-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G40IE0fDcjOmDjTmGQ+nzk26FDNJmiBh56qoUTN3q7IlPu27/P8MwwnbTfDtC7Py GMAPQOi8OwSdi9VvY5sILQ== 0000912057-96-024601.txt : 19961106 0000912057-96-024601.hdr.sgml : 19961106 ACCESSION NUMBER: 0000912057-96-024601 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19961104 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FINGERHUT COMPANIES INC CENTRAL INDEX KEY: 0000740126 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 411396490 STATE OF INCORPORATION: MN FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-15491 FILM NUMBER: 96653997 BUSINESS ADDRESS: STREET 1: 4400 BAKER RD CITY: MINNETONKA STATE: MN ZIP: 55343 BUSINESS PHONE: 6129323100 MAIL ADDRESS: STREET 2: 4400 BAKER ROAD CITY: MINNETONKA STATE: MN ZIP: 55343 S-4 1 FORM S-4 As filed with the Securities and Exchange Commission on November 4, 1996 333-_______ - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------ FINGERHUT COMPANIES, INC. (Exact name of registrant as specified in its charter) Minnesota 5961 41-1396490 (State of other (Primary Standard (I.R.S. Employer jurisdiction of incorporation Industrial Classification Identification Number) or organization) Code Number) 4400 Baker Road Minnetonka, Minnesota 55343 (612) 932-3100 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) Mr. Michael P. Sherman General Counsel Fingerhut Companies, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 (612) 932-3100 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------ COPIES TO: Elizabeth C. Hinck, Esq. Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402-1498 (612) 340-2600 ------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH GENERAL INSTRUCTION G, PLEASE CHECK THE FOLLOWING BOX. / / ------------------ CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Proposed Proposed Title of each maximum maximum Amount of class of securities Amount to be offering price aggregate registration to be registered registered per unit offering price fee - --------------------------------------------------------------------------------------------------- 7.375% Senior Notes Due 1999 . . . . $125,000,000 100% $125,000,000 $37,878.79 - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
------------------ The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. SUBJECT TO COMPLETION, DATED NOVEMBER 4, 1996 PROSPECTUS FINGERHUT COMPANIES, INC. [FINGERHUT LOGO] OFFER TO EXCHANGE ITS 7.375% SENIOR NOTES DUE 1999 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 7.375% SENIOR NOTES DUE 1999 - ------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 199 , UNLESS EXTENDED. - ------------------------------------------------------------------------------- Fingerhut Companies, Inc., a Minnesota corporation (the "Company"), hereby offers, upon the terms and subject to the conditions set forth in this Prospectus (as the same may be amended or supplemented from time to time, the "Prospectus") and in the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange up to $125,000,000 aggregate principal amount of its 7.375% Senior Notes Due 1999 (the "New Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement (as defined herein) of which this Prospectus constitutes a part, for a like principal amount of its outstanding 7.375% Senior Notes Due 1999 (the "Old Notes"), of which $125,000,000 aggregate principal amount is outstanding. The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that (i) the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights, (ii) the New Notes are issuable in minimum denominations of $1,000 compared to minimum denominations of $250,000 for the Old Notes, and (iii) the New Notes will not provide for any increase in the interest rate thereon. In that regard, the Old Notes provide that, if the Exchange Offer is not consummated by January 24, 1997, the interest rate borne by the Old Notes will increase by 0.50% per annum commencing on January 25, 1997 until the Exchange Offer is consummated. See "Description of the Old Notes." The New Notes are being offered for exchange in order to satisfy certain obligations of the Company under the Registration Rights Agreement dated as of September 27, 1996 (the "Registration Rights Agreement") between the Company and the Initial Purchasers (as defined herein) of the Old Notes. The New Notes will be issued under the same Indenture (as defined herein) as the Old Notes and the New Notes and the Old Notes will constitute a single series of debt securities under the Indenture. In the event that the Exchange Offer is consummated, any Old Notes which remain outstanding after consummation of the Exchange Offer and the New Notes issued in the Exchange Offer will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount of Notes (as defined herein) have taken certain actions or exercised certain rights under the Indenture. The New Notes and the Old Notes are collectively referred to herein as the "Notes." See "Description of the New Notes" and "Description of the Old Notes." SEE "RISK FACTORS" COMMENCING ON PAGE 13 FOR CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER OLD NOTES IN THE EXCHANGE OFFER. Interest on the New Notes is payable semiannually on March 15 and September 15 of each year (each, an "Interest Payment Date"), commencing on the first such date following the original issuance date of the New Notes. The New Notes will mature on September 15, 1999. The New Notes are not entitled to any sinking fund and are not redeemable prior to maturity. ------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------ The date of this Prospectus is November 4, 1996 The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission (the "Commission") as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any holder of Old Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distributing New Notes, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A under the Securities Act ("Rule 144A") or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such holder is not a broker-dealer, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that broker-dealers who acquired Old Notes for their own accounts, as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement, the Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period ending 180 days after the Expiration Date (subject to extension 2 under certain limited circumstances described below) or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer--Resales of New Notes." In that regard, each Participating Broker-Dealer who surrenders Old Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the New Notes, it shall extend the 180-day period referred to above during which Participating Broker-Dealers are entitled to use this Prospectus in connection with the resale of New Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the amended or supplemented Prospectus necessary to permit resales of the New Notes or to and including the date on which the Company has given notice that the sale of New Notes may be resumed, as the case may be. Prior to the Exchange Offer, there has been only a limited secondary market and no public market for the Old Notes. The New Notes will be a new issue of securities for which there currently is no market. Although the Initial Purchasers have informed the Company that they each currently intend to make a market in the New Notes, they are not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Company currently does not intend to apply for listing of the New Notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. Any Old Notes not tendered and accepted in the Exchange Offer will remain outstanding and will be entitled to all the same rights and will be subject to the same limitations applicable thereto under the Indenture (except for those rights which terminate upon consummation of the Exchange Offer). Following consummation of the Exchange Offer, the holders of Old Notes will continue to be subject to the existing restrictions upon transfer thereof and the Company will have no further obligation to such holders (other than under certain limited circumstances) to provide for registration under the Securities Act of the Old Notes held by them. To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. See "Risk Factors--Consequences of a Failure to Exchange Old Notes." THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. Old Notes may be tendered for exchange on or prior to 5:00 p.m., New York City time, on , 199_ (such time on such date being hereinafter called the "Expiration Date"), unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal 3 amount of Old Notes being tendered for exchange. However, the Exchange Offer is subject to certain events and conditions which may be waived by the Company and to the terms and provisions of the Registration Rights Agreement. Old Notes may be tendered in whole or in part in a principal amount of $1,000 and integral multiples thereof, provided that if any Old Note is tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. The Company has agreed to pay all expenses of the Exchange Offer. See "The Exchange Offer--Fees and Expenses." Each New Note will bear interest from the most recent date to which interest has been paid or duly provided for on the Old Note surrendered in exchange for such New Note or, if no such interest has been paid or duly provided for on such Old Note, from September 27, 1996. Holders of the Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes for any period from and after the last Interest Payment Date to which interest has been paid or duly provided for on such Old Notes prior to the original issue date of the New Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Old Notes, and will be deemed to have waived the right to receive any interest on such Old Notes accrued from and after such Interest Payment Date or, if no such interest has been paid or duly provided for, from and after September 27, 1996. