EXECUTION COPY
FINGERHUT COMPANIES, INC.
$60,500,000
8.92% Senior Unsecured Notes, Series A, due June 15, 2002
$14,500,000
8.92% Senior Unsecured Notes, Series B, due June 15, 0000
XXXXXX XXXXXXXXX AGREEMENT
Dated as of August 14, 1996
to
PURCHASE AGREEMENT
dated as of June 15, 1992
as amended by
First Amendment Agreement
dated as of June 17, 1994
Second Amendment Agreement
dated as of October 30, 1995
and
Third Amendment Agreement
dated as of June 4, 1996
FOURTH AMENDMENT AGREEMENT,
dated as of August 14, 1996 (this
"Amendment"), between FINGERHUT COMPANIES,
INC., a Minnesota corporation (the
"Company"), and the Noteholders (as defined
below).
Preliminary Statement
Reference is made to the Purchase Agreement dated
as of June 15, 1992, between the Company and the Purchasers
listed in Schedule 1 thereto and their assigns (the
"Noteholders"), pursuant to which the Company issued and
sold its 8.92% Senior Unsecured Notes, Series A, due
June 15, 2002, in the aggregate principal amount of
$60,500,000 (the "Series A Notes"), and its 8.92% Senior
Unsecured Notes, Series B, due June 15, 2004, in the
aggregate principal amount of $14,500,000 (the "Series B
Notes"), as amended by amendments dated as of June 17, 1994,
October 30, 1995 and June 4, 1996 (as amended, the "Purchase
Agreement"). The Series A Notes and the Series B Notes are
hereinafter collectively referred to herein as the "Notes".
Unless otherwise defined in this Amendment, capitalized
terms used herein without definition shall have the meanings
set forth in the Purchase Agreement.
The Company has requested the amendment of certain
covenants in the Purchase Agreement.
Accordingly, the Company and the Noteholders
hereby agree as follows:
ARTICLE I
Conditions Precedent to Effectiveness of Amendment
This Amendment is expressly subject to and shall
become effective only upon satisfaction of each of the
following conditions (such date upon which all of such
conditions are satisfied being herein called the "Effective
Date"):
SECTION 1.01. There shall exist on the Effective
Date no Default or Event of Default under the Purchase
Agreement, both before and after giving effect to this
Amendment.
SECTION 1.02. The Noteholders shall have received
a certificate, dated as of the Effective Date and signed by
a Responsible Officer of the Company, stating that, as of
the Effective Date, (i) all of the obligations of the
Company to be performed prior to or as of the Effective Date
under this Amendment have been performed; (ii) the
representations and warranties contained in Article IV of
this Amendment are accurate and complete, and (iii) all of
the conditions to the effectiveness of this Amendment have
been satisfied in full.
SECTION 1.03. All corporate and other proceedings
and all documents incident to the transaction contemplated
by this Amendment shall be satisfactory in form and
substance to the Noteholders, and the Noteholders shall have
received copies of all documents and records relating
thereto which they may reasonably request.
SECTION 1.04. In consideration for having entered
into this Amendment, the Noteholders shall have received in
immediately available funds the one-time payment by the
Company of additional interest in an amount equal to 0.250%
of the outstanding principal balance of the Notes as of the
Effective Date.
ARTICLE II
Amendments to Article VII of the Purchase Agreements
SECTION 2.01. (a) Section 7.5 of the Purchase
Agreement is hereby amended by (i) deleting the word "and"
at the end of paragraph (d), (ii) inserting the word "and"
at the end of paragraph (e) and (iii) inserting after
paragraph (e) the following paragraph:
"(f) Certificateholder Statements. Within fifty
(50) days after the end of each of the first three
fiscal quarters of each fiscal year of the Company and
within one hundred (100) days after the end of each
fiscal year of the Company, any monthly
certificateholder statements required to be delivered
by the Fingerhut Master Trust or any similar
independent trust formed by the Company or any
Subsidiary for the purpose of acquiring interests in
the Company's customer accounts receivable and issuing
certificates of beneficial interest in such receivables
or commercial paper."
(b) Section 7.5(c)(y)(B) of the Purchase Agreement
shall be deemed to include a reference to Section 8.13 of
the Purchase Agreement.
SECTION 2.02. Section 7.11 of the Purchase
Agreements is hereby amended by amending the first sentence
thereof to read as set forth below:
"On or prior to (i) the direct or indirect acquisition
by the Company of any Subsidiary which at the time of
such acquisition shall be a Significant Subsidiary or
(ii) the fifth Business Day after the availability of
financial statements revealing that any Subsidiary
(other than (A) a Guarantor, (B) either of the MWD
Subsidiaries, (C) FRI, (D) any of the TV Shopping
Companies, (E) the Credit Card Bank or (F) any of the
Financial Services Companies) shall have become a
Significant Subsidiary, the Company agrees that the
Company will cause such Subsidiary to
(x) unconditionally guarantee the payment and
performance of all obligations and liabilities of the
Company under this Agreement and the Notes, all upon
the terms set forth in the Guaranty, and (y) execute
and deliver or cause to be delivered to the Noteholders
one or more such instruments as the Noteholders may
request in form and substance undertaking the
obligations of a Guarantor; provided that,
notwithstanding any other provision of this Section
7.11, if any Subsidiary that is not one of the
Financial Services Companies guarantees the payment or
performance of any obligations or liabilities of any of
the Financial Services Companies, the Company will
cause such Subsidiary to (x) unconditionally guarantee
the payment and performance of all obligations and
liabilities of the Company under this Agreement and the
Notes, all upon the terms set forth in the Guaranty,
and (y) execute and deliver or cause to be delivered to
the Noteholders one or more such instruments as the
Noteholders may request in form and substance
undertaking the obligations of a Guarantor."
