis regarding the status of the Note
Portfolio, the marketing efforts and the amount of Notes remaining available for
issuance under the Registration Statement. Agent shall provide such reports on
or before the tenth (10th) day of each month with respect to activity during the
immediately preceding month. Agent shall also provide interim or custom reports
at the Company's request as is commercially reasonable, including, without
limitation, a weekly update via email identifying new Holders by name, address
and principal amount of Notes purchased.
ARTICLE IV
REPRESENTATIONS AND COVENANTS OF THE COMPANY
SECTION 4.01 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with the Agent as follows,
which representations and warranties shall be deemed to be made continuously
from and as of the date hereof until this Offering is terminated or such earlier
date that this Agreement has been terminated.
(a) The Company satisfies all of the requirements for the use of
Form S-3 with respect to the offer and sale of securities as
contemplated by the Offering. The Commission has not issued any order
preventing or suspending the use of the Registration Statement or
Prospectus and no proceeding for that purpose has been instituted or, to
the Company's knowledge, threatened by the Commission or the securities
authority of any state or other jurisdiction. As of (i) the effective
date of the Registration Statement and (ii) the date of the Prospectus
Supplement, the Company had been filing reports with the SEC during the
36 months and any portion of a month immediately preceding such dates
and had $150 Million of "public float" (as determined in the manner set
forth on the front page of Form 10-K under the Exchange Act relating to
the aggregate market value of common equity securities held by
non-affiliates of the Company) or at least $100 Million of public float
and an annual trading volume of at least 3,000,000 shares.
(b) The Registration Statement, in the form in which it became
effective and also in such form as it may be when any post-effective
amendment thereto shall become effective, and the Prospectus, and any
supplement or amendment thereto when filed with the Commission under
Rule 424 under the Securities Act, complied or will comply with the
provisions of the Securities Act and the Trust Indenture Act, and did
not or will not at any such times contain an untrue statement of
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of
the circumstances in which they were made, not misleading, except that
this representation and warranty does not apply to: (i) any statements
in, or omissions from the Agent Disclosure Statements (as defined in
Section 5.01(f) below) in the Registration Statement or the Prospectus,
or any amendment thereof or supplement thereto; or (ii) statements in or
omissions from the Registration Statement (or any amendment thereto)
related to or resulting from the specific terms of the Offering, which
terms are included in the Prospectus.
13
(c) The Incorporated Documents previously filed, at the time
they were filed, complied in all material respects with the requirements
of the Exchange Act, and all subsequently filed Incorporated Documents
will, at the time they are filed, comply in all material respects with
the requirements of the Exchange Act. No such previously filed
Incorporated Document, when filed, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading; and no such further Incorporated Document, when filed, will
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to
make the statements therein not misleading, except that this
representation and warranty does not apply to the extent that any
misstatement or omission in any Incorporated Document is superseded by a
subsequent Incorporated Document, but in such case only with respect to
the period from and after the filing of the subsequent Incorporated
Document.
(d) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Registration
Statement, the Prospectus and the Incorporated Documents. The Company is
duly qualified to do business and is in good standing in each
jurisdiction in which the ownership or lease of its properties or the
conduct of its business requires such qualification and in which the
failure to be qualified or in good standing would have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and, to the best of the Company' s
knowledge, no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.
(e) Each subsidiary of the Company has been duly incorporated or
organized and is validly existing in good standing under the laws of the
jurisdiction of its incorporation or organization, with full power and
authority to own, lease and operate its properties and conduct its
business as described in the Registration Statement, the Prospectus and
the Incorporated Documents. Each such subsidiary is duly qualified to do
business and is in good standing in each jurisdiction in which the
ownership or lease of its properties or the conduct of its business
requires such qualification and in which the failure to be qualified or
in good standing would have a material adverse effect on the condition
(financial or otherwise), earnings, operations or business of the
Company and, to the best of the Company' s knowledge, no proceeding has
been instituted in any such jurisdiction revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification.
(f) The Company and each subsidiary has operated and is
operating in material compliance with all authorizations, licenses,
certificates, consents, permits, approvals and orders of and from all
state, federal and other governmental regulatory officials and bodies
necessary to own its properties and to conduct its business as described
in the Registration Statement, the Prospectus and the Incorporated
Documents, all of which are, to the best of the Company's knowledge,
valid and in full force and effect. The Company and each subsidiary is
conducting its business in substantial compliance with all applicable
laws, rules and regulations of the jurisdictions in which it
14
is conducting business, and the Company and each subsidiary is not in
material violation of any applicable law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or governmental
agency or body, domestic or foreign, having jurisdiction over the
Company or any such subsidiary or their respective over its properties.
(g) The Company and each subsidiary is not in violation of its
certificate or articles of incorporation or bylaws (or similar governing
documents) or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any Material
Agreement to which it is a party or by which it or its properties are
bound.
(h) The Company has full requisite power and authority to enter
into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Company and is a valid and binding agreement on the part of the Company,
enforceable against the Company in accordance with its terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The performance
of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under:
(i) any Material Agreement to which the Company or any
subsidiary is a party or by which the Company or any subsidiary
or their respective properties may be bound;
(ii) the articles of incorporation or bylaws of the
Company, or
(iii) any applicable law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any subsidiary or their
respective properties.
(i) No consent, approval, authorization or order of or
qualification with any court, governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its properties is
required for the execution and delivery of this Agreement and the
consummation by the Company of the transactions herein contemplated,
except such as may be required under the Securities Act, the Exchange
Act, the Trust Indenture Act, or under state or other securities or blue
sky laws, all of which requirements have been satisfied.
(j) Except as is otherwise expressly described in or
incorporated by reference into the Registration Statement or Prospectus,
there is neither pending nor, to the best of the Company's knowledge,
threatened, any action, suit, claim or proceeding against the Company or
any subsidiary or any of their respective officers or properties, assets
or rights before any court, government or governmental agency or body,
domestic or foreign, having jurisdiction there over which, if
successful, would be likely to (A) result
15
in any material adverse change in the condition (financial or
otherwise), earnings, operations or business of the Company or might
materially and adversely affect its properties, assets or rights, or (B)
prevent consummation of the transactions contemplated hereby.
(k) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus and the shares of issued and
outstanding Common Stock set forth thereunder have been duly authorized,
validly issued and are fully paid and non-assessable. The Notes to be
sold hereunder by the Company have been duly authorized for issuance and
sale pursuant to the Indenture and this Agreement and, when issued and
delivered against payment therefor in accordance with the terms of the
Indenture and this Agreement, will be duly and validly issued and fully
paid and non-assessable and will constitute valid and legally binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or
affecting creditors' rights and to general principles of equity and will
be sold free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other
similar right of stockholders exists with respect to any of the Notes to
be sold hereunder by the Company or the issuance and sale thereof.
(l) KPMG LLP, which has expressed its opinion with respect to
certain of the financial statements filed or incorporated by reference
as part of the Registration Statement, is an independent accounting firm
within the meaning of the Securities Act. The financial statements of
the Company set forth or incorporated by reference in the Registration
Statement and Prospectus comply in all material respects with the
requirements of the Securities Act and fairly present the financial
position and the results of operations of the Company at the respective
dates and for the respective periods to which they apply in accordance
with generally accepted accounting principles consistently applied
throughout the periods involved; and the supporting schedules included
or incorporated by reference in the Registration Statement present
fairly the information required to be stated therein.
(m) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, except as is
otherwise disclosed in the Registration Statement or Prospectus or as is
otherwise incorporated into the Registration Statement pursuant to the
Securities Act, there has not been (i) any material adverse change in
the condition, financial or otherwise, earnings, affairs or business
prospects of the Company or any subsidiary, or (ii) any material
transactions entered into by the Company, or any of its subsidiaries,
other than those in the ordinary course of business.