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders of Old Notes as of , 1996. The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. No dealer-manager is being used in connection with this Exchange Offer. See "Use of Proceeds From Sale of Old Notes" and "Plan of Distribution." -------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY OR ITS SUBSIDIARIES SINCE THE DATE HEREOF. -------------------- TABLE OF CONTENTS PAGE ---- Available Information . . . . . . . . . . . . . . . . . . . . . . . 5 Incorporation of Certain Documents by Reference . . . . . . . . . . 5 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Use of Proceeds from Sale of Old Notes . . . . . . . . . . . . . . 18 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Selected Consolidated Financial Information . . . . . . . . . . . . 19 Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 The Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . 25 Description of the New Notes . . . . . . . . . . . . . . . . . . . 34 Description of the Old Notes . . . . . . . . . . . . . . . . . . . 40 Certain United States Federal Income Tax Considerations . . . . . . 41 Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . 42 Validity of New Notes . . . . . . . . . . . . . . . . . . . . . . . 43 Independent Public Accountants . . . . . . . . . . . . . . . . . . 43 4 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information filed by the Company may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the Commission: 7 World Trade Center, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and copies of such material can be obtained by mail from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Such information may also be accessed electronically by means of the Commission's home page on the Internet (http://www.sec/gov.) Such reports, proxy statements and other information can also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005 on which the Company's common stock is listed. This Prospectus constitutes a part of a registration statement on Form S-4 (the "Registration Statement") filed by the Company with the Commission under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission, and reference is hereby made to the Registration Statement and to the exhibits relating thereto for further information with respect to the Company and the Notes. Any statements contained herein concerning the provisions of any document are not necessarily complete, and, in each instance, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated in this Prospectus by reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1995; (ii) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters ended March 29, 1996 and June 28, 1996; and (iii) the Company's Current Report on Form 8-K dated April 18, 1996. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the Exchange Offer of the Notes shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from and after the respective dates of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is incorporated or deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company hereby undertakes to provide without charge to each person (including any beneficial owner) to whom a copy of this Prospectus has been delivered, on the written or oral request of any such person, a copy of any or all of the documents referred to above which have been or may be incorporated in this Prospectus by reference, other than exhibits to such documents for which the Company may impose a copying charge. Requests for such copies should be directed to Michael P. Sherman, Secretary, Fingerhut Companies, Inc., 4400 Baker Road, Minnetonka, Minnesota 55343 (612) 932-3100. 5 - ------------------------------------------------------------------------------- SUMMARY THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND IS SUBJECT TO, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS CONTAINED ELSEWHERE AND INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED OR UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO THE COMPANY INCLUDE FINGERHUT COMPANIES, INC. AND ITS SUBSIDIARIES. THE COMPANY The Company is a direct-to-the-consumer marketing company that sells a broad range of products and services directly to consumers via catalogs, telemarketing, television and other media. The Company conducts its direct-to-the-consumer marketing business through three principal subsidiaries, Fingerhut Corporation ("Fingerhut"), Figi's Inc. ("Figi's") and Infochoice USA, Inc. ("Infochoice"). Fingerhut has been in the direct mail marketing business for over 45 years and sells general merchandise using catalogs and other direct marketing solicitations. Fingerhut's merchandise includes a broad mix of quality brand name and private label products, many of which are specially manufactured or packaged to appeal to its customers. See "Business." The Company conducts its financial services business through Metris Companies Inc. ("Metris"), an information-based direct marketer of consumer credit products, extended service plans, and fee-based products and services to moderate income consumers. See "Business--Financial Services Business Segment." Metris is an indirect subsidiary of the Company which recently sold 17% of its outstanding shares of common stock in an initial public offering (the "Metris Offering"). See "--Recent Developments--Metris Initial Public Offering" below. The Company was incorporated in Minnesota in 1978 as a successor to a business originally established in 1948. The Company's principal executive office is located at 4400 Baker Road, Minnetonka, Minnesota 55343, telephone number (612) 932-3100. RECENT DEVELOPMENTS METRIS INITIAL PUBLIC OFFERING On August 20, 1996 the Company formed Metris as an indirect wholly owned subsidiary of the Company to operate certain financial services businesses previously operated as a division of the Company (collectively, the "Financial Services Business"). On October 30, 1996, Metris completed the initial public offering of shares of common stock representing 17% of the outstanding shares of common stock of Metris. In connection with the Metris Offering, the Company contributed all of the Financial Services Business to Metris. Unless otherwise noted herein, the information in this Prospectus gives effect to such contribution to Metris, but does not give effect to the Metris Offering. See "Business--Financial Services Business Segment" below. THIRD QUARTER OPERATING RESULTS On October 17, 1996 the Company announced results for the thirteen weeks and 39 weeks ended September 27, 1996. The Company reported net revenues of $441.9 million for the quarter ended September 27, 1996, compared with $469.5 million for the third quarter of 1995. Net revenues for the 39-week period ended September 27, 1996 were $1,284.9 million, compared to $1,337.0 million for the corresponding period in 1995. Pretax earnings were $13.4 million and $13.6 million, respectively, for the third quarter and first three quarters of 1996, compared to $13.2 million and $31.8 million, respectively, for the third quarter and first three quarters of 1995. Net earnings in the third quarter of 1996, which reflect a slightly higher effective consolidated tax rate than in 1995, were $8.6 million, or $.18 per share, compared with $8.6 million, or $.18 per share in third quarter of 1995. Net earnings in the first three quarters of 1996 were $8.7 million, or - ------------------------------------------------------------------------------- 6 ` - ------------------------------------------------------------------------------- $.18 per share, compared with $8.6 million, or $.18 per share in third quarter of 1995. Net earnings in the first three quarters of 1996 were $8.7 million, or $.18 per share, compared with $20.5 million, or $.42 per share in the corresponding period of 1995. The Company also announced that it has declared a quarterly cash dividend in the amount of $.04 per share payable on November 15, 1996, to shareholders of record as of the close of business on November 4, 1996. NEW BANK FACILITIES On September 16, 1996, the Company restructured its bank credit facilities. The Company's existing revolving credit facility (the "Revolving Credit Facility") was amended and restated to, among other things, reduce the aggregate commitments for revolving borrowings and letters of credit from $400 million to $200 million (the "Amended Revolving Credit Facility"). The Amended Revolving Credit Facility will continue to be guaranteed by subsidiaries of the Company, including Fingerhut but excluding Metris and its subsidiaries, and will terminate in September 2001. On September 16, 1996, Metris entered into a revolving credit facility with the same group of lenders as in the Amended Revolving Credit Facility. Metris' facility (the "Metris Revolving Credit Facility") provides for aggregate commitments of $300 million. The proceeds from borrowings under the Metris Revolving Credit Facility are to be used by Metris to provide for working capital and other