ARTICLE III
Amendments to Article VIII of the Purchase Agreements
SECTION 3.01. Section 8.1 of the Purchase
Agreements is hereby amended by restating paragraph (d)
thereof in its entirety as follows:
"(d) additional Indebtedness of the Company or any
Subsidiary, provided that immediately after the
incurrence of such additional Indebtedness and after
giving effect thereto, Consolidated Indebtedness of the
Company and the Subsidiaries does not exceed 60% of the
sum of (x) the then outstanding Consolidated
Indebtedness of the Company and the Subsidiaries and
(y) the then Consolidated Net Worth of the Company and
the Subsidiaries, and provided, further, that any such
additional Indebtedness of any Subsidiary which is
otherwise permitted by this clause (d) shall also be
permitted by 8.2; for purposes of any computation
under this clause (d), Indebtedness of the Company and
the Subsidiaries shall not include (i) Indebtedness
incurred as a result of the sale of accounts receivable
on a nonrecourse basis pursuant to the Receivables
Transfer Agreement or (ii) Guarantees permitted by
clauses (a) through (e), inclusive, of 8.14."
SECTION 3.02. Section 8.2 of the Purchase
Agreements is hereby amended by restating such section
in its entirety as follows:
"SECTION 8.2. Secured Indebtedness; Subsidiary
Indebtedness. (a) Secured Indebtedness. The Company
will not, and will not permit any Subsidiary, other
than any of the Financial Services Companies, to incur
or suffer to exist any Secured Indebtedness, except
(i) Secured Indebtedness to the extent permitted by
clause (c) of 8.1 and (ii) Indebtedness permitted by
clause (d) of 8.1, provided that (x) any Lien
securing any such Secured Indebtedness is permitted by
8.3 and (y) no property or asset which has been
subjected to any Lien in favor of the Collateral Agent
for the benefit of the Secured Parties may secure
Indebtedness other than Indebtedness under the Bank
Credit Agreement (and any extension, renewal, refunding
or replacement thereof) and the Existing Notes.
"(b) Subsidiary Indebtedness. The Company will
not at any time permit the outstanding amount of
Indebtedness of all Subsidiaries to exceed $15,000,000,
provided, however, that such amount shall not include
(a) any Guarantee permitted by clauses (a) through (e),
inclusive, of Section 8.14, (b) Indebtedness of any
Wholly-Owned Subsidiary owing to the Company or to any
other Wholly-Owned Subsidiary, (c) Indebtedness of any
of the Financial Services Companies that in the
aggregate does not exceed Four Hundred Million Dollars
($400,000,000) for all such Financial Services
Companies, (d) any guarantees by the Company or any
Subsidiaries of any obligations of any of the Financial
Services Companies that in the aggregate do not exceed
Four Hundred Million Dollars ($400,000,000) for all
such Financial Services Companies, provided that such
guarantees are permitted pursuant to paragraph (g) of
Section 8.14 hereof, or (e) up to $27,000,000 of
Capitalized Leases and other Indebtedness listed in
Schedule 8.2 hereto and any renewals or replacements of
such Capitalized Leases and any extensions, renewals,
refundings or replacements of such Indebtedness, except
that (a) all renewals or replacements of any such
Capitalized Lease must be in respect of similar
equipment or replacement equipment of a similar type,
(b) the amount of Indebtedness (including, without
limitation, Capitalized Lease Obligations in respect of
any such Capitalized Lease) represented by any such
extension, renewal, refunding or replacement must be
permitted to be incurred as additional Indebtedness
pursuant to clause (d) of Section 8.1 and (c) in the
event that (x) the amount of Indebtedness (including,
without limitation, Capitalized Lease Obligations in
respect of any such Capitalized Lease) represented, at
any time, by all of such Capitalized Leases and other
Indebtedness listed in Schedule 8.2 hereto, including
any extension, renewal, refunding or replacement
thereof, is greater than $27,000,000 or (y) any such
extension, renewal, refunding of replacement would
cause any additional property (other than the equipment
referred to in clause (a) above) of the Company or any
Subsidiary to become subject to any Capitalized Lease
or otherwise subject to any Lien, such greater amount
of Indebtedness (including, without limitation,
obligations in respect of any such Capitalized Lease)
must be permitted to be incurred or remain outstanding
as Indebtedness under this Section 8.2, but without
giving effect to the provisos hereof and any Lien on
any such additional property must be permitted by
Section 8.3, and provided further, that any
Indebtedness that is a Guarantee and that, except for
clause (a) above, would be included within such
aggregate outstanding amount must also be permitted by
Section 8.14."