(n) Except as is otherwise expressly disclosed in the
Registration Statement or Prospectus or as is otherwise incorporated
into the Registration Statement pursuant to the Securities Act:
(i) the Company and its subsidiaries have good and
marketable title to all of the property, real and personal, and
assets described in the
16
Registration Statement or Prospectus as being owned by them,
free and clear of any and all pledges, liens, security
interests, encumbrances, equities, charges or claims, other than
such as would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations or
business of the Company;
(ii) the Material Agreements to which the Company or any
subsidiary is a party described in the Registration Statement
and Prospectus are valid agreements, enforceable by the Company
or such subsidiary except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally or by judicial limitations on the
right of specific performance; and
(iii) except as set forth in the Registration Statement
and Prospectus, the Company and each of its subsidiaries owns or
leases all such properties as are necessary to their operations
as now conducted.
(o) The Company has timely filed (or has timely requested an
extension of time to file) all necessary federal and state income and
franchise tax returns, except for any such failures that would not have
a material adverse effect on the condition (financial or otherwise)
earnings, operations, business or properties of the Company. The Company
has paid all taxes shown on such tax returns as due and payable, and
there is no tax deficiency that has been or, to the best of the
Company's knowledge, could be asserted against the Company that might
have a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or properties of the Company,
and all tax liabilities are adequately provided for in the books of the
Company; provided, however, that the Company has not paid, and a
deficiency may have been asserted for, taxes which are being contested
by the Company in good faith and by proper proceedings and for which
appropriate and reasonable reserves have been provided.
(p) The Company and its subsidiaries own, or possess adequate
rights to use, all patents, inventions, trade secrets, know-how,
technology, service marks, trade names, copyrights, trademarks and other
intellectual property rights which are necessary for the conduct of
their present or intended business as described in the Registration
Statement or Prospectus or incorporated by reference therein. The
expiration of any patents, patent rights, trade secrets, trademarks,
service marks, trade names or copyrights would not have a material
adverse effect on the condition (financial or otherwise), earnings,
operations or business of the Company and the Company has not received
any notice of, and has no knowledge of, any infringement of or conflict
with the asserted rights of others with respect to any patents,
inventions, trade secrets, know-how, technology, service marks, trade
names, copyrights, trademarks and other intellectual property rights
that, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, might have a material adverse effect on the
condition (financial or otherwise), earnings, operations, or business of
the Company.
17
(q) The Company has not taken and will not take, directly or
indirectly, any action (and does not know of any action by its
directors, officers, employees, or other agents) which has constituted
or is designed to, or which might reasonably be expected to, cause or
result in stabilization or manipulation, as defined in the Exchange Act
or otherwise, to facilitate the sale or resale of the Notes. The Company
has not distributed and will not distribute prior to the completion of
the distribution of the Notes, any offering material in connection with
the offering and sale of the Notes other than the Prospectus, the
Registration Statement and other materials, if any, permitted by the
Securities Act.
(r) The Company and its subsidiaries maintain insurance, which
is in full force and effect, with insurers of recognized financial
responsibility of the types and in the amounts generally deemed adequate
for its business and the Company has no reason to believe that it or its
subsidiaries will not be able to renew such existing insurance coverage
as and when such coverage expires or obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not materially and adversely affect the condition (financial
or otherwise), earnings, operations, business or business prospects of
the Company.
(s) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that transactions
are executed in accordance with management's general or specific
authorizations and transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles. To maintain accountability for assets,
access to assets is permitted only in accordance with management's
general or specific authorization, and the recorded accountability for
assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(t) During the term of this Agreement, and except as set forth
herein and in the Registration Statement, the Company has not taken any
action to create a right in any person or entity other than the Agent to
any compensation or other payments from either the Company or the Agent,
as a finder, underwriter or agent in connection with the Offering or any
other proposed transaction between the Company and the Agent. The
Company agrees to promptly notify the Agent of any such relationships,
including consulting or prior agency agreements entitling other parties
to compensation for the Offering and agrees to provide the Agent with a
copy of such agreements.
SECTION 4.02 COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees with the Agent as follows:
(a) The Company will use its best efforts to cause any
post-effective amendments to the Registration Statement to become
effective as promptly as possible. The Company will notify the Agent
promptly of the time when any post-effective amendment to the
Registration Statement has become effective or any supplement to the
Prospectus has been filed and of any request by the Commission for any
amendment or supplement to the Registration Statement or Prospectus or
additional information. The Company will prepare and file with the
Commission, promptly upon the Agent's
18
reasonable request, any amendments or supplements to the Registration
Statement or Prospectus that, in the Agent's opinion, as may be
supported by the opinion of such Agent's counsel if reasonably required
by the Company, may be necessary or advisable in connection with the
Offering of the Notes by the Agent. In the event that the Company files
any amendment or supplement to the Registration Statement or Prospectus
to which the Agent shall reasonably object, the Agent will be relieved
of its obligations with respect to the Offering (but not the
administration) of the Notes until such time as the Company shall have
filed such further amendments or supplements such that the Agent is
reasonably satisfied with the Registration Statement and the Prospectus,
as then amended or supplemented.
(b) The Company will advise the Agent, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement, of the suspension of the qualification of the
Notes for offering or sale in any jurisdiction, or of the initiation or
receipt of any specific threat of any proceeding for any such purpose.
The Company will promptly use its best efforts to prevent the issuance
of any stop order or to obtain its withdrawal if such a stop order
should be issued.
(c) Within the time during which a Prospectus relating to the
Notes is required to be delivered under the Securities Act, the Company
will comply as far as it is able with all requirements imposed upon it
by the Securities Act, so far as necessary to permit the continuance of
sales of or dealings in the Notes as contemplated by the provisions
hereof and the Prospectus. If, during the longer of such period or the
term of this Agreement, any event or change occurs that could reasonably
be considered material to the Offering or that causes any of the
representations and warranties of the Company contained herein to be
untrue in any material respect, or as a result of which the Prospectus
would include an untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances then existing, not misleading, or if, during such
period, it is necessary to amend the Registration Statement or
supplement the Prospectus to comply with the Securities Act, then the
Company will promptly notify the Agent, and, if necessary, will amend
the Registration Statement or supplement the Prospectus (at the expense
of the Company) so as to correct such statement or omission or effect
such compliance. Without limiting the foregoing, if this Agreement is
terminated for any reason, the Company shall promptly amend the
Prospectus and any related Offering materials to delete references to
the Agent.
(d) The Company will use its best efforts to take such action as
requested by the Agent in order to arrange for the qualification of the
Notes for offering and sale under the securities laws of such
jurisdictions as the Company may reasonably designate (after consulting
with the Agent) and to continue such qualifications in effect for so
long as may be required for purposes of the Offering. In each
jurisdiction in which the Notes shall have been qualified as herein
provided, the Company will make and file such statements and reports in
each year as are or may be reasonably required by the laws of such
jurisdiction as advised by the Agent.
19
(e) The Company will furnish to the Agent copies of the
Registration Statement, the Prospectus, and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Agent may from time to time reasonably request.
(f) For such period as this Agreement may be in effect, the
Company shall make available to the Agent, as soon as the same shall be
sent to its stockholders generally, copies of all annual or interim
stockholder reports of the Company and will, for the same period, also
furnish the Agent one copy of any report, application or document (other
than exhibits, which, however, will be furnished on Agent's request)
filed by the Company with the Commission, the New York Stock Exchange,
the NASD or any other securities exchange.
(g) At all times during the term of this Agreement, the Company
shall provide all information reasonably requested by Agent that relates
to the Renewable Note Program in a timely manner and shall use its best
efforts to insure that such information is complete and accurate.