general corporate purposes. Metris' obligations under the Metris Revolving Credit Facility are secured by a pledge of the capital stock of all of Metris' subsidiaries except Direct Merchants Credit Card Bank, National Association ("Direct Merchants Bank"). In addition, the Metris Revolving Credit Facility is guaranteed by the Company, Fingerhut and all other subsidiaries that guarantee the Amended Revolving Credit Facility, and certain of Metris' subsidiaries. The Metris Revolving Credit Facility will terminate in September 2001. INCREASE IN ASSET-BACKED COMMERCIAL PAPER PROGRAM On September 16, 1996, the Metris Master Trust (formerly the Fingerhut Financial Services Master Trust) issued asset-backed certificates with maximum proceeds of approximately $512 million. These certificates will be used to support an increase in the Company's asset-backed commercial paper program. THE EXCHANGE OFFER THE EXCHANGE OFFER . . . . . . . . . . . Up to $125,000,000 aggregate principal amount of New Notes are being offered in exchange for a like aggregate principal amount of Old Notes. Old Notes may be tendered for exchange in whole or in part in a principal amount of $1,000 and integral multiples thereof, provided that if any Old Note is tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. The Company is making the Exchange Offer in order to satisfy its obligations under the Registration Rights Agreement relating to the Old Notes. For a description of the procedures for tendering Old Notes, see "The Exchange Offer--Procedures for Tendering Old Notes." EXPIRATION DATE . . . . . . . . . . . . 5:00 p.m., New York City time, on , 199_ (such time on such date being hereinafter called the "Expiration Date") unless the Exchange Offer is - ------------------------------------------------------------------------------- 7 - ------------------------------------------------------------------------------- extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). See "The Exchange Offer--Expiration Date; Extensions; Amendments." CONDITIONS TO THE EXCHANGE OFFER . . . . The Exchange Offer is subject to certain conditions, which may be waived by the Company in its sole discretion. The Exchange Offer is not conditioned upon any minimum principal amount of Old Notes being tendered. See "The Exchange Offer-- Conditions to the Exchange Offer." The Company reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer if certain specified conditions have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Notes to withdraw their tendered Old Notes, or (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. See "The Exchange Offer--Expiration Date; Extensions; Amendments." WITHDRAWAL RIGHTS . . . . . . . . . . . . Tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date by delivering a written notice of such withdrawal to the Exchange Agent in conformity with certain procedures set forth below under "The Exchange Offer--Withdrawal Rights." PROCEDURES FOR TENDERING OLD NOTES . . . Tendering holders of Old Notes must complete and sign a Letter of Transmittal in accordance with the instructions contained therein and forward the same by mail, facsimile or hand delivery, together with any other required documents, to the Exchange Agent, either with the Old Notes to be tendered or in compliance with the specified procedures for guaranteed delivery of Old Notes. Certain brokers, dealers, commercial banks, trust companies and other nominees may also effect tenders by book-entry transfer. Holders of Old Notes registered in the name of a broker, dealer, commercial bank, trust company or other nominee are urged to contact such person promptly if they wish to tender Old Notes pursuant to the Exchange Offer. See "The Exchange Offer--Procedures for Tendering Old Notes." Letters of Transmittal and certificates representing Old Notes should not be sent to the Company. Such documents should only be sent to the Exchange Agent. - ------------------------------------------------------------------------------- 8 - ------------------------------------------------------------------------------- Questions regarding how to tender and requests for information should be directed to the Exchange Agent. See "The Exchange Offer--Exchange Agent." RESALES OF NEW NOTES . . . . . . . . . . The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any holder of Old Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distributing the New Notes, or any broker-dealer who purchased the Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will - ------------------------------------------------------------------------------- 9 - ------------------------------------------------------------------------------- be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such holder is not a broker-dealer, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that broker-dealers who acquired Old Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement and to the limitations described below under "The Exchange Offer--Resale of New Notes", the Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period ending 180 days after the Expiration Date (subject to extension under certain limited circumstances) or, if earlier, when all such New Notes have been disposed of by such - ------------------------------------------------------------------------------- 10 - ------------------------------------------------------------------------------- Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. See "The Exchange Offer--Resales of New Notes." EXCHANGE AGENT . . . . . . . . . . . . . The exchange agent with respect to the Exchange Offer is First Bank National Association (the "Exchange Agent"). The addresses, and telephone and facsimile numbers of the Exchange Agent are set forth in "The Exchange Offer--Exchange Agent" and in the Letter of Transmittal. USE OF PROCEEDS . . . . . . . . . . . . The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. See "Use of Proceeds From Sale of Old Notes." CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS . . . . . . Holders of Old Notes should review the information set forth under "Certain United States Federal Income Tax Considerations" prior to tendering Old Notes in the Exchange Offer. THE NEW NOTES SECURITIES OFFERED . . . . . . . . . . . Up to $125,000,000 aggregate principal amount of the Company's 7.375% Senior Notes Due 1999 which have been registered under the Securities Act. The New Notes will be issued and the Old Notes were issued under an Indenture dated as of September 15, 1996 (the "Indenture") between the Company and First Bank National Association, as trustee (the "Trustee"). The New Notes and any Old Notes which remain outstanding after consummation of the Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Indenture. See "Description of the New Notes--General." The terms of the New Notes are identical in all material respects to the terms of the Old Notes, except that (i) the New Notes have been registered under the Securities Act and therefore are not subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration rights or other rights under the Registration Rights Agreement, (ii) the New Notes are issuable in minimum denominations of $1,000 compared to minimum denominations of $250,000 for - ------------------------------------------------------------------------------- 11 - ------------------------------------------------------------------------------- the Old Notes and (iii) the New Notes will not provide for any increase in the interest rate thereon. See "The Exchange Offer--Purpose of the Exchange Offer," "Description of the New Notes" and "Description of the Old Notes." MATURITY DATE . . . . . . . . . . . . . . September 15, 1999. INTEREST PAYMENT DATES . . . . . . . . . March 15 and September 15 of each year, commencing on the first such date following the original issuance of the New Notes. DENOMINATIONS . . . . . . . . . . . . . . The New Notes will be issued in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof. REDEMPTION . . . . . . . . . . . . . . . The New Notes may not be redeemed prior to maturity. SINKING FUND . . . . . . . . . . . . . . None. RANKING . . . . . . . . . . . . . . . . . The New Notes will constitute unsecured unsubordinated indebtedness of the Company and will rank PARI PASSU with all other unsecured and unsubordinated indebtedness of the Company for borrowed money. Because the Company is a holding company, the New Notes will be effectively subordinated to all existing and future indebtedness, trade payables, guarantees, lease obligations and letter of credit obligations of the Company's subsidiaries. See "Risk Factors--Holding Company Structure; Effective Subordination." ABSENCE OF MARKET FOR THE NEW NOTES . . . . . . . . . . . . . . . . The New Notes will be a new issue of securities for which there currently is no market. Although Bear, Stearns & Co. Inc., Smith Barney Inc. and First Chicago Capital Markets, Inc., the initial purchasers of the Old Notes (the "Initial Purchasers"), have informed the Company that they each currently intend to make a market in the New Notes, they are not obligated to do so, and any such market making may be discontinued at any time without notice. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes. The Company currently does not intend to apply for listing of the New Notes on any securities exchange or for quotation through the National Association of Securities Dealers Automated Quotation System. FOR FURTHER INFORMATION REGARDING THE NEW NOTES, SEE "DESCRIPTION OF THE NEW NOTES." - ------------------------------------------------------------------------------- 12 RISK FACTORS IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE DECIDING WHETHER TO ACCEPT THE EXCHANGE OFFER. THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS IMPORTANCE OF FOURTH QUARTER; FLUCTUATIONS IN QUARTERLY OPERATING RESULTS The Company's business is subject to the seasonal variations in demand that the Company believes are generally associated with the direct marketing and retail industries. Historically, the Company has realized a significant portion of its sales and net income during the fourth quarter. Over the past several years, the Company has observed that customers waited until later in the fourth quarter to order merchandise from the Company's catalogs, following a trend which has affected the retail industry as a whole. The Company's annual results could be adversely affected if the Company's sales were to be substantially below seasonal norms during the fourth quarter of any year. In addition to seasonal variations, the Company experiences variances in quarterly results from year to year that result from changes in the timing of its promotions and the types of customers and products promoted and, to some extent, variations in dates of holidays and the timing of quarter ends resulting from a 52/53 week year. HOLDING COMPANY STRUCTURE; EFFECTIVE SUBORDINATION The Notes are obligations exclusively of the Company. The Company is a holding company substantially all of the consolidated assets of which are held by its subsidiaries. Accordingly, the cash flow of the Company and the consequent ability to service its debt, including the Notes, are dependent upon the earnings of such subsidiaries. Because the Company is a holding company, the Notes will be effectively subordinated to all existing and future indebtedness, trade payables, guarantees, lease obligations and letter of credit obligations of the Company's subsidiaries. Therefore, the Company's rights and the rights of its creditors, including the holders of the Notes, to participate in the assets of any subsidiary upon the latter's liquidation or reorganization will be subject to the prior claims of such subsidiary's creditors, except to the extent that the Company may itself be a creditor with recognized claims against the subsidiary, in which case the claims of the Company would still be effectively subordinate to any security interest in, or mortgages or other liens on, the assets of such subsidiary and would be subordinate to any indebtedness of such subsidiary senior to that held by the Company. As of June 28, 1996 the Company's subsidiaries had $1.6 million of outstanding indebtedness. As described above under "Summary--Recent Developments--New Bank Facilities," the Company may borrow up to $200 million under the Amended Revolving Credit Facility and Metris may borrow up to $300 million under the Metris Revolving Credit Facility. All of the available $500 million under these credit facilities is guaranteed by Fingerhut. In addition, as of June 28, 1996, the Company had outstanding $180 million aggregate principal amount of outstanding senior notes ($35 million of which was repaid on August 15, 1996), which notes are also guaranteed by Fingerhut. The Notes are also effectively subordinated to the lease obligations of the Company's subsidiaries, which payments totalled $38.6 million in fiscal year 1995, and other liabilities, including trade payables, the amount of which could be material. The Indenture does not limit the amount of Indebtedness the Company and its subsidiaries may incur. See "Description of the New Notes." INCREASES IN POSTAL AND PAPER COSTS The Company mails its catalogs and ships most of its merchandise through the United States Postal Service. The Company experienced a significant increase in postage costs in fiscal 1995. In addition, the Company experienced price increases in 1995 for paper that is used in the production of its 13 catalogs which further increased the Company's cost of doing business in 1995 and further continued in 1996. Additional increases in postal rates or paper costs may have a material adverse impact on the Company's results of operations to the extent that the Company is unable to offset such increase by raising selling prices or by implementing more efficient mailing, delivery and order fulfillment systems. FUNDING AND SECURITIZATION CONSIDERATIONS The Company depends heavily upon the securitization of its subsidiaries' accounts receivable and credit card loans to fund its operations and to date has been able to complete securitization transactions on terms that it believes are favorable. There can be no assurance, however, that the securitization market will continue to offer attractive funding alternatives. In addition, the Company's ability to securitize the assets of its subsidiaries depends on the continued availability of credit enhancement on acceptable terms and the continued favorable legal, regulatory, accounting and tax environment for securitization transactions. While the Company does not at present foresee any significant problems in any of these areas, any such adverse change could force the Company to rely on other potentially more expensive funding sources. Adverse changes in the performance of the securitized assets of the Company's subsidiaries, including increased delinquencies and losses, could result in a downgrade or withdrawal of the ratings on the outstanding certificates under these securitization transactions or cause early amortization of such certificates. This could jeopardize the ability of the Company's subsidiaries to effect other securitization transactions on acceptable terms, thereby decreasing the Company's liquidity and forcing the Company to rely on other funding sources to the extent available. CONSUMER SPENDING The success of the Company's operations depends upon a number of economic conditions affecting disposable consumer income such as employment, business conditions, interest rates and taxation. Adverse changes in these economic conditions may restrict consumer spending. There can be no assurance that weak economic conditions or changes in the retail environment or other economic factors that have an impact on the level of consumer spending would not have a material adverse impact on the Company. CREDIT RISKS Fingerhut's installment sales practices and Metris' credit card operations are subject to all of the risks associated with unsecured credit transactions, including (1) the risk of increasing delinquencies and credit losses during economic downturns, (2) the risk that an increasing number of customers will default on the payment of their outstanding balances or seek protection under bankruptcy laws, resulting in accounts being charged off as uncollectible, (3) the risk of fraud, and (4) in the case of revolving credit accounts, the risk that increases in discretionary repayment of account balances by customers will result in diminished finance charge or other income. In addition, general economic factors, such as the rate of inflation, unemployment levels and interest rates may affect the Company's target market customers (moderate income consumers) more severely than other market segments. In addition, Metris' credit card portfolio, as of the date hereof, consists of accounts which have been generated in the last 18 months and, as a result, there can be no assurance as to the levels of delinquencies and losses that can be expected over time with respect to such portfolio. INTEREST RATE RISK Fingerhut's closed-end installment contracts are fixed-priced, fixed-term contracts and Metris' credit card accounts generally have finance charges set as a variable rate with a spread above a designated prime rate or other designated index. The Company intends to manage interest rate risk through asset and liability management. Fluctuations in interest rates may adversely affect the cost of funds of Fingerhut and Metris. 14 REGULATORY MATTERS The Company's business is subject to regulation by a variety of state and federal laws and regulations related to advertising, time payment pricing, offering and extending credit, charging and collecting state sales and use taxes and product safety. The Company's practices in certain of these areas are subject to periodic inquiries and proceedings by various regulatory agencies. None of these actions has had a material adverse effect upon the Company. While the Company believes it is in material compliance with all such laws and regulations, if the Company is found not to be in compliance with any such laws and regulations, it could become subject to cease and desist orders, injunctive proceedings, obligations to collect additional sales and use taxes, obligations for prior uncollected sales and use taxes, civil fines and other penalties. The occurrence of any of the foregoing could adversely affect the Company's results of operations and financial condition. Fingerhut relies on the Minnesota "time-price" doctrine in establishing and collecting installment payments on products sold in many states. Under this doctrine, the difference between the time price and cash price for the same goods is not treated as interest subject to regulation under laws governing the extension of credit. In other states, Fingerhut is subject to regulations that limit maximum finance charges and require refunding of finance