SECTION 3.03. Section 8.3 of the Purchase
Agreements is hereby amended by restating the preamble
thereof in its entirety as follows:
"The Company will not, and will not permit
any Subsidiary, other than any of the Financial
Services Companies, to, create, incur, assume or
permit to exist any Lien upon any of the property
or assets, including capital stock (other than
assets sold on a nonrecourse basis pursuant to the
Receivables Transfer Agreement, but
notwithstanding the exceptions set forth below, no
Lien shall at any time be permitted with respect
to (i) any of the capital stock of FRI or any
Subsidiary that is also a subsidiary of FRI, other
than any of the Financial Services Companies, or
(ii) any of the capital stock of the TV Shopping
Companies or any Subsidiary that is also a
subsidiary of the TV Shopping Companies except for
only such capital stock that is pledged to secure
Indebtedness of only the TV Shopping Companies or
any such subsidiary, which Indebtedness (x) is
then permitted under the other provisions of this
8.3 and the other provisions of this Agreement to
be incurred and (y) is at all times nonrecourse to
the Company and the Subsidiaries other than the TV
Shopping Companies or any subsidiary of the TV
Shopping Companies), now owned or hereafter
acquired by it or on any income or rights in
respect of any thereof, except:"
SECTION 3.04. Section 8.4 of the Purchase
Agreements is hereby amended by restating such section in
its entirety as follows:
"SECTION 8.4. Disposition of Stock and
Indebtedness of Subsidiaries. The Company will not,
and will not permit any Subsidiary, other than any of
the Financial Services Companies, to, sell or otherwise
dispose of any shares of stock of, or any Indebtedness
of, a Subsidiary owned by the Company or another
Subsidiary, except:
(a) sales or other dispositions to the Company or
to a Wholly-Owned Subsidiary; and
(b) (i) sales, contributions or other dispositions
of all or a portion of the capital stock or
Indebtedness of any of the TV Shopping Companies or
their joint ventures or (ii) a dividend of all or a
portion of the capital stock of any of the TV Shopping
Companies to the shareholders of the Company;
excluding, however, any such sale, contribution or
other disposition that would result in such TV Shopping
Company no longer being a Subsidiary, unless
(x) immediately prior thereto and after giving effect
thereto, no Default or Event of Default shall have
occurred and be continuing and (y) if substantially all
of the capital stock of any of the TV Shopping
Companies held by the Company or any Subsidiary shall
have been sold, contributed or otherwise disposed of to
a person other than the Company or a Subsidiary, all of
the Indebtedness of such TV Shopping Company held by
the Company or any Subsidiary shall at such time have
been sold, contributed or otherwise disposed of to a
person other than the Company or a Subsidiary;
(c) sales or other dispositions in which all
shares of stock and all Indebtedness of any Subsidiary
at the time owned by the Company and all other
Subsidiaries are sold or otherwise disposed of as an
entirety for a consideration which represents the fair
value at the time of sale of the shares and
Indebtedness so sold, provided that in the case of
transactions pursuant to this clause (c):
(i) immediately after such sale or other
disposition (such sale or other disposition being
herein called the "8.4 Transaction") and after
giving effect thereto, no Default shall have
occurred and be continuing;
(ii) at the time of the 8.4 Transaction,
such Subsidiary shall not own, directly or
indirectly, any shares of stock or any
Indebtedness of the Company or of any other
Subsidiary (unless all shares of stock and all
Indebtedness of such other Subsidiary at the time
owned, directly or indirectly, by the Company and
all Subsidiaries are simultaneously being sold or
otherwise disposed of as permitted by this
clause (c)); and
(iii) the sum of the net book values of
(x) the assets of such Subsidiary, plus (y) the
assets of each other Subsidiary, if any, the stock
and Indebtedness of which were sold or otherwise
disposed of pursuant to this clause (c) during the
12-month period ending on the close of business on
the date of the 8.4 Transaction, plus (z) the
assets of the Company and of each Subsidiary, if
any, which were sold, leased, or otherwise
disposed of, and the assets of each Subsidiary, if
any, which merged or consolidated, pursuant to
clause (d) of Section 8.5 during the 12-month
period ending on the close of business on the date
of the 8.4 Transaction, did not, after giving
effect to the 8.4 Transaction, constitute more
than 10% of the Consolidated Net Tangible Assets
of the Company and the Subsidiaries as of the end
of the then most recently completed fiscal year of
the Company, provided that if the proceeds from an
8.4 Transaction or an 8.5 Transaction (x) are
reinvested within one year after the consummation
of the 8.4 Transaction or the 8.5 Transaction in a
similar line of business, or (y) are applied
within 180 days of the consummation of the
8.4 Transaction or the 8.5 Transaction to the
prepayment of senior Indebtedness of the Company,
such assets shall not be included in such 10%
calculation; and provided, further, that, in the
case of an 8.4 Transaction with respect to an MWD
Subsidiary, the proceeds of such 8.4 Transaction
that are subject to the preceding proviso shall be
limited to an amount equal to the aggregate amount
of all outstanding loans and advances and all
capital contributions (including the ownership of
Preferred Stock) made by the Company and the
Subsidiaries to such MWD Subsidiary or to
Xxxxxxxxxx Xxxx Direct; and
(d) (i) sales, contributions or other dispositions
or all of a portion of the capital stock or
Indebtedness of any of the Financial Services Companies
or (ii) a dividend of all or a portion of the capital
stock of any of the Financial Services Companies to the
shareholders of the Company, provided that, immediately
prior thereto and after giving effect thereto, no
Default or Event of Default shall have occurred and be
continuing."