(h) The Company will, during the term of this Agreement, furnish
directly to the Agent quarterly profit and loss statements and reports
of the Company's cash flow as reported on the applicable quarterly
report on Form 10-Q; and (ii) within five (5) days following the filing
of any quarterly report on Form 10-Q, provide or cause KPMG (or another
nationally recognized firm of independent public accountants) to provide
to the Agent a letter from KPMG or such other firm with respect to the
Form 10-Q, confirming performance of the procedures and providing such
comfort as set forth in Sections 6.01(g)(ii)(A),(B) and (C),
6.01(g)(iii)(A) and (B), and 6.01(g)(iv) of this Agreement with respect
to the unaudited interim financial statements or other data, as the case
may be, contained therein.
(i) The Company will apply the net proceeds from the sale of the
Notes substantially in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(j) The Company will not take, and will use its best efforts to
cause each of its officers and directors not to take, directly or
indirectly, any action designed to or which might reasonably be expected
to cause or result in stabilization or manipulation as defined in the
Exchange Act of the price of any security of the Company to facilitate
the sale or resale of the Notes.
(k) If a material adverse change in the financial condition of
the Company occurs, the Company will authorize Agent to conduct due
diligence investigations (limited to one per calendar year following the
date hereof) to verify the Company's ability to offer and perform its
obligations under the Notes during the term of this Agreement and agrees
to provide Agent with access to its relevant books and records for the
purpose of performing quarterly cash flow analysis.
20
ARTICLE V
REPRESENTATIONS AND COVENANTS OF AGENT; CONDITIONS
SECTION 5.01 REPRESENTATIONS AND WARRANTIES OF AGENT. The Agent hereby
represents and warrants to the Company as follows, which representations and
warranties shall be deemed to be made continuously from and as of the date
hereof until this Offering is terminated or such earlier date that this
Agreement has been terminated:
(a) The Agent (i) has been duly organized, is validly existing
and in good standing as a Minnesota corporation, (ii) has qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of its properties or the nature of its
activities (including without limitation activities of the Agent
hereunder) makes such qualification necessary, and (iii) has full power,
authority and legal right to own its property, to carry on its business
as presently conducted, and to enter into and perform its obligations
under this Agreement. The Agent is a member in good standing of the
NASD.
(b) The Agent has full requisite power and authority to enter
into this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by the
Agent and is a valid and binding agreement on the part of the Agent,
enforceable against the Agent in accordance with its terms subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general principles of equity. The performance
of this Agreement and the consummation of the transactions herein
contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under:
(i) any Material Agreement to which the Agent is a party
or by which the Company or its properties may be bound;
(ii) the articles of incorporation or bylaws of the
Agent, or
(iii) any applicable law, order, rule, regulation, writ,
injunction, judgment or decree of any court, government or
governmental agency or body, domestic or foreign, having
jurisdiction over the Agent or over its properties.
(c) The Agent has obtained all governmental consents, licenses,
approvals and authorizations, registrations and declarations which are
necessary for the execution, delivery, performance, validity and
enforceability of Agent's obligations under this Agreement. The Agent is
a registered broker-dealer in good standing under the appropriate laws
and regulations of each of the states in which offers or solicitations
of offers to subscribe for the Notes will be made by the Agent.
(d) There are no actions, suits or proceedings pending or, to
the knowledge of the Agent, threatened against or affecting the Agent,
before or by any court, administrative agency, arbitrator or
governmental body with respect to any of the
21
transactions contemplated by this Agreement, or which will, if
determined adversely to the Agent, materially and adversely affect it or
its business, assets, operations or condition, financial or otherwise,
or adversely affect the Agent's ability to perform its obligations under
this Agreement. The Agent is not in default with respect to any order of
any court, administrative agency, arbitrator or governmental body so as
to materially and adversely affect the transactions contemplated by this
Agreement.
(e) The Agent has obtained all necessary consents, approvals,
waivers and notifications of creditors, lessors and other
nongovernmental persons in connection with the execution and delivery of
this Agreement, and the consummation of all the transactions herein
contemplated.
(f) When the Prospectus Supplement is or was filed with the
Commission and at all times subsequent thereto until the termination of
the Offering, the Agent Disclosure Statements in the Prospectus (as
amended or supplemented, if the Company shall have filed with the
Commission any amendment thereof or supplement thereto) will not or did
not contain any untrue statement of a material fact or 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 in which they
were made, not misleading. "Agent Disclosure Statements" shall mean any
statements or disclosures included within or the subject of the
Registration Statement or the Prospectus, which, when the Prospectus
Supplement is or was filed with the Commission and at all times
subsequent thereto, are either (i) included within the disclosure under
the heading "Plan of Distribution" in the Prospectus Supplement, or (ii)
based upon and conform to written information relating to the Agent
furnished in writing to the Company by the Agent specifically for use in
the preparation of the Prospectus Supplement, or any further supplement
to the Prospectus; provided, however, the Agent makes no representation
with respect to any Agent Disclosure Statement made without the consent
of the Agent, or with respect to which the Agent has provided the
Company a written objection.
(g) The Agent has operated and is operating in material
compliance with all authorizations, licenses, certificates, consents,
permits, approvals and orders of and from all state, federal and other
governmental regulatory officials and bodies necessary to conduct its
business as contemplated by and described in this Agreement, all of
which are, to the Agent's knowledge, valid and in full force and effect.
The Agent is conducting its business in substantial compliance with all
applicable Governmental Rules, laws, rules and regulations of the
jurisdictions in which it is conducting business, and the Agent is not
in material violation of any applicable Governmental Rules, law, order,
rule, regulation, writ, injunction, judgment or decree of any court,
government or governmental agency or body, domestic or foreign, having
jurisdiction over the Agent or over its properties.
(h) The Agent has not distributed and will not distribute prior
to the completion of the Offering, any offering material in connection
with the Offering, other than the Prospectus, the Registration
Statement, the Incorporated Documents, and other materials, if any,
permitted by and in compliance with the Securities Act.
22
(i) The Agent maintains insurance, which is in full force and
effect, with insurers of recognized financial responsibility of the
types and in the amounts generally deemed adequate for its business and,
to the best of the Agent's knowledge, in line with the insurance
maintained by similar companies and businesses; and the Agent shall add
the Company as a beneficiary or additional insured against any covered
loss and shall provide the Company with a copy of the respective
insurance policies; and the Agent has no reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that would not
materially and adversely affect the financial condition or business
operations of the Agent.
(j) The Agent has not taken any actions or made any agreements
which would create a right in any person to receive the commissions to
be paid pursuant to this Agreement.
SECTION 5.02 COVENANTS OF AGENT. The Agent hereby covenants to the
Company as follows, which covenants shall be deemed in force unless and until
this Agreement is terminated as provided herein:
(a) The Agent shall punctually perform and observe all of its
obligations and agreements contained in this Agreement. The Agent and
its associated persons will conduct their activities pursuant to this
Agreement in compliance with the requirements of the Securities Act, the
Exchange Act, the rules and regulations of the NASD and all applicable
Blue Sky laws and the rules and regulations thereunder.
(b) Except as provided in this Agreement, the Agent shall not
take any action, or permit any action to be taken by others, which would
excuse any person from any of its covenants or obligations under any
Note, or under any other instrument related to a Note, or which would
result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any Note or
any such instrument or any right in favor of the Company in a Note or
such instrument, without the written consent of the Company.
(c) The Agent shall not assign this Agreement or any of its
rights, powers, duties or obligations hereunder without the express
prior written consent of the Company, which may be conditioned upon
Agent remaining primarily liable for assigned obligations.