charges to customers under certain circumstances. Certain individuals who have purchased goods from Fingerhut have filed suit challenging the applicability of the time-price doctrine to Fingerhut's business. Any change of law restricting Fingerhut's use of the time-price doctrine or otherwise negatively affecting its credit practices could have an adverse effect on the Company's results of operations and financial condition. Metris is subject to numerous Federal and state consumer protection laws that impose requirements related to offering and extending credit. The United States Congress and the states may enact laws and amendments to existing laws to regulate further the credit card industry or to reduce finance charges or other fees or charges applicable to credit card and other consumer revolving loan accounts. Such laws, as well as any new laws or rulings which may be adopted, may adversely affect the ability of Metris to collect on account balances or maintain previous levels of periodic rate finance charges and other fees and charges with respect to the accounts. Any failure by the Company to comply with such legal requirements also could adversely affect its ability to collect the full amount of the account balances. Direct Merchants Bank is also subject to regulation by the Federal Reserve Board, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency. Such regulations include limitations on the extent to which Direct Merchants Bank can finance or otherwise supply funds to Metris and its affiliates through dividends, loans or otherwise. Changes in Federal and state bankruptcy and debtor relief laws could adversely affect the Company if such changes result in, among other things, additional administrative expenses and accounts being written off as uncollectible. FOREIGN SUPPLIERS Fingerhut purchases, directly or indirectly, a significant portion (approximately 36% in fiscal 1995) of its merchandise from foreign suppliers. Although substantially all of the Company's foreign purchases are denominated in U.S. dollars, the Company is subject to the risks of doing business abroad, including increases in import duties, decreases in quotas, adverse fluctuations in currency exchange rates, increased customs regulations and political turmoil. The occurrence of any of the foregoing could adversely affect the Company's earnings. 15 COMPETITION The direct marketing industry includes a wide variety of specialty and general merchandise retailers and is both highly fragmented and highly competitive. The Company's direct-to-the consumer segment sells its products to customers in all states of the United States and competes in the purchase and sale of merchandise with all retailers, including general and specialty catalog marketers, television shopping marketers, retail department stores, discount department stores and variety stores, many of which are national chains. The loss of any significant portion of the Company's market share to other retailers could adversely affect the Company's earnings. As a marketer of consumer credit products, Metris faces increasing competition from numerous providers of financial services, many of which have greater resources than Metris. In particular, Metris' credit card business competes with national, regional and local bank card issuers as well as issuers of other general purpose credit cards, such as American Express, Discover Card and Diners Club. Many of these issuers are substantially larger and have more seasoned credit card portfolios than the Company and often compete for customers by offering lower interest rates or fee levels. In general, customers are attracted to credit card issuers largely on the basis of price, credit limit and other product features and customer loyalty is often limited. CONSEQUENCES OF A FAILURE TO EXCHANGE OLD NOTES The Old Notes have not been registered under the Securities Act or any state securities laws and therefore may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the Securities Act and any other applicable securities laws, or pursuant to an exemption therefrom or in a transaction not subject thereto, and in each case in compliance with certain other conditions and restrictions, including the Company's and the Trustee's right in certain cases to require the delivery of opinions of counsel, certifications and other information prior to any such transfer. Old Notes which remain outstanding after consummation of the Exchange Offer will continue to bear a legend reflecting such restrictions on transfer. In addition, upon consummation of the Exchange Offer, holders of Old Notes which remain outstanding will not be entitled to any rights to have such Old Notes registered under the Securities Act or to any similar rights under the Registration Rights Agreement (subject to certain limited exceptions). The Company currently does not intend to register under the Securities Act any Old Notes which remain outstanding after consummation of the Exchange Offer (subject to such limited exceptions, if applicable). To the extent that Old Notes are tendered and accepted in the Exchange Offer, a holder's ability to sell untendered Old Notes could be adversely affected. In addition, although the Old Notes have been designated for trading in the Private Offerings, Resale and Trading through Automatic Linkages ("PORTAL") market, to the extent that Old Notes are tendered and accepted in connection with the Exchange Offer, any trading market for Old Notes which remain outstanding after the Exchange Offer could be adversely affected. The New Notes and any Old Notes which remain outstanding after consummation of the Exchange Offer will constitute a single series of debt securities under the Indenture and, accordingly, will vote together as a single class for purposes of determining whether holders of the requisite percentage in outstanding principal amount thereof have taken certain actions or exercised certain rights under the Indenture. See "Description of the New Notes --General." The Old Notes provide that, if the Exchange Offer is not consummated by January 24, 1997, the interest rate borne by the Old Notes will increase by 0.50% per annum commencing January 25, 1997, until the Exchange Offer is consummated. See "Description of the Old Notes." Following consummation of the Exchange Offer, the Old Notes will not be entitled to any increase in the interest rate thereon. The New Notes will not be entitled to any such increase in the interest rate thereon. 16 ABSENCE OF PUBLIC MARKET The Old Notes were issued to, and the Company believes are currently owned by, a relatively small number of beneficial owners. The Old Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for the New Notes. Although the New Notes will generally be permitted to be resold or otherwise transferred by the holders (who are not affiliates of the Company) without compliance with the registration requirements under the Securities Act, they will constitute a new issue of securities with no established trading market. The Company has been advised by the Initial Purchasers that the Initial Purchasers presently intend to make a market in the New Notes. However, the Initial Purchasers are not obligated to do so and any market-making activity with respect to the New Notes may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer. Accordingly, no assurance can be given that an active public or other market will develop for the New Notes or the Old Notes or as to the liquidity of or the trading market for the New Notes or the Old Notes. If an active public market does not develop, the market price and liquidity of the New Notes may be adversely affected. If a public trading market develops for the New Notes, future trading prices of such securities will depend on many factors, including, among other things, prevailing interest rates, the Company's results of operations and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the New Notes may trade at a discount. Notwithstanding the registration of the New Notes in the Exchange Offer, holders who are "affiliates" (as defined under Rule 405 of the Securities Act) of the Company may publicly offer for sale or resell the New Notes only in compliance with the provisions of Rule 144 under the Securities Act. Each broker-dealer that receives New Notes for its own account in exchange for Old Notes, where such Old Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." EXCHANGE OFFER PROCEDURES Issuance of the New Notes in exchange for Old Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Company of such Old Notes, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of the Old Notes desiring to tender such Old Notes in exchange for New Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Old Notes for exchange. 