SECTION 3.05. Section 8.8 of the Purchase
Agreements is hereby amended by restating such section in
its entirety as follows:
"Section 8.8 INTEREST COVERAGE RATIO. (a) At
any time prior to the initial public offering of the
common stock of the Financial Services Companies, the
Company will not at any time permit Consolidated Net
Earnings Before Interest and Taxes of the Company and
the Subsidiaries for the period of the four then most
recently completed fiscal quarters of the Company to be
less than 250% of Consolidated Interest Expense of the
Company and the Subsidiaries for the period of the four
then most recently completed fiscal quarters of the
Company.
(b) At any time after the later to occur of
(x) December 27, 1996, and (y) the initial public
offering of the common stock of the Financial Services
Companies, the Company will not at any time permit
Consolidated Net Earnings Before Interest and Taxes of
the Company and the Subsidiaries for the period of the
four (4) then most recently completed fiscal quarters
of the Company to be less than two hundred fifty
percent (250%) of Consolidated Interest Expense of the
Company and the Subsidiaries for the period of the four
(4) then most recently completed fiscal quarters of the
Company; provided that for the purposes of any
calculations pursuant to this Section 8.8(b), (x) the
amount of any Interest Expense of the Financial
Services Companies shall be included in Consolidated
Interest Expense of the Company and the Subsidiaries
only to the extent that the related Indebtedness of the
Financial Services Companies is guaranteed by the
Company or any Subsidiary, (y) the Net Earnings of the
Financial Services Companies shall be included in the
determination of such Consolidated Net Earnings Before
Interest and Taxes; provided that the amount of such
Net Earnings of the Financial Services Companies so
included shall not exceed the lesser of (A) 250% of the
aggregate Interest Expense related to Indebtedness of
the Financial Services Companies that is included in
the calculation of such Consolidated Interest Expense
and (B) the amount of Net Earnings of the Financial
Services Companies excluding any cash dividends paid
during such period by the Financial Services Companies
to the Company and the Subsidiaries (other than the
Financial Services Companies), and (z) cash dividends
paid during such period by the Financial Services
Companies to the Company and the Subsidiaries (other
than the Financial Services Companies) shall be
included in the determination of such Consolidated Net
Earnings Before Interest and Taxes."
SECTION 3.06. Section 8.9 of the Purchase
Agreement is hereby amended by restating paragraph (a)
thereof in its entirety as follows:
(a) (i) make and permit to remain outstanding
investments in the capital stock of any Subsidiary or
any person which immediately after such investment is
made will be a Subsidiary, provided that, immediately
after the making of any investment in the capital stock
of any person which immediately after such investment
is made will be a Subsidiary and after giving effect
thereto, no Default shall have occurred and be
continuing and the Company would be permitted to incur
at least One Dollar ($1) of additional Indebtedness
pursuant to clause (d) of Section 8.1 hereof, and
provided further that, if any Subsidiary shall cease to
be a Subsidiary, then for purposes of this Agreement,
every investment by the Company or any other Subsidiary
in such former Subsidiary which remains outstanding
shall be deemed to have been made immediately after
such former Subsidiary ceased to be a Subsidiary; or
(ii) make and permit to remain outstanding
investments in any of the Financial Services Companies,
provided that (A) in the event that any person acquires
shares of capital stock of any of the Financial
Services Companies pursuant to the exercise of any
options or pursuant to any employee stock purchase,
compensation or incentive plan, additional investments
by the Company or any Subsidiary that is not one of the
Financial Services Companies in the capital stock of
any of the Financial Services Companies shall be
permitted pursuant to this clause (ii) of
Section 8.9(a) hereof only in order to maintain the
Company's ownership of such capital stock such that the
shares of capital stock of such Financial Services
Companies owned by the Company represent at least 80%
of the outstanding capital stock of such Financial
Services Companies and (B) any loans or advances from
the Company or any Subsidiary that is not one of the
Financial Services Companies to any of the Financial
Services Companies shall not exceed Ten Million Dollars
($10,000,000) in the aggregate.
SECTION 3.07. Section 8.13 of the Purchase
Agreements is hereby amended by restating such section in
its entirety as follows:
"SECTION 8.13. Transactions with Affiliates.