(d) Within the shorter of the time during which a prospectus
relating to the Notes is required to be delivered under the Securities
Act or the term of this Agreement, the Agent will comply with all
requirements imposed upon it by the Securities Act, so far as necessary
to permit the continuance of sales of or dealings in the Notes as
contemplated by the provisions hereof and the Prospectus. If, during the
shorter of such period or the term of this Agreement, to the Agent's
best knowledge, any event or change occurs that could reasonably be
considered material to the Offering or that causes any of the
representations and warranties of the Agent contained herein to be
untrue in any material respect, or as a result of which the Prospectus
would include an untrue statement
23
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances then existing,
not misleading, or if, during such period, to the Agent's best
knowledge, it is necessary to amend the Registration Statement or
supplement the Prospectus to comply with the Securities Act, then the
Agent will promptly notify the Company, and, if necessary, use
reasonable efforts to assist the Company in amending the Registration
Statement or supplementing the Prospectus (at the expense of the
Company) so as to correct such statement or omission or effect such
compliance. The Agent will solicit offers to purchase the Notes only
from persons who are residents of states where the Agent is a registered
broker-dealer in good standing. All such solicitations will be made by
associated persons of the Agent who are licensed as salespeople under
the applicable securities laws of the relevant state.
(e) The Agent will use reasonable efforts (i) to determine and
designate the states or jurisdictions, if any, where the qualification
or registration of the Notes is necessary or advisable in connection
with the Offering and (ii) to assist the Company in arranging for the
qualification or registration of the Notes for offering and sale under
the securities laws of such states or jurisdictions and to continue such
qualifications or registrations in effect for so long as may be required
for purposes of the distribution of the Notes. In each state or
jurisdiction in which the Notes shall have been qualified or registered
as herein provided, the Agent will assist with making and filing the
Company statements and reports in each year as are or may be reasonably
required by the laws of such states or jurisdiction. The Agent will not,
whether orally or in writing, without the prior written consent of the
Company, provide any information or make any representations with
respect to any information concerning the Company, except (i)
information contained in the Prospectus (as amended and supplemented to
the date of such solicitation), the Subscription Agreement and as
provided in Section 5.2(f).
(f) Except for the Prospectus, the Registration Statement and
the Incorporated Documents, Agent will not use, send, mail transmit,
distribute or otherwise make available to prospective Investors,
Investors or Holders any offering, marketing or advertising materials or
similar communications in connection with the Offering without having
first received, from an authorized officer of the Company, the Company's
prior written approval of such materials in the form proposed to be
used. For purposes of the foregoing, offering, marketing and advertising
materials and similar communications include, but are not limited to,
advertisements in newspapers, on the radio, on the internet and through
direct mail, newsletters to be sent to Holders, investment kits or
information relating to the Offering included on the Agent's website or
on websites controlled by the Agent or its affiliates.
(g) Upon receipt of written instructions from the Company, the
Agent and its associated person will forthwith suspend the solicitation
of purchases of Notes until advised in writing by the Company that such
solicitation may be resumed.
(h) The Agent will promptly notify the Company in writing of any
change to the representations and warranties contained in Section 5.01.
24
(i) The Agent will not purchase any Notes for accounts over
which it has discretionary authority without the prior written approval
of the account holder.
(j) At all times during the term of this Agreement, the Agent
shall provide all information relating to the Offering, the Renewable
Note Program or the Note Portfolio reasonably requested by the Company
in a timely manner and shall use its best efforts to insure that such
information is complete and accurate in all material respects.
(k) With respect to all software, data and the security thereof
related to or necessary to administer the Notes, the Agent agrees to (i)
maintain and test at least annually a disaster recovery plan allowing
for recovery of data, including a hot site for disaster recovery
purposes, within 24 hours; (ii) maintain one key contact person,
identified to the Company, having responsibility for data security
administration; (iii) maintain effective password and authentication
controls; and (iv) perform network security self-assessments not less
than annually. In addition, the Agent shall not use, or allow any of its
vendors to use, any of the Company's customer data in the performance of
any system testing.
(l) The Agent shall take such additional action as is reasonably
requested by the Company in order to carry out the purposes of this
Agreement.
ARTICLE VI
CONDITIONS
SECTION 6.01 CONDITIONS OF THE AGENT'S OBLIGATIONS. The obligation of
the Agent to sell the Notes on a best efforts basis as provided herein shall be
subject to the accuracy of the representations and warranties of the Company, to
the performance by the Company of its obligations hereunder, and to the
satisfaction of the following additional conditions:
(a) The Registration Statement be effective, and no stop order
suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the
knowledge of the Company, or the Agent, threatened by the Commission or
any state securities commission or similar regulatory body. Any request
of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been
complied with to the satisfaction of the Agent and Agent's counsel.
(b) The Agent shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment thereof or
supplement thereto, contains any untrue statement of a fact which is
material or omits to state a fact which is material and is required to
be stated therein or is necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(c) There shall not have occurred any change, or any development
involving a prospective change, which materially and adversely affects
the Company's condition (financial or otherwise), earnings, operations,
properties, business or business prospects from that set forth in the
Registration Statement or Prospectus, and which is material and
25
adverse or that makes it impracticable or inadvisable to proceed with
the Offering of the Notes as contemplated by the Prospectus and this
Agreement.
(d) The Indenture shall have been duly authorized, executed and
delivered by the Company and duly qualified under the Trust Indenture
Act and shall constitute a valid and binding obligation of the Company
enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(e) All corporate proceedings and other legal matters in
connection with this Agreement, the form of Registration Statement and
the Prospectus, and the registration, authorization, issue, sale and
delivery of the Notes shall have been reasonably satisfactory to Agent's
counsel, in all material respects, and Agent's counsel shall have been
furnished with such papers and information as it may reasonably have
requested to enable it to pass upon the matters referred to in this
Section.
(f) The Agent shall have received the opinion of ▇▇▇▇▇▇ &
Whitney LLP, counsel for the Company, dated as of the Initial Closing
Date, satisfactory in form and substance to the Agent and Agent's
counsel, which includes the opinions as set forth in Exhibit B attached
hereto. Such counsel, in rendering the foregoing opinion, may rely as to
questions of fact upon representations or certificates of officers of
the Company and of government officials, in which case its opinion is to
state such reliance. Copies of any opinion, representation or
certificate so relied upon shall be delivered to the Agent and to
Agent's counsel.
(g) On the Initial Closing Date, the Agent shall have received
from KPMG LLP a letter, dated as of the Initial Closing Date, in form
and substance satisfactory to the Agent, to the effect that they are
independent accountants with respect to the Company within the meaning
of the Securities Act and the applicable rules and regulations
thereunder, and further stating that:
(i) In their opinion, the consolidated balance sheets of
the Company as of December 31, 2001 and 2000, and the related
consolidated statements of income, changes in stockholders'
equity, and cash flows for each of the years in the three-year
period then ended, all audited by them and incorporated by
reference in the Registration Statement, comply as to form in
all material respects with the applicable accounting
requirements of the Act and the related rules and regulations
adopted by the SEC.
(ii) For purposes of the letter they have:
(A) read the minutes of the stockholders' and
directors' meetings of the Company;
(B) inquired of certain officials of the Company
responsible for financial and accounting matters;
26
(C) performed the procedures specified by the
American Institute of Certified Public Accountants for a
review of interim financial information as described in
Statement of Auditing Standards No. 71, Interim
Financial Information, on any unaudited financial
statements filed on a Form 10-Q included or incorporated
by reference in the Registration Statement; and
(D) reviewed the unaudited consolidated balance
sheet of the Company as of September 30, 2002 and the
unaudited consolidated statements of income for the
three and nine-month periods ended September 30, 2002
and 2001, each of which has been filed as Exhibit 99.1
to the Company's Form 8-K, dated October 16, 2002 and
incorporated by reference in the Registration Statement.