17 USE OF PROCEEDS FROM SALE OF OLD NOTES The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. In consideration for issuing the New Notes in exchange for Old Notes as described in this Prospectus, the Company will receive Old Notes in like principal amount. The Old Notes surrendered in exchange for the New Notes will be retired and cancelled. Accordingly, the issuance of the New Notes will not result in any change in the indebtedness of the Company. The net proceeds to the Company from the sale of the Old Notes was approximately $124 million. The Company has used all of such net proceeds from the issuance of the Old Notes to repay short-term indebtedness under the Amended Revolving Credit Facility which was incurred for general corporate purposes. CAPITALIZATION The following table sets forth the short-term debt and the capitalization of the Company at June 28, 1996, as adjusted to give effect to the sale by the Company of the Old Notes and the repayment of certain short-term debt with the net proceeds therefrom. The issuance of the New Notes in exchange for the Old Notes pursuant to the Exchange offer will have no effect on the capitalization of the Company. See "Use of Proceeds From Sale of Old Notes." June 28, 1996 ---------------- Pro Forma ---------------- (in thousands) Short-term debt: Revolving credit facility(1) . . . . . . . . . . . . . . $ 76,690 Current portion of long-term debt(2) . . . . . . . . . . $ 35,099 --------- Total short-term debt . . . . . . . . . . . . . . . . $ 111,789 --------- --------- Long-term debt, less current maturities: Senior notes . . . . . . . . . . . . . . . . . . . . . . $ 145,000 7.375% Senior Notes Due 1999 . . . . . . . . . . . . . . 125,000 Other . . . . . . . . . . . . . . . . . . . . . . . . . . 1,511 --------- Total long-term debt . . . . . . . . . . . . . . . . . $ 271,511 Shareholders' equity: Common Stock - $.01 per share: authorized 100,000,000 shares, issued and outstanding 46,209,461 shares . . . . . . . . . . . . . $ 462 Additional paid-in capital . . . . . . . . . . . . . . . 263,808 Unearned compensation . . . . . . . . . . . . . . . . . . (2,894) Earnings reinvested . . . . . . . . . . . . . . . . . . . 282,472 --------- Total stockholders' equity . . . . . . . . . . . . . . $ 543,848 --------- Total capitalization. . . . . . . . . . . . . . . . . . . $ 815,359 --------- --------- - ------------- (1) On September 16, 1996 the Company amended the revolving credit facility and entered into the Amended Revolving Credit Facility. See "Recent Developments--New Bank Facilities." (2) The Company repaid $35 million of such debt on August 15, 1996. 18 SELECTED CONSOLIDATED FINANCIAL INFORMATION The following sets forth certain selected consolidated financial data, which should be read in conjunction with the Company's Consolidated Financial Statements and related Notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 1995 and the quarterly report on form 10-Q for the quarter ended June 28, 1996 incorporated by reference herein. The selected consolidated Statement of Earnings and Statement of Position financial data set forth below for each of the years in the five-year period ended December 29, 1995 and as of the end of each such year has been derived from the Consolidated Financial Statements of the Company which have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The selected consolidated Statement of Earnings and Statement of Position financial data as of December 29, 1995 and December 30, 1994 and for each of the years in the three-year period ended December 29, 1995 and the report thereon, is incorporated by reference herein. The selected consolidated Statement of Earnings and Statement of Position financial data as of and for the six months ended June 28, 1996 and June 30, 1995 is derived from the Company's unaudited consolidated financial statements, which in the opinion of management include all adjustments, consisting of only normal, recurring adjustments, necessary for a fair presentation of the financial position and results of operations. The results for the six months ended June 28, 1996 are not necessarily indicative of the results to be achieved for the full fiscal year.
Six Months Ended Fiscal Year Ended ------------------------- ------------------------------------------------------------------ June 28, June 30, Dec. 29, Dec. 30, Dec. 31, Dec. 25, Dec. 27, 1996 1995 1995 1994 1993(c) 1992 1991 ----------- ---------- ---------- ----------- ------------ ---------- ---------- STATEMENT OF EARNINGS DATA: (in thousands except ratios and share data) REVENUES: Net sales . . . . . . . . . . . . . $ 703,226 $ 773,813 $1,826,339 $1,718,647 $1,634,009 $1,470,628 $1,314,636 Finance income and other revenues . . . . . . . . . 154,596 106,459 283,617 215,738 173,899 135,486 113,792 ---------- ---------- ---------- ---------- ---------- ---------- ---------- 857,822 880,272 2,109,956 1,934,385 1,807,908 1,606,114 1,428,428 ---------- ---------- ---------- ---------- ---------- ---------- ---------- COSTS AND EXPENSES: Product cost. . . . . . . . . . . . 359,832 384,006 892,736 854,461 821,357 711,764 621,531 Administrative and selling expenses . . . . . . . . 334,714 327,476 755,891 701,582 619,009 558,416 497,770 Provision for uncollectible accounts . . . . . . . . . . . . 117,607 103,173 276,688 229,396 194,494 186,372 179,085 Discount on sale of accounts receivable . . . . . . . 30,936 34,687 82,392 53,736 26,713 22,325 24,460 Interest expense, net . . . . . . . 14,585 12,385 25,943 24,284 34,456 33,307 24,184 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Total costs and expenses . . . . . . . . . . . . 857,674 861,727 2,033,650 1,863,459 1,696,029 1,512,184 1,347,030 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings before income taxes (b) . . . . . . . . . . . . 148 18,545 76,306 70,926 111,879 93,930 81,398 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Provision for income taxes . . . . . . . . . . . . . . 54 6,567 25,448 25,001 36,551 32,124 27,840 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net earnings(b). . . . . . . . . . . $ 94 $ 11,978 $ 50,858 $ 45,925 $ 75,328 $ 61,806 $ 53,558 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings per share(a)(b) . . . . . . $ .00 $ .25 $ 1.05 $ .91 $ 1.50 $ 1.19 $ 1.07 Dividends . . . . . . . . . . . . . $ .08 $ .08 $ .16 $ .16 $ .16 $ .16 $ .16 Weighted average shares . . . . . . . . . . . . . . 48,703,782 48,321,429 48,478,971 50,270,419 50,101,739 51,937,936 49,960,546 STATEMENT OF POSITION DATA: Total assets . . . . . . . . . . . $1,198,173 $1,108,350 $1,281,077 $1,097,933 $ 988,302 $ 925,649 $ 801,999 Total current liabilities . . . . . $ 477,873 $ 322,110 $ 556,163 $ 323,628 $ 249,268 $ 269,113 $ 292,875 Total long-term debt . . . . . . . $ 146,511 $ 246,460 $ 146,564 $ 246,516 $ 246,852 $ 247,190 $ 119,164 Stockholders' equity . . . . . . . $ 543,848 $ 510,556 $ 547,490 $ 500,950 $ 472,389 $ 399,591 $ 384,149 OTHER DATA: Ratio of earnings to fixed charges(d) . . . . . . . . . . . (e) 1.89 2.75 2.82 3.34 3.06 3.40
- ------------ (a) Based on a weighted average of 48,478,971; 50,270,419; 50,101,739; 51,937,936 and 49,960,546 shares of common stock and common stock equivalents for the fiscal years ended December 29, 1995; December 30, 1994; December 31, 1993; December 25, 1992 and December 27, 1991, respectively. (b) 1994 earnings before income taxes include a $29.9 million charge ($19.4 million after tax) relating to unusual items. 1995 earnings before income taxes include an $8.0 million adjustment ($5.3 million after tax) to these unusual items. (c) In 1993, the Company sold certain assets of COMB Corporation and FDC, Inc., a subsidiary of Figi's Inc. (d) For the purposes of such computation (i) earnings consist of earnings from continuing operations before income taxes, plus fixed charges adjusted to exclude capitalized interest, plus a proportional share of income or loss before income taxes of 50 percent owned companies, less equity in undistributed earnings of companies owned less than 50 percent; and (ii) fixed charges consist of interest, including amounts capitalized, amortization of debt discount, premium and expense and a portion of rental expense deemed representative of the interest factor. (e) For the six months ended June 28, 1996, earnings were insufficient to cover fixed charges by $1.4 million. 19 BUSINESS The Company is a direct-to-the-consumer marketing company that sells a broad range of products and services directly to consumers via catalogs, telemarketing, television and other media. The Company had 1995 revenues of $2.110 billion. The Company conducts its direct-to-the-consumer marketing business through three principal subsidiaries, Fingerhut, Figi's and Infochoice. Fingerhut has been in the direct mail marketing business for over 45 years and sells general merchandise using catalogs and other direct marketing solicitations. Fingerhut's merchandise includes a broad mix of quality brand name and private label products, many of which are specially manufactured or packaged to appeal to its customers. Fingerhut offers extended payment terms on all purchases under fixed term, fixed payment installment contracts and makes substantially all of its sales on credit utilizing its own closed-end credit. Fingerhut has used its extensive database, credit programs and proprietary database segmentation software to establish a dominant position in this market, with a large base of loyal, repeat customers. The Company conducts its financial services business through Metris, an information-based direct marketer of consumer credit products, extended service plans, and fee-based products and services to moderate income consumers (with annual household incomes of $15,000 to $35,000). Metris' consumer credit products currently are unsecured and secured credit cards, including the Fingerhut co-branded MasterCard-Registered Trademark- and the Direct Merchants Bank MasterCard. Metris' customers and prospects include both Fingerhut's existing customers and individuals who are not Fingerhut customers but for whom credit bureau information is available. Metris also provides extended service