Except as set forth in Schedule 8.13, the Company will
not, and will not permit any Subsidiary to, sell or
transfer any property or assets (except for the
Transferred Assets) to, or purchase or acquire any
property or assets (except for the Transferred Assets)
from, or otherwise engage in any other transactions
with, any of its Affiliates, other than Fingerhut
Financial Services Corporation, except:
(a) (i) so long as no Default or Event of Default
shall have occurred and be continuing, any transactions
between the Company and any Significant Subsidiary or
transactions between Significant Subsidiaries;
provided, however, that the Company may not sell or
transfer assets related to the direct retail marketing
business of the Company with a book value in the
aggregate for all such sales and transfers in excess of
5% of the Company's Consolidated Net Worth at the time
of any such sale or transfer to any of the Financial
Services Companies, and
(ii) during the continuance of a Default
or Event of Default, only such transactions
entered into in the ordinary course of business
and upon fair and reasonable terms no less
favorable than the Company or any Subsidiary, as
applicable, could obtain or could become entitled
to in an arm's-length transaction with a person
which was not an Affiliate;
(b) so long as no Default or Event of Default
shall have occurred and be continuing, any transactions
between the Company or any Subsidiary and any Affiliate
(other than the Company or a Subsidiary) entered into
in the ordinary course of business and upon fair and
reasonable terms no less favorable than the Company or
such Subsidiary, as applicable, could obtain or could
become entitled to in an arm's-length transaction with
a person which was not an Affiliate;
(c) so long as no Default or Event of Default
shall have occurred and be continuing, any transactions
between the Company or any Significant Subsidiary and
any Subsidiary that is not a Significant Subsidiary or
transactions between Subsidiaries that are not
Significant Subsidiaries entered into in the ordinary
course of business and upon fair and reasonable terms
no less favorable than the Company or any such
Subsidiary, as the case may be, could obtain or could
become entitled to in an arm's-length transaction with
a person which was not an Affiliate; provided, however,
that nothing in this clause (c) shall, so long as no
Default or Event of Default shall have occurred and be
continuing, prohibit any such transactions that are not
entered into upon such fair and reasonable and no less
favorable terms, so long as any such transaction (such
as, without limitation, transactions involving the
sharing of computer services) does not involve the
transfer or sale of assets or property;
(d) any transaction between the Company or any
Subsidiary and Xxxxxxxxxx Xxxx Direct permitted by
8.9(j), 8.14(e) or 8.14(f) and any other
transactions between the Company or any Subsidiary and
Xxxxxxxxxx Xxxx Direct entered into in the ordinary
course of business and upon fair and reasonable terms
no less favorable than the Company or such Subsidiary,
as applicable, could obtain or could become entitled to
in an arm's-length transaction with a person other than
Xxxxxxxxxx Xxxx Direct; provided, however, that any
determination with respect to whether any transaction
between the Company or any Subsidiary and Xxxxxxxxxx
Xxxx Direct satisfies the foregoing requirements shall
be made by considering the relationship taken as a
whole between the Company and its Subsidiaries, on the
one hand, and Xxxxxxxxxx Xxxx Direct, on the other;
(e) any transactions between the Company or any
Subsidiary and FRI, the Fingerhut Master Trust or any
transferee thereunder pursuant to the Receivables
Transfer Agreement;
(f) at any time the Company owns, directly or
indirectly, at least 10% of the capital stock of any of
the TV Shopping Companies that is not a Subsidiary, any
transactions between the Company or any Subsidiary and
such TV Shopping Company entered into in the ordinary
course of business and upon fair and reasonable terms
no less favorable than the Company or such Subsidiary,
as applicable, could obtain or become entitled to in an
arm's-length transaction with a person that is not an
Affiliate; provided, however, that any determination
with respect to whether any transaction between the
Company or any Subsidiary and such TV Shopping Company
satisfies the foregoing requirements shall be made by
considering the relationship taken as a whole between
the Company and the Subsidiaries, on the one hand, and
such TV Shopping Company, on the other; and
(g) (i) the transfer of the Transferred Assets in
connection with or in contemplation of an initial
public offering of the common stock of the Financial
Services Companies, (ii) any of the transactions among
the Company or any Subsidiary and any of the Financial
Services Companies contemplated by the Intercompany
Agreements, provided that any extension or renewal by
the Company or any Subsidiary of any of the
Intercompany Agreements shall be (A) upon terms no less
favorable to the Company than the original terms of
such Intercompany Agreements or (B) upon fair and
reasonable terms no less favorable than the Company or
such Subsidiary, as applicable, could obtain or could
become entitled to in an arm's-length transaction with
a person which was not an Affiliate, (iii) any sale or
transfer of assets among the Company or any Subsidiary
and any of the Financial Services Companies entered
into in the ordinary course of business and upon fair
and reasonable terms no less favorable than the Company
or such Subsidiary, as applicable, could obtain or
could become entitled to in an arm's-length transaction
with a person which was not an Affiliate and (iv) any
transaction between any of the Financial Services
Companies; provided that, notwithstanding any other
provision of this Section 8.13, the Company may not
sell or transfer any customer accounts receivable
generated by the Company or any Subsidiary that is not
one of the Financial Services Companies to any of the
Financial Services Companies."