(iii) Nothing came to their attention as a result of the
procedures described above that caused them to believe that:
(A) Any material modifications should be made to
the unaudited consolidated financial statements
incorporated by reference in the Registration Statement,
for them to be in conformity with accounting principles
generally accepted in the United States of America;
(B) The unaudited consolidated financial
statements incorporated by reference in the Registration
Statement do not comply as to form in all material
respects with the applicable accounting requirements of
the Securities Act and the Securities Exchange Act of
1934, as amended, as they apply to Form 10-Q;
(C) At a specified date not more than five (5)
business days prior to the date of the letter, there was
any change in: (i) the capital stock, (ii) the
short-term indebtedness or long-term debt of the Company
and its consolidated subsidiaries, or (iii)
stockholders' equity, as compared with amounts shown on
the latest balance sheet incorporated by reference in
the Registration Statement; or
(D) For the period from the closing date of the
latest income statement filed on a Form 10-Q
incorporated by reference in the Registration Statement
to the closing date of the latest available income
statement read by such accountants, there were any
changes, as compared with the corresponding period of
the previous year, in consolidated revenues, net income
or in the ratio of earnings to fixed charges;
except in all cases set forth in clauses (C) and (D) above, for
changes which the Registration Statement discloses have occurred
or may occur or which are described in such letter.
27
(iv) They have compared specified dollar amounts (or
percentages derived from such dollar amounts) and other
financial information contained in the Registration Statement
(in each case to the extent that such dollar amounts, percentage
and other financial information are derived from the general
accounting records of the Company and its subsidiaries subject
to the internal controls of the Company's accounting system or
are derived directly from such records by analysis or
computation) with the results obtained from inquires, a reading
of such general accounting records and other procedures
specified in such letter and have found such dollar amounts,
percentages and other financial information to be in agreement
with such results, except as otherwise specified in such letter.
(h) The Agent shall have received from the Company a
certificate, dated as of the Initial Closing Date, of the principal
financial officer of the Company, to the effect that:
(i) The representations and warranties of the Company in
this Agreement are true and correct as if made on and as of the
date of the certificate, and the Company has complied with all
the agreements and satisfied all the conditions on its part to
be performed or satisfied under this Agreement.
(ii) No stop order or other order suspending the
effectiveness of the Registration Statement or any amendment
thereof or the qualification of the Notes for offering or sale
have been issued, and no proceedings for that purpose have been
instituted or, to the best of his knowledge, are contemplated by
the Commission or any state or regulatory body.
(iii) The signer of said certificate has carefully
examined the Registration Statement and the Prospectus and any
amendments thereof or supplements thereto.
(iv) Such documents contain all statements and
information required to be included therein; the Registration
Statement, or any amendment thereof, does not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading; and the Prospectus, as
amended or supplemented, does not include any untrue statement
of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading.
(v) There has not occurred any change, or any
development involving a prospective change, which materially and
adversely affects the Company's condition (financial or
otherwise), earnings, operations,
28
properties, business or business prospects except as set forth
on contemplated in the Prospectus (or in the Incorporated
Documents as of the date of such certificate).
(i) The Agent shall have received a certificate of Secretary of
the Company, dated as of such Initial Closing Date, with the documents
listed herein attached, and to the effect and certifying as follows:
(i) Attached thereto are true and correct copies of the
articles of incorporation of the Company, as amended to the date
of the certificate, and stating that there have been no changes
or amendments to the attached certificate of incorporation of
the Company, and no resolutions have been adopted by the Board
of Directors or stockholders of the Company relating to (A) the
amendment of said certificate of incorporation; (B) the merger,
consolidation or dissolution of the Company; or (C) the sale of
all or substantially all of the assets or business of the
Company, and that the Company is in good standing in the State
of Delaware and has paid all of its corporate franchise taxes
due as of the date of such certificate.
(ii) Attached thereto is a true and correct copy of the
bylaws of the Company as in effect as of the date of such
certificate and no resolutions have been adopted by the Board of
Directors or stockholders of the Company relating to changes or
amendments to the attached bylaws.
(iii) Attached thereto are true and correct copies of
the resolutions of the Board of Directors of the Company
relating to the preparation and signing of the Registration
Statement and this Agreement, the issuance and sale of the Notes
and other related matters, and such resolutions have not been
amended, modified or rescinded and are in full force and effect
as of the date of such certificate and are the only resolutions
adopted by the Board of Directors of the Company with respect to
the Offering.
(iv) The persons who have signed the Registration
Statement and all amendments thereto were duly elected at the
respective times of such signing and duly acting as officers and
directors of the Company or as an attorney-in-fact therefor, as
set forth in the Registration Statement.
(j) ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP shall deliver to the Agent a Blue Sky
Memorandum reasonably satisfactory to the Agent confirming that all
requisite actions for the offer and sale of the Notes in all
jurisdictions requested by the Agent have been taken.
(k) The Company shall have furnished to the Agent and to Agent's
Counsel such additional certificates, documents and evidence as the
Agent shall reasonably request.
29
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are reasonably satisfactory
to the Agent and Agent's counsel. All statements contained in any certificate,
letter or other document delivered pursuant hereto by, or on behalf of, the
Company shall be deemed to constitute representations and warranties of the
Company.
The Agent may waive in writing the performance of any one or more of the
conditions specified in this Section or extend the time for their performance.
If any of the conditions specified in this Section shall not have been
fulfilled when and as required by this Agreement to be fulfilled and if the
fulfillment of said condition has not been waived by the Agent, this Agreement
and all obligations of the Agent hereunder may be canceled at, or at any time
prior to, the Initial Closing Date by the Agent. Any such reasonable
cancellation shall be without liability of the Agent to the Company and shall
not relieve the Company of its obligations under Article VII hereof. Notice of
such cancellation shall be given to the Company as specified in Section 8.02.
SECTION 6.02 CONDITIONS OF THE COMPANY'S OBLIGATIONS.
The obligations of the Company as provided herein shall be subject to
the accuracy of the representations and warranties of the Agent, the performance
by the Agent of its obligations hereunder and to the satisfaction of the
following conditions:
(a) Within five Business Days of the Initial Closing Date, the
Company shall have received the opinion of ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
LLP, counsel for the Agent, dated as of the Initial Closing Date,
satisfactory in form and substance to the Company and Company's counsel,
which includes the opinions as set forth in Exhibit C hereto. Such
counsel, in rendering the foregoing opinion, may rely as to questions of
fact upon representations or certificates of officers of the Agent and
of government officials, in which case its opinion is to state such
reliance. Copies of any opinion, representation or certificate so relied
upon shall be delivered to the Company and to Company's counsel.
ARTICLE VII
INDEMNIFICATION AND CONTRIBUTION
SECTION 7.01 COMPANY'S INDEMNIFICATION OF AGENT. The Company hereby
agrees to indemnify and hold harmless the Agent, and each person, if any, who
controls the Agent within the meaning of Section 15 of the Securities Act,
against any losses, claims, damages or liabilities that arise out of, or are
based upon, (i) any breach, in any material respect, of any representation,
warranty, agreement or covenant of the Company contained in this Agreement; (ii)
any untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement or any amendment thereof or supplement thereto, or
the omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Prospectus or any related preliminary prospectus
or prospectus supplement, or
30
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; or (iv) any untrue statement or alleged untrue
statement of a material fact contained in any application or other statement
executed by the Company or based upon written information furnished by the
Company filed in any jurisdiction in order to qualify the Notes under, or exempt
the Notes or the sale thereof from qualification under, the securities laws of
such jurisdiction, or the omission or alleged omission to state in such
application or statement a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company will reimburse the Agent and
each such controlling person (subject to the limitation set forth in Section
7.03 hereof) for any legal or other expenses reasonably incurred by the Agent or
controlling person in connection with investigating or defending against any
such loss, claim, damage, liability or action. However, the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission (i) made in reliance upon and in
conformity with the Agent Disclosure Statements or any written information
furnished to the Company by the Agent specifically for use in any application or
other statement executed by the Company or the Agent filed in any jurisdiction
in order to qualify the Notes under, or exempt the Notes or the sale thereof
from qualification under, the securities laws of such jurisdiction (unless the
Agent provided the Company with written notice of such untrue statement or
omission within a reasonable time prior to the use thereof and the Company
failed to undertake prompt action to correct such untrue statement or omission
before its use, in which case the Company's indemnification shall nevertheless
apply); or (ii) is corrected in any amendment or supplement to the Registration
Statement or the Prospectus; provided that the Company has performed its
obligations hereunder in respect of such amendment or supplement and, to the
extent that a prospectus relating to the Notes was required to be delivered by
the Agent under the Securities Act, the Agent, having been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, thereafter fails to deliver such amended or supplemented
Prospectus prior to or concurrently with the sale of the Notes to the person
asserting such loss, claim, damage or liability.