plans on certain categories of products sold by Fingerhut that extend service coverage beyond the manufacturer's warranty. See "Summary--Recent Developments--Metris Initial Public Offering." DIRECT-TO-THE-CONSUMER MARKETING BUSINESS SEGMENT The Company's direct-to-the-consumer marketing business segment is conducted through Fingerhut, Figi's and Infochoice. FINGERHUT CORPORATION INTRODUCTION Fingerhut, one of the largest catalog marketers in the United States, sells general merchandise to moderate income consumers. It is the only large general merchandise retailer in the United States that serves this market exclusively through catalog direct marketing. The median age of Fingerhut's customers is slightly lower than the national average and young families are a significant portion of its customer base. MARKETING Marketing activities are divided into three primary programs: new customer acquisition, a transitional program and existing customer programs. During 1995, Fingerhut mailed approximately 591 million catalogs and other promotions to existing and prospective customers. NEW CUSTOMER ACQUISITION PROGRAMS: Fingerhut's new customer acquisition program is designed to identify and attract new customers on a cost-effective basis. The primary sources of new customers are rented lists, advertisements in magazines and newspapers, catalog requests and other direct marketing solicitations. Fingerhut mails catalogs and other multi-product offerings to prospective customers and adds such customers to its database as responses are received. These programs are intended to identify and target new customers who will become long-term Fingerhut customers. New customers typically account for approximately 20% of Fingerhut's net sales. 20 Fingerhut's determinations as to which prospective customers to solicit, which products to offer and which media to use are based upon the projected long-term profitability and internal rates of return of the program. Maintaining acceptable financial rates of return on new customers depends on balancing the cost of acquisition of new customers with their long-term profitability to Fingerhut. To determine whether the cost to obtain new customers is acceptable, Fingerhut maintains a system that monitors profitability by source of new customers, by type of product and by type of promotional media. Fingerhut also continuously tests various media, products, offerings and incentives and analyzes the results in order to maximize the effectiveness of its customer acquisition efforts. TRANSITIONAL PROGRAMS: After first-time buyers commence payments on their initial purchases, they are placed into a transitional program. The amount of time a first-time buyer remains in a transitional program and the number and type of products he or she is offered depends on the buyer's purchasing and payment practices. A customer is placed on Fingerhut's promotable customer list after demonstrating his or her creditworthiness. EXISTING CUSTOMER PROGRAMS: Fingerhut reaches its existing customers through extensive promotional mailing efforts, primarily catalogs, and through telemarketing. In 1995, Fingerhut mailed 155 different catalogs and other promotions to its established customers. These mailings included general merchandise catalogs, specialty catalogs, small and large multi-product mailers and single product promotions. Management believes that the key factors in optimizing the profitability of its existing customer list are developing long-term repeat buyers and balancing customer response with appropriate credit losses and customer return rates for each segment of its customer list. Fingerhut promotes customer satisfaction and loyalty by extending credit; by using a number of marketing devices, including targeted promotions, deferred payments, 30-day free home trials, a customer satisfaction policy, free gifts, merchandise giveaways, and personalized mailings; and by offering attractive brand name and private label merchandise. DATABASE Fingerhut is a leader in the development and use of information-based marketing concepts in the direct mail industry, using computer technology, proprietary software and a proprietary database containing information on more than 30 million individuals, including approximately 10 million customers who have made a purchase from Fingerhut within the past 24 months. This database contains names, addresses, behavioral characteristics, general demographic information and other information provided by the customer. Fingerhut has entered into an exclusive seven year license with Metris allowing Metris to use the information in the Fingerhut database for marketing financial service products. See "--Financial Services Business Segment" below. CREDIT MANAGEMENT Fingerhut generally does not require its customers to provide traditional credit information in order to approve purchases on credit. Instead of using traditional credit applications, Fingerhut has developed sophisticated and automated proprietary techniques for evaluating the creditworthiness of new and existing customers and for selecting those customers who will receive various categories of mailings. Management believes that Fingerhut's more than 45 years of experience in the mail order business, its database containing purchase and payment histories of more than 30 million people and its significant investment in computer technology and proprietary analytical models give Fingerhut a unique ability to analyze the creditworthiness of customers in its market. The goal of the analysis is not to achieve the lowest possible credit losses but to balance credit losses and return rates with customer response, thereby optimizing profitability. Consequently, Fingerhut's planned credit losses typically are higher than other direct mail and retail companies. 21 Once a customer places an order, Fingerhut employs proprietary techniques designed to identify customers whose orders can be automatically shipped, customers from whom additional information, including credit applications, must be obtained and reviewed and customers to whom credit is declined. After purchases are shipped, customer payments are continuously monitored to identify credit problems as early as possible. Fingerhut has a flexible policy of working with certain delinquent customers, including adjusting their payment schedules, which Fingerhut believes reduces default rates and maintains customer loyalty. Substantially all of Fingerhut's sales are made utilizing its own closed-end credit program, which uses fixed term, fixed payment installment plans. Monthly payments are made by customers and processed by Fingerhut through the use of coupons contained in payment books delivered with each order shipment. Payment terms to existing customers generally range from 4 to 36 monthly payments. In addition, a majority of sales are to customers who receive a deferred payment option, which extends the due date of the first payment by approximately four to five months. Many customers pay their accounts in full before the end of the scheduled payment term. MERCHANDISING Fingerhut offers a broad mix of brand name and private label consumer products, including electronics, housewares, home textiles, apparel, furniture, home accessories, jewelry, sporting goods and toys, tools, automotive, lawn and garden, and financial service products. In 1995, Fingerhut offered approximately 16,000 different products. Fingerhut's gross retail sales mix by product category for 1995 is shown in the following table: PERCENT OF GROSS RETAIL SALES ------------------ Electronics . . . . . . . . . . . . . . . . . . 21% Home Textiles . . . . . . . . . . . . . . . . . 18% Housewares . . . . . . . . . . . . . . . . . . 17% Furniture/Home Accessories . . . . . . . . . . 10% Leisure . . . . . . . . . . . . . . . . . . . . 9% Apparel . . . . . . . . . . . . . . . . . . . . 8% Jewelry . . . . . . . . . . . . . . . . . . . . 8% Tools/Automotive/Lawn & Garden . . . . . . . . 6% Financial Service Products and Other . . . . . 3% --- 100% --- --- Fingerhut selects merchandise to be offered to its customers by evaluating historical product and category demand and analyzing emerging merchandise trends in conjunction with proprietary marketing information. Fingerhut is constantly developing unique brand name and private label product groupings, such as coordinated kitchen ensembles, coordinated bed and bath ensembles and tool sets, targeted to appeal to its customers and to add value and/or style to its merchandise. Fingerhut's general merchandise catalogs feature a wide array of products; they are updated and published throughout the year, including a 496-page holiday big book. Specialty catalogs mailed to targeted portions of Fingerhut's customer list permit Fingerhut to expand the product selection and intensify the growth opportunities for certain product categories. These specialty catalogs include outdoor living, jewelry, electronics, domestics/housewares, gifts, juvenile, seniors, home fitness, home improvement and Spanish-language catalogs. 