SECTION 3.08. Section 8.14 of the Purchase
Agreements is hereby amended by restating such section in
its entirety as follows:
"SECTION 8.14. Guarantees. The Company will not,
and will not permit any Subsidiary, other than
Fingerhut Financial Services Corporation and its
subsidiaries, to, create, incur, assume or permit to
exist any Guarantee, except
(a) the Guaranty;
(b) the Guarantees of the Subsidiaries incurred
(i) as guarantors of the Existing Notes under the
Existing Guarantees and any Guarantee of the
Subsidiaries that may be required to be incurred
pursuant to the Existing Purchase Agreements and
(ii) as guarantors of the Obligations under the Bank
Credit Agreement;
(c) Guarantees of Indebtedness of the Subsidiaries
permitted by Section 8.2 and Guarantees of Operating
Leases of the Subsidiaries not prohibited by
Section 8.12;
(d) Guarantees of additional Indebtedness of the
Company permitted by clause (d) of Section 8.1,
provided that the instrument representing any such
Guarantee contains an acknowledgement of the existence
of the Guaranty and an agreement on the part of the
beneficiary of such Guarantee not to contest the
validity of the Guaranty or the Notes;
(e) Guarantees by the MWD Subsidiaries of
Indebtedness of Xxxxxxxxxx Xxxx Direct; provided that
immediately after the creation, incurrence, assumption
or existence of any such Guarantee and after giving
effect thereto the aggregate amount of Indebtedness of
Xxxxxxxxxx Xxxx Direct guaranteed by the outstanding
Guarantees permitted under this clause (e) and under
clause (f) of 8.14, without duplication, shall not
exceed an amount equal to the difference between
$30,000,000 and the aggregate amount of all outstanding
loans and advances and all capital contributions made
by the MWD Subsidiaries to Xxxxxxxxxx Xxxx Direct;
(f) Guarantees by the Company of Indebtedness of
Xxxxxxxxxx Xxxx Direct, provided that such Guarantees
are permitted by clause (d) of 8.1 and that
immediately after the creation, incurrence, assumption
or existence of any such Guarantee and after giving
effect thereto the aggregate amount of Indebtedness of
Xxxxxxxxxx Xxxx Direct guaranteed by the outstanding
Guarantees permitted under this clause (f) and under
clause (e) of 8.14, without duplication, shall not
exceed an amount equal to the difference between
$30,000,000 and the aggregate amount of all outstanding
loans and advances and all capital contributions made
by the Company or any Subsidiary to Xxxxxxxxxx Xxxx
Direct;
(g) (i) Guarantees by the Company or any
Subsidiary of Indebtedness or other obligations of any
of the Financial Services Companies, provided that such
Guarantees are permitted by clause (d) of Section 8.1
hereof and (ii) Guarantees by any of the Financial
Services Companies of Indebtedness or other obligations
of any of the Financial Services Companies;
(h) additional Guarantees by the Company of
Indebtedness or other obligations, provided that such
Guarantees are permitted by clause (d) of 8.1 and
that immediately after the creation, incurrence,
assumption or existence of such additional Guarantee
and after giving effect thereto the aggregate amount of
all Indebtedness and other obligations guaranteed by
the outstanding Guarantees of the Company permitted
under this clause (h) does not exceed $5,000,000; and
(i) Notwithstanding anything in the foregoing, no
Guarantee of Indebtedness shall at any time be
permitted to be made by FRI, any of the TV Shopping
Companies, either of the MWD Subsidiaries, the Credit
Card Bank or any Subsidiary that is a subsidiary of
FRI, any of the TV Shopping Companies, either of the
MWD Subsidiaries or the Credit Card Bank, other than
(i) as permitted under clause (e) with respect to the
MWD Subsidiaries and (ii) Guarantees of Indebtedness of
one or more of the TV Shopping Companies by one of such
TV Shopping Companies."
SECTION 3.09. The following Section 8.18 shall be
added to the Purchase Agreement immediately following
Section 8.17 thereof:
"SECTION 8.18. Funding Ratio. A violation of
Section 6.07 of the Bank Credit Agreement shall
constitute a Default under this Agreement, regardless
of whether the Banks shall have waived any default
resulting from any such violation under the Bank Credit
Agreement."
ARTICLE IV
Amendments to Article X of the Purchase Agreement
Section 10.2 of the Purchase Agreement is hereby
amended by (i) replacing the definition of "Net Worth" and
(ii) inserting the following additional definitions in
alphabetical order:
"Financial Services Companies--shall mean,
collectively, (i) a newly formed Delaware corporation
into which the Company will transfer the Transferred
Assets in connection with or in contemplation of the
initial public offering of the common stock of such
entity, (ii) Direct Merchants Credit Card Bank,
National Association, (iii) Fingerhut Financial
Services Receivables, Inc., (iv) DMCCB, Inc.,
(v) Fingerhut Financial Services Corporation and
(vi) any subsidiary of such newly formed Delaware
corporation hereafter formed.
Intercompany Agreements--shall mean any agreements
entered into between the Company or any Subsidiary that
is not one of the Financial Services Companies and any
of the Financial Services Companies prior to or as of
the date of closing of, and in connection with or in
contemplation of, the initial public offering of the
common stock of the Financial Services Companies
(including, without limitation, the Database Access
Agreement, the Co-Brand Agreement, the Administrative
Services Agreement, the Data Sharing Agreement, the Tax
Sharing Agreement, the Extended Service Plan Agreement,
the Services Agreement, the Transfer Agreement and the
Registration Rights Assessment).