SECTION 7.02 AGENT'S INDEMNIFICATION OF THE COMPANY. The Agent agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the Registration Statement, and each person who controls
the Company within the meaning of Section 15 of the Securities Act against any
losses, claims, damages or liabilities that arise out of, or are based upon, (i)
any breach, in any material respect, of any representation, warranty, agreement,
obligation or covenant of the Agent contained in this Agreement, (ii) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof or supplement thereto, or the
omission or alleged omission to state in the Registration Statement or any
amendment thereof or supplement thereto, a material fact required to be stated
therein or necessary to make the statements therein not misleading; (iii) any
untrue statement or alleged untrue statement of a material fact contained in the
Prospectus (as amended or as supplemented), or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; or (iv) any untrue statement or alleged untrue
statement of a material fact contained in any application or other statement
executed by the Company or by the Agent and filed in any jurisdiction in order
to
31
qualify the Notes under, or exempt the Notes or the sale thereof from
qualification under, the securities laws of such jurisdiction, or the omission
or alleged omission to state in such application or statement a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
however, that indemnification under subsections (ii) through (iv) above shall
extend only to the extent that such untrue statement or alleged untrue statement
or omission or alleged omission was made in reliance upon and in conformity with
the Agent Disclosure Statements or any written information furnished to the
Company by, or on behalf of, the Agent specifically for use in any application
or other statement executed by the Company or by the Agent and filed in any
jurisdiction (unless the Agent provided the Company with written notice of such
untrue statement or omission within a reasonable time prior to the use thereof
and the Company failed to undertake prompt action to correct such untrue
statement or omission before its use in which case the Agent's indemnification
shall not apply). The Agent will reimburse any legal or other expenses
reasonably incurred by the Company or any such director, officer, or controlling
person (subject to the limitation in Section 7.03 hereof) in connection with
investigating or defending against any such loss, claim, damage, liability or
action. This indemnity agreement is in addition to any liability which the Agent
may otherwise have.
SECTION 7.03 NOTICE OF INDEMNIFICATION CLAIM. Promptly after receipt by
an indemnified party under Section 7.01 or 7.02 of notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against any indemnifying party under Section 7.01 or 7.02, notify in
writing the indemnifying party of the commencement thereof. Failure or delay to
so notify the indemnifying party will not relieve it from any liability under
Section 7.01 or 7.02 as to the particular item for which indemnification is then
being sought, except to the extent that the indemnifying party incurs or
sustains damages or losses or is otherwise materially prejudiced as a result of
such failure to notify or delay in notification. In case any such action is
brought against any indemnified party, and the indemnified party notifies an
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, to assume
the defense thereof, with counsel who shall be reasonably satisfactory to such
indemnified party. After notice from the indemnifying party to such indemnified
party of the indemnifying party's election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under Section
7.01 or 7.02 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party, and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it or other indemnified parties which are different from
or additional to those available to the indemnifying party, the indemnified
party or parties shall have the right to select one separate counsel to assume
such legal defenses and to otherwise participate in the defense of such action
on behalf of such indemnified party or parties, in which event the fees and
expenses of such separate counsel shall be borne by the indemnifying party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel for each indemnified party separate from the indemnifying
party's respective counsel(s) for all indemnified parties in connection with any
one action or separate but similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances. Any such
indemnifying party shall not be liable to any such indemnified party on account
of any settlement of any claim or action effected without the consent of such
indemnifying party.
32
SECTION 7.04 CONTRIBUTION. In order to provide for just and equitable
contribution in any action in which the Agent or the Company (or any person who
controls the Agent or the Company within the meaning of Section 15 of the
Securities Act) makes claim for indemnification pursuant to Section 7.01 or 7.02
hereof, but such indemnification is unavailable or insufficient to hold harmless
and indemnify a party under Section 7.01 or 7.02, as applicable, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in Section 7.01 or 7.02, as applicable, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Agent on the other from the offering of the Notes hereunder or (ii)
if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in such clause (i) but also the relative fault of
the Company on the one hand and the Agent on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Agent on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering of the Notes (before deducting expenses) received by the
Company bear to the total commissions received by the Agent. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Agent and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The Company
and the Agent agree that it would not be just and equitable if contributions
pursuant to this Section 7.04 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to in this Section 7.04. The amount paid by an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in this Section 7.04 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending against any action or claim which is the subject of
this Section 7.04. Notwithstanding the provisions of this Section, the Agent
shall not be required to contribute any amount in excess of the amount by which
(x) the total price at which the Notes which are the subject of the action were
distributed to the public exceeds (y) the amount of any damages that the Agent
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
SECTION 7.05 NOTICE OF CONTRIBUTION CLAIM. Promptly after receipt by a
party to this Agreement of notice of the commencement of any action, suit or
proceeding, such person will, if a claim for contribution in respect thereof is
to be made against another party (the "Contributing Party"), notify the
Contributing Party of the commencement thereof, but the failure to so notify the
Contributing Party will not relieve the Contributing Party from any liability
which it may have to any party other than under Section 7.04. Any notice given
pursuant to Section 7.03 hereof shall be deemed to be like notice under this
Section 7.05. In case any such action, suit or proceeding is brought against any
party, and such person notifies a Contributing Party of the commencement
thereof, the Contributing Party will be entitled to participate therein with the
notifying party and any other Contributing Party similarly notified.
33
SECTION 7.06 REIMBURSEMENT. In addition to its other obligations under
Section 7.01 and 7.04 hereof, the indemnifying party, as applicable, agrees
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding described in Section 7.01, it will
reimburse the indemnified party on a monthly basis for all legal or other
expenses incurred in connection with investigating or defending any such claim,
action, investigation, inquiry or other proceeding, notwithstanding the absence
of a judicial determination as to the propriety and enforceability of the
indemnifying party's obligation to reimburse the indemnified party for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the indemnified
party shall promptly return such payment to the indemnifying party.
SECTION 7.07 INTELLECTUAL PROPERTY INFRINGEMENT. Agent agrees that it
shall defend, indemnify and hold harmless, at its own expense, all suits and
claims against the Company and any officers, directors, employees and affiliates
of the Company (collectively, the "Company Indemnified Parties"), for
infringement or violation of any patent, trademark, copyright, trade secret or
other intellectual property rights of any third party that relates to this
Agreement or the Offering, sale or servicing of the Notes. Agent agrees that it
shall pay all sums, including without limitation, reasonable attorneys' fees and
other costs incurred by the Company, in defense of, by final judgment or decree,
or in settlement of any suit or claim asserted or assessed against, or incurred
by, any of the Company Indemnified Parties on account of such infringement or
violation, provided that the Company Indemnified Parties involved shall
cooperate in all reasonable respects with Agent and its attorneys in the
investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; provided, however, that the Company Indemnified Parties may,
at their own cost, participate in the investigation, trial and defense of such
lawsuit or action and any appeal arising therefrom. The parties shall cooperate
with each other in any notifications to insurers.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.01 EFFECTIVE DATE OF THIS AGREEMENT. This Agreement shall
become effective as of the date first set forth above, and shall continue in
full force and effect until terminated as provided below.