Net Worth--(i) of any person other than the
Company shall mean, as of any date as of which the
amount thereof is to be determined, the stockholders'
equity of such person and (ii) of the Company shall
mean, as of any date as of which the amount thereof is
to be determined, the sum of (A) the stockholders'
equity of the Company immediately following the initial
public offering of the common stock of the Financial
Services Companies, excluding any minority equity
interest in any of the Financial Services Companies,
(B) the cumulative Net Earnings of the Company,
excluding the Net Earnings of the Financial Services
Companies, from the date of the initial public offering
of the common stock of the Financial Service Companies
to the date as of which the amount thereof is to be
determined, and (C) the aggregate amount of cash
dividends received by the Company or any of the
Subsidiaries from any of the Financial Services
Companies from the date of the initial public offering
of the common stock of the Financial Services Companies
to the date as of which the amount thereof is to be
determined; provided that, for the purposes of
clauses (i) and (ii) above, any computation of
Consolidated Net Worth of the Company and the
Subsidiaries shall not include the equity interest of
the Company or any Subsidiary in the undistributed
earnings of Xxxxxxxxxx Xxxx Direct.
Transferred Assets--shall mean, collectively
(i) the capital stock of (A) Direct Merchants Credit
Card Bank, National Association, (B) Fingerhut
Financial Services Receivables, Inc., (C) DMCCB, Inc.
and (D) Fingerhut Financial Services Corporation and
(ii) certain assets of the Company related to its
extended service plan, third-party insurance and
financial services businesses with an aggregate book
value not to exceed (A) in the case of MasterCard
credit card receivables, One Billion, Two Hundred
Million Dollars ($1,200,000,000) in receivables
existing as of July 7, 1996, plus the amount of any
additional receivables arising subsequent to July 7,
1996, and prior to the closing date of the initial
public offering of the common stock of the Financial
Services Companies, and (B) in the case of all other
assets related to the extended service plan, third-
party insurance and financial services businesses, One
Hundred Fifty Million Dollars ($150,000,000)."
ARTICLE V
Representations and Warranties
SECTION 5.01. The Company hereby represents and
warrants to the Noteholders as of the Effective Date:
(a) Each of the Company, the Guarantors and the
Significant Subsidiaries is duly organized, validly existing
and in good standing in its jurisdiction of incorporation.
(b) The Company has the power to enter into this
Amendment and to perform its obligations hereunder.
(c) The execution and delivery by the Company of
this Amendment and the performance of its obligations
hereunder have been duly authorized, and this Amendment
will, upon execution and delivery thereof, be duly executed
and delivered thereby and will constitute the legal, valid
and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to
applicable laws affecting the enforcement of creditors'
rights generally and principles of equity.
(d) Neither the execution nor delivery by the
Company of this Amendment nor the performance by it of its
obligations hereunder or under the Purchase Agreement (as
amended as contemplated hereby), the Notes or the Guaranty
of each Guarantor:
(1) will adversely affect the enforceability
against the Company of the Purchase Agreement or the
Notes, or against the Guarantors of the Guaranty;
(2) will require the taking of any action or the
giving of any consent or approval by, or the making or
any registration or filing with, any Governmental
Authority or other person other than such actions,
consents, approvals, registrations and filings as have
heretofore been taken, given or made (as the case may
be);
(3) will violate any provision of the articles of
incorporation or by-laws of any of the Company or any
Guarantor or any provision of any law, rule,
regulation, order or decree of any Governmental
Authority applicable thereto;
(4) will violate or constitute a default under any
material agreement to which any of the Company or any
Guarantor is a party or by which any of its properties
or assets is or may be bound; or
(5) will result in the creation or imposition of
any Lien on the properties or assets of the Company or
any Guarantor other than as contemplated by the
Receivables Transfer Agreement.
(e) Neither this Amendment nor any certificate
furnished in connection herewith nor any other document or
statement furnished to the Noteholders in connection with
the transactions contemplated hereby, contains any untrue
statement of a material fact or omits to state a material
fact necessary in order to make the statements contained
herein and therein not misleading. Except as expressly
disclosed in documents filed by the Company or any
Subsidiary with the Commission and delivered by the Company
to the Noteholders prior to the Effective Date, there is no
fact known to the Company (except for general economic or
political conditions) which materially adversely affects,
or, so far as the Company can now reasonably foresee, would
be likely to materially and adversely affect, the business,
properties, prospects, operations or condition, financial or
otherwise, of the Company and the Subsidiaries taken as a
whole or the ability of the Company or any Significant
Subsidiary to perform any material obligation under the
Purchase Agreement, which has not been disclosed in writing
to the Noteholders.
(f) There exists no Default or Event of Default
under the Purchase Agreement either before or after giving
effect to this Amendment.