SECTION 8.02 TERMINATION PRIOR TO INITIAL CLOSING DATE. This Agreement
may be terminated by either party, at its option, by giving notice to the other
party, if (i) the other party shall have failed, refused, or been unable, at or
prior to the Initial Closing Date, to perform any agreement on its part to be
performed hereunder; (ii) any other condition of the terminating party's
obligations hereunder is not fulfilled or waived by the terminating party; (iii)
a banking moratorium shall have been declared by federal, New York or Minnesota
authorities; (iv) there shall have been such a serious, unusual and material
change in general economic, monetary, political or financial conditions, or the
effect of international conditions on the financial markets in the United States
shall be such as, in the judgment of the Agent, makes it inadvisable to proceed
with the delivery of the Notes; (v) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which, in the reasonable judgment of the
Agent, materially and adversely
34
affects or will materially and adversely affect the business or operations of
the Company; or (vi) there shall be a material outbreak of hostilities or
material escalation and deterioration in the political and military situation
between the United States and any foreign power, or a formal declaration of war
by the United States of America shall have occurred.
SECTION 8.03 NOTICE OF TERMINATION. If either party elects to terminate
this Agreement as provided in Section 8.02, it shall notify the other party and
the other party's counsel promptly by telephone or transmitted by any standard
form of telecommunication, confirmed by letter sent to the address specified in
Section 9.02 hereof.
SECTION 8.04 TERMINATION AFTER INITIAL CLOSING DATE. The Company or
Agent may terminate this Agreement at any time subsequent to the Initial Closing
Date in whole or in part as more specifically provided below, and in such case,
Agent will be paid fees and commissions incurred up to the date of such
termination plus its expenses accrued as of such date within thirty (30) days of
such termination:
(a) The Company will have the ability to terminate this
Agreement in the following manner:
(i) with respect to the Company's termination of Agent's
activities to market and sell the Notes, the Company must
provide at least seven (7) days prior written notice to Agent,
and
(ii) with respect to the Company's termination of
Agent's administration activities relating to the Notes, the
Company will provide at least thirty (30) days prior written
notice to Agent;
(b) Agent will have the ability to terminate this Agreement in
the following manner:
(i) with respect to the termination of Agent's
activities to market and sell the Notes, Agent must provide at
least ninety (90) days prior written notice to the Company,
except as otherwise provided herein or in the event of any
material breach hereof by Company, in which case such
termination may be effective upon (1) days' notice, and
(ii) with respect to the termination of Agent's other
activities relating to the Notes, Agent must provide at least
ninety (90) days prior written notice to the Company; provided,
however, that in either case of clause (i) or (ii) of this
sentence, the Company may decrease the time periods for
terminating Agent's activities by providing Agent with notice
for termination consistent with the preceding paragraph (a).
(c) In the event of termination of the Agent's activities to
market and sell the Notes under subsection (a)(i) or (b)(i), above, but
not the administration activities as set forth in subsection (a)(ii) or
(b)(ii), the Company will continue to be obligated to pay the portfolio
fee under Section 2.03(a)(ii) but will have no obligation to pay
commissions
35
under Section 2.03(a)(i) and Section 2.03(c) accruing from and after the
effective date of such termination .
(d) In the event of the termination of the administration of the
Notes by the Agent pursuant to subsection (a)(ii) or (b)(ii), but not
the termination of the sales and marketing of the Notes by the Agent
pursuant to subsection (a)(i) or (b)(i), the Company will continue to be
obligated to pay the commission fee under Section 2.03(a)(i), but will
not be obligated to pay the portfolio fee under Section 2.03(a)(ii) for
periods after the effective date of such termination.
SECTION 8.05 TERMINATION WITHOUT TERMINATION OF OFFERING. Anything to
the contrary notwithstanding, the termination of this Agreement shall not
prevent the Company from commencing or cause the Company to terminate the
Offering. In the event this Agreement is terminated without a termination of the
Offering, then the Company, or its agents, shall be entitled to use all
materials developed by Agent related to the Notes as provided elsewhere herein.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 SURVIVAL. The respective indemnity and contribution
agreements of the Company and the Agent set forth herein and the respective
representations, warranties, covenants and agreements of the Company and the
Agent set forth herein, shall remain operative and in full force and effect,
regardless of any investigation made by, or on behalf of, the Agent, the
Company, any of its officers and directors, or any controlling person referred
to in Article VII and shall survive the sale of the Notes and any termination or
cancellation of this Agreement. Any successor of any party or of any such
controlling person, or any legal representative of such controlling person, as
the case may be, shall be entitled to the benefit of the respective indemnity
and contribution agreements.
SECTION 9.02 NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and shall be mailed,
delivered or transmitted by any standard form of telecommunication, as follows:
If to the Agent, to: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
36
If to the Company, to: Metris Companies Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
with copies to: Metris Companies Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
and ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 9.03 SUCCESSORS AND ASSIGNS; TRANSFER. This Agreement shall
inure to the benefit of and be binding upon the Agent and the Company and their
respective successors and permitted assigns, and the officers, directors and
controlling persons referred to in Article VII. Nothing expressed in this
Agreement is intended or shall be construed to give any person or corporation,
other than the parties hereto, their respective successors and assigns, and the
controlling persons, officers and directors referred to in Article VII, any
legal or equitable right, remedy or claim under, or in respect of, this
Agreement or any provision herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors, assigns and such controlling persons, officers and directors, and
for the benefit of no other person or corporation. No purchaser of any Notes
shall be construed a successor or assign merely by reason of such purchase.
Neither party may assign its rights and obligations under this Agreement without
the written consent of the other party.
SECTION 9.04 CUMULATIVE REMEDIES. Unless otherwise expressly provided
herein, the remedies of the parties provided for herein shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the party for whose benefit such remedy is provided, and may be
exercised as often as occasion therefor shall arise.
SECTION 9.05 ATTORNEYS' FEES. In the event of any action to enforce or
interpret this Agreement, the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs, whether or not such action proceeds to
judgment.
SECTION 9.06 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement constitutes the entire agreement of the parties hereto
with respect to the matters addressed herein and supersedes all prior or
contemporaneous contracts, promises,
37
representations, warranties and statements, whether written or oral (including,
but not limited to, the Proposal), with respect to such matters.
SECTION 9.07 CHOICE OF LAW; VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of Minnesota, without
regard to conflict of law principles.
SECTION 9.08 CONFIDENTIALITY. Proprietary information furnished by one
party to the other in connection with this Agreement will be kept in confidence
by such other party, including its affiliates, in accordance with its policies
for maintaining the confidence of its own information of similar content. Such
policies shall include, at a minimum, generally- accepted industry standards
requiring each party to maintain the safety and security of Confidential
Information. The term "Confidential Information" shall mean and include (i) all
trade secrets and other confidential business information learned in the course
of performance (including any due diligence) by either party of its obligations
under this Agreement; and (ii) any information or data which is disclosed by a
party to the other party under or in contemplation of this Agreement including
but not limited to either party's customer information. "Confidential
Information" may be either the property of the disclosing party or information
provided to the disclosing party by a third party. Notwithstanding the
foregoing, the term "Confidential Information" shall not include information
which (i) is already known to such other party when received; (ii) thereafter
becomes generally obtainable by a party other than as a result of an
unauthorized disclosure by the party taking advantage of this clause; or (iii)
is required by law, regulation or court order to be disclosed by such party,
provided that, in the case of this clause, prior notice of such disclosure has
been given to the party which furnished such information, when legally
permissible, and that such other party which is required to make the disclosure
uses its best efforts to provide sufficient notice to permit the party which
furnished such information to take legal action to prevent the disclosure. This
Section shall survive any expiration or termination of this Agreement.
SECTION 9.09 RIGHTS TO INVESTOR LISTS. The parties acknowledge that the
Offering will produce a list of investors that purchase Notes, a list of
prospects that respond to advertisements, but do not purchase any Notes, a list
of former investors who redeemed their Notes, and a list of former investors
whose Notes the Company redeemed. Subject to any privacy laws, both the Company
and Agent will be able to use these lists for their own business purposes as
long as doing so does not interfere with the marketing, sale or administration
of the Notes, provided however, that any list of potential investors that
originates from the Company or any of its affiliates may be used by Agent solely
for the purpose of marketing to potential investors for the Company's Notes, and
may not be used for purposes of marketing any notes or securities from any
issuer other than the Company.
SECTION 9.10 WAIVER; SUBSEQUENT MODIFICATION. Except as expressly
provided herein, no delay or omission by any party in insisting upon the strict
observance or performance of any provision of this Agreement, or in exercising
any right or remedy, shall be construed as a waiver or relinquishment of such
provision, nor shall it impair such right or remedy, and no waiver by any party
or any failure or refusal of the other party to comply with its obligations
under this Agreement shall be deemed a waiver of any other or subsequent failure
or refusal to so comply
38
by such other party. No waiver or modification of the terms hereof shall be
valid unless in writing and signed by the party to be charged, and then only to
the extent therein set forth.
SECTION 9.11 SEVERABILITY. If any term or provision of this Agreement or
application thereof to any person or circumstance shall, to any extent, be found
by a court of competent jurisdiction to be invalid or unenforceable, the
remainder of this Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term or provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
SECTION 9.12 JOINT PREPARATION. The preparation of this Agreement has
been a joint effort of the parties and the resulting document shall not, solely
as a matter of judicial construction, be construed more severely against one of
the parties than the other.
SECTION 9.13 CAPTIONS. The title of this Agreement and the headings of
the various articles, section and subsections have been inserted only for the
purpose of convenience, are not part of this Agreement and shall not be deemed
in any manner to modify, explain, expand or restrict any of the provisions of
this Agreement.
SECTION 9.14 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.
SECTION 9.15 THIRD PARTY CONTRACTORS. In the event that the Company
engages a third party to perform any of the obligations of the Agent under this
Agreement, including, without limitation, coordinating the receipt and logging
of incoming Subscription Agreements to purchase Notes and accompanying funds and
documents, the Company shall provide written notice to the Agent of such
engagement, the Agent shall thereafter be relieved of any such obligations for
which the third party was engaged, and in no event shall the Agent be liable
for, or be obligated to indemnify the Company with regard to, any act (or
failure to act) of such third party. The Company agrees to indemnify the Agent
against any loss, claim, damage or liability arising from the Company's
engagement of any such third party or such third party's acts (or failures to
act) in a manner consistent with the provisions of Article VII hereof.
[Remainder of page intentionally left blank]
39
IN WITNESS WHEREOF, this Distribution and Management Agreement is hereby
entered into by the undersigned parties as of the date first set forth above.
METRIS COMPANIES INC.
By: /s/ ▇▇▇▇▇ ▇. Than
Name: ▇▇▇▇▇ ▇. Than
Title: Senior Vice President, Treasurer
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ LTD.
By: /s/ K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ AGENCY, INC.
(for purposes of Section 3.01 only)
By: /s/ K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: K. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
40
EXHIBIT A
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ AGENCY, INC. SERVICES
The following describes the media planning, media buying and other marketing
services to be provided by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Agency, Inc ("Agency") to Metris
Companies Inc. ("Company") in connection with the offer and sale of Company's
renewable, unsecured, subordinated notes (the "Notes"), as more specifically
defined in, and pursuant to the terms of, the Distribution and Management
Agreement between Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Ltd., the parent company of
Agency ("Agent") to which this description is an exhibit.
1. Agency Services
Agency will perform the following services for the Company:
- Employ on Company's behalf Agency's knowledge of the available
media and marketing approaches that can effectively be used to
promote the issuance of the Notes on a "direct to the consumer"
basis.
- Acting on the study, analysis and knowledge of the product
described above, formulate and recommend a marketing and media
plan (or plans).
- In the execution of the plan (or plans), when approved by
Company:
- Order space, time or other marketing services and materials to
be used for advertising, endeavoring to secure the most
advantageous rates available.
- Check and verify insertions, displays, broadcasts or other
means used.
- Audit invoices for space and time and other marketing services
performed on the Company's behalf.
2. General Provisions.
Approval of Expenditures: Agency agrees to secure Company's written
approval of all expenditures in connection with Company's plans.
Cancellation of Plans: Company reserves the right to modify, reject,
cancel or stop any and all plans, schedules or work in progress. In such event
Agency shall take reasonable steps to carry out Company's instructions as
promptly as practicable. Company agrees to assume liability for all commitments
made by Agency on its behalf, and to reimburse Agency for any losses (including
cancellation penalties) that Agency may sustain derived therefrom and for all
expenses incurred in connection with Company approved plans on its
authorization, and to pay Agency any service charges relating thereto, in
accordance with the provisions hereof.
41
Failure of Suppliers to Perform: Agency will endeavor to the best of its
knowledge and ability guard against any loss to Company through failure of media
or suppliers to properly execute their commitments, but shall not be held
responsible for any failure on their part.
Confidentiality: Agency acknowledges its responsibility to use all
reasonable efforts to preserve the confidentiality of any proprietary or
confidential information or data developed by Agency on behalf of Company or
disclosed by Company to Agency.
Responsibility of and Indemnification by Agency: Agency agrees to
indemnify and hold Company, its officers, directors, agents and employees
harmless from and against any claims, liabilities, losses, costs, expenses, or
the like, including reasonable attorneys' fees, incurred in respect to any
material breach by Agency hereof or Agency's negligence and/or intentional
wrongdoing in connection with the services.
Responsibility of and Indemnification by Company: Company agrees to
indemnify and hold Agency, its officers, directors, agents and employees
harmless from and against any claims, liabilities, losses, costs, expenses, or
the like, including reasonable attorneys' fees, incurred in respect to any
material breach by the Company of this Agreement or the Company's negligence
and/or intentional wrongdoing in connection with the services. Company shall be
responsible for the accuracy, completeness and propriety of information
concerning its products and services that it furnishes to Agency in connection
with the performance of the services.
3. Charges.
- Charges for Advertising Space and Time: Company agrees to pay the
media expense directly to Agency. Payment will be at current
published gross rates (or at lower gross rates when available)
for advertising that runs in all media.
- Rate Adjustments:
- Short Rates: If, in a medium having a schedule of graduated
rates, less space or time than contracted for is used, Company
is to pay the difference, if any, between the rate billed and
the rate actually earned.
- Other Refunds: Agency shall refund or credit Company any other
refunds received by us in connection with advertising space or
time.
- Other Marketing Expenses. Company agrees to pay Agency for all
other out of pocket, non-media charge marketing expenses related
to the development and production of all direct marketing and
promotional materials. All work will be outlined in a Project Fee
Estimate and must be approved in writing by the Company.
42
4. Terms of Payment
- Terms of Payment: Payment of invoices will be due by wire
transfer within 30 days.
- Wire Instructions: Payment of invoices are to be made by wire
transfer to:
The Business Bank
Minnetonka, MN
ABA# ▇▇▇▇▇▇▇▇▇
FC: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Agency, Inc.
Acct# 102657
- Company Agreement to Pay: Company agrees to pay Agency invoices
on payment dates stated thereon. So that Company may have
sufficient time to audit and pay Agency bills and that Agency may
have sufficient time to pay the media suppliers, by payment date,
Agency will mail media invoices at least 15 days before payment
due date.
- Right to Change Payment Terms: Agency reserves the right in case
of delinquency in Company payments, or such impairment of
Company's credit as in Agency's opinion might endanger future
payments to Agency, to change the requirements as to terms of
payment under this Agreement, including but not limited to,
payment in advance for all Agency services and purchases
including media advertising when applicable.
5. Termination.
- Period of Services: The services provided by Agency shall begin
upon execution and delivery of the Distribution and Management
Agreement and shall continue until termination of Agent's
activities to market and sell the Notes thereunder.
- Payment for Purchases and Work Done: Any materials, services,
etc. Agency has committed to purchase for Company's account, or
with Company's approval (or any uncompleted work previously
approved by Company either specifically or as part of a plan)
prior to termination of the Services shall be paid for by Company
in accordance with the provisions of this Agreement.
43