(g) The businesses operated by (A) Direct
Merchants Credit Card Bank, National Association, (B)
Fingerhut Financial Services Receivables, Inc., (C) DMCCB,
Inc. and (D) Fingerhut Financial Services Corporation are
substantially as described in Schedule I attached hereto.
ARTICLE VI
Miscellaneous
SECTION 6.01. This Amendment shall not be valid
and binding upon the Company or any Noteholder under the
Purchase Agreement until the execution hereof by a Majority-
in-Interest of Noteholders and complete satisfaction by the
Company of the conditions precedent set forth in Article I,
and upon the execution hereof by such Noteholders, and
compliance by the Company with said conditions precedent,
this Amendment shall be valid and binding upon the Company
and each Noteholder under the Purchase Agreement with
respect to each provision of this Amendment.
SECTION 6.02. This Amendment embodies the entire
agreement and understanding of the parties hereto and
supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any one or more of
the provisions contained in this Amendment, or in the
Purchase Agreement as amended hereby, or in any Note, or any
application thereof, shall be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
and therein, and any other applications thereof, shall not
be in any way be affected or impaired thereby.
SECTION 6.03. This Amendment is intended to be
governed by the laws of the State of New York and shall be
construed and enforced in accordance with, and the rights of
the parties shall be governed by, the laws of such State.
SECTION 6.04. This Amendment shall bind and inure
to the benefit of the respective successors and assigns of
the Company and the Noteholders.
SECTION 6.05. Except as otherwise expressly
provided herein, nothing contained in this Amendment shall,
or shall be construed to, modify, invalidate or otherwise
affect any provision of the Purchase Agreement or any right
of the Noteholders arising thereunder.
SECTION 6.06. The execution of this Amendment by
the Noteholder shall not in any way constitute, or be
construed as, a waiver of any provision of, or of any
Default or Event of Default otherwise existing under, the
Purchase Agreement, nor shall it constitute an agreement or
obligation of the Noteholders to give their consent to any
future amendment of the Purchase Agreement or to any future
transaction which would, absent consent of the Noteholders,
constitute a Default or Event of Default under the Purchase
Agreement.
SECTION 6.07. Except as specifically provided
herein, the Purchase Agreement is in all respects ratified
and confirmed, and all the terms, conditions and provisions
thereof shall be and remain in full force and effect. For
any and all purposes, from and after the Effective Date, any
and all references hereafter to any Purchase Agreement, and
all references to "this Agreement" in the Purchase
Agreement, shall refer to such Purchase Agreement as hereby
amended.
SECTION 6.08. This Amendment may be executed in
as many counterparts as may be deemed necessary or
convenient and by the different parties hereto on separate
counterparts (provided that the Company will execute each
counterpart), and each of which, when so executed, shall be
deemed to be an original, but all such counterparts shall
constitute but one and the same agreement.
SECTION 6.09. The Company will pay, or cause to
be paid, the reasonable out-of-pocket costs and expenses of
the Noteholder in connection with entering into this
Amendment and the consummation of all transactions
contemplated hereby, and the Company will also indemnify and
hold each Noteholder harmless from and against all liability
and loss with respect to or resulting from all claims on
account of brokers' or finders' fees or commissions in
connection with this Amendment or any of the transactions
contemplated hereby. The obligations of the Company under
this Section 6.09 shall survive payment of any Note issued
under any Purchase Agreement.
IN WITNESS WHEREOF, the Company and the
Noteholders have caused this Amendment to be executed by
their respective officers thereto duly authorized.
FINGERHUT COMPANIES, INC.,
by
Name:
Title:
by
Name:
Title:
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA,
by
Name:
Title:
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES,
by
Name:
Title:
AMERICAN FAMILY LIFE INSURANCE COMPANY,
by
Name:
Title:
GENERAL AMERICAN LIFE INSURANCE COMPANY,
by
Name:
Title:
ST. LOUIS REINSURANCE COMPANY,
by
Name:
Title:
BERKSHIRE LIFE INSURANCE COMPANY,
by
Name:
Title:
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY,
by
Name:
Title:
STATE MUTUAL INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
GUARANTEE RESERVE LIFE INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
SECURITY LIFE INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
UNITED OF OMAHA LIFE INSURANCE COMPANY,
by
Name:
Title:
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
MIMLIC FUNDING, INC.,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
NATIONAL TRAVELERS LIFE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
THE RELIABLE LIFE INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
MUTUAL TRUST LIFE INSURANCE COMPANY,
by MIMLIC ASSET MANAGEMENT COMPANY,
by
Name:
Title:
INDIANAPOLIS LIFE INSURANCE COMPANY,
by
Name:
Title:
Schedule I
Direct Merchants Credit Card Bank, National Association
A limited purpose credit card bank.
Fingerhut Financial Services Receivables, Inc.
A bankruptcy-remote special
purpose subsidiary that is the transferor under the
Receivables Transfer Program relating to credit card
receivables.
DMCCB, Inc.
A subsidiary holding lease obligations for the office of Direct
Merchants Credit Card Bank, National Association.
Fingerhut Financial Services Corporation
A subsidiary that provides marketing and administrative services to
Direct Merchants Bank and markets and services extended product
service plans and other financial services products.