22 COSTS OF MAILING In 1995, the Company spent an aggregate of $296 million on postage (including the cost of parcel shipments that were passed on to customers) of which 48% was attributable to the mailing of promotional materials, 44% was attributable to parcel shipments and 8% was attributable to various correspondence with customers. As is customary in the direct mail industry, the Company passes on the cost of parcel shipments directly to the customer as part of the shipping and handling charge. The costs of mailing promotional material and certain other correspondence (including postage) are not directly passed on to customers, but are considered in the Company's overall product pricing and mailing strategies. The Company substantially reduces mailing costs by effectively using discounts offered by the United States Postal Service from the basic postal rates. For example, Fingerhut sorts mailings by zip code to the carrier route level and also prints the "zip plus four" bar-code to obtain optimum postal discounts, resulting in savings not always available to smaller direct mail companies. In January 1995, the United States Postal Service increased its first class, third class and fourth class postage rates. In addition, the cost of paper increased. To reduce the effect of the postal and paper increases, Fingerhut took steps to reduce its operating expenses and intends to continue to improve the efficiency of its mailings by reviewing mailing depth criteria and catalog size. FIGI'S INC. Figi's is a mail order retailer of specialty food gifts (such as quality cheeses, smoked meats, candies and baked goods) and other gifts headquartered in Marshfield, Wisconsin. The Company acquired Figi's in 1981. Figi's is one of the largest direct mail food gifts marketers in the United States, with 1995 net sales of approximately $83 million. New customers are acquired from sources similar to those used by Fingerhut, although Figi's customers include both moderate income consumers attracted by Figi's in-house credit terms and more affluent customers who use credit cards. Sales using Figi's interest-free, three payment credit terms constituted approximately 83% of its net sales in 1995. Figi's offerings are made predominantly in catalogs mailed prior to holidays and other gift-giving occasions such as Christmas, Easter, Valentine's Day and Mother's Day. Figi's business is highly seasonal, with approximately 81% of its net sales in the fourth quarter. Like Fingerhut, Figi's seeks to develop repeat business from customers by offering a "satisfaction assured" policy. INFOCHOICE USA, INC. Infochoice markets specially selected products primarily through 30-minute direct response television advertisements commonly known as "infomercials." These advertisements provide entertaining and informative product demonstrations and often feature a well known entertainer or other recognized individual. Infochoice's advertisements are distributed through cable networks and broadcast television stations. During 1995, these products included the Body by Jake-Registered Trademark- Ab and Back Plus-TM- and the Bissell-Registered Trademark- Plus-TM- vacuum. Infochoice's gross retail sales mix by product category in 1995 was: 89% fitness/leisure and 11% housewares. 23 FINANCIAL SERVICES BUSINESS SEGMENT The Company's financial services business segment is conducted through Metris, an information-based direct marketer of consumer credit products, extended service plans, and fee-based products and services to moderate income consumers. Metris provides credit to this market by utilizing a risk-based pricing strategy based on proprietary databases and credit scoring systems. The Company has entered into agreements with Metris to provide for the exclusive use of Fingerhut's proprietary database to market Metris' products and services. Metris' consumer credit products currently are unsecured and secured credit cards, including the Fingerhut co-branded MasterCard and the Direct Merchants Bank MasterCard. Metris' customers and prospects include both Fingerhut's existing customers and individuals who are not Fingerhut customers but for whom credit bureau information is available. Once a prospective customer is targeted, Metris utilizes its proprietary credit scoring models and a risk-based pricing strategy to assign the annual percentage rate, annual fee and credit line based upon the expected risk of the individual prospect. As a result of the risk profile that is typical of Metris' customers, approximately 82% of the existing credit card accounts carry an annual fee, annual percentage rates range from prime plus 6.45% to prime plus 14.20%, and the average initial credit line is approximately $1,700. Metris also provides extended service plans on certain categories of products sold by Fingerhut that extend service coverage beyond the manufacturer's warranty. Although these plans historically have been available only on consumer electronics, Metris has recently begun to offer these plans for jewelry and furniture, and may offer plans on additional types of products in the future. Metris markets its fee-based products and services, including third party insurance, membership clubs, card registration and debt waiver programs, to its credit card customers and to Fingerhut's customers. As a result of Metris' direct marketing and cross-selling efforts, approximately 53% of Metris' credit card customers have purchased one or more fee-based products. As an additional service, Metris develops highly tailored marketing lists, derived from its proprietary database, for third parties. At year-end 1995, Metris was the 23rd largest MasterCard issuer based on number of cards issued, with over 700,000 total credit card accounts and $543.6 million total managed loans outstanding. At March 31, 1996, Metris was the 52nd largest credit card issuer in the United States, based on managed credit card loan balances. As of June 30, 1996 Metris had approximately 1.1 million total credit card accounts and $1.068 billion in total managed loans outstanding. For the first six months of 1996, Metris had total revenues of approximately $65.9 million and net income of approximately $8.9 million. Metris has entered into a number of intercompany agreements with the Company and/or Fingerhut. In addition to providing Metris exclusive use of the Fingerhut database for the marketing of financial service products, the agreements provide for continued access to information about Fingerhut customers, for marketing of extended service plans and for a variety of administrative and other services during the term (generally seven years) of these agreements. 24 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER In connection with the sale of the Old Notes, the Company entered into the Registration Rights Agreement with the Initial Purchasers, pursuant to which the Company agreed to file and to use its best efforts to cause to become effective with the Commission a registration statement with respect to the exchange of the Old Notes for debt securities with terms identical in all material respects to the terms of the Old Notes. A copy of the Registration Rights Agreement has been filed as an Exhibit to the Registration Statement of which this Prospectus is a part. The Exchange Offer is being made to satisfy the contractual obligations of the Company under the Registration Rights Agreement. The form and terms of the New Notes are the same as the form and terms of the Old Notes except that: (i) the New Notes have been registered under the Securities Act and therefore will not be subject to certain restrictions on transfer applicable to the Old Notes and will not be entitled to registration and other rights under the Registration Rights Agreement, (ii) the New Notes are issuable in minimum denominations of $1,000 compared to minimum denominations of $250,000 for the Old Notes, and (iii) the New Notes will not provide for any increase in the interest rate thereon. In that regard, the Old Notes provide, among other things, that, if the Exchange Offer is not consummated by January 24, 1997, the interest rate borne by the Old Notes commencing on January 25, 1997, will increase by 0.50% per annum until the Exchange Offer is consummated. Upon consummation of the Exchange Offer, holders of Old Notes will not be entitled to any increase in the rate of interest thereon or any further registration rights under the Registration Rights Agreement, except under limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange Old Notes" and "Description of the Old Notes." The Exchange Offer is not being made to, nor will the Company accept tenders for exchange from, holders of Old Notes in any jurisdiction in which the Exchange Offer or the acceptance thereof would not be in compliance with the securities or blue sky laws of such jurisdiction. Unless the context requires otherwise, the term "holder" with respect to the Exchange Offer means any person in whose name the Old Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder, or any person whose Old Notes are held of record by The Depository Trust Company who desires to deliver such Old Notes by book-entry transfer at The Depository Trust Company. TERMS OF THE EXCHANGE The Company hereby offers, upon the terms and subject to the conditions set forth in this Prospectus and in the accompanying Letter of Transmittal, to exchange up to $125,000,000 aggregate principal amount of New Notes for a like aggregate principal amount of Old Notes properly tendered on or prior to the Expiration Date (as defined below) and not properly withdrawn in accordance with the procedures described below. The Company will issue, promptly after the Expiration Date, an aggregate principal amount of up to $125,000,000 of New Notes in exchange for a like principal amount of outstanding Old Notes tendered and accepted in connection with the Exchange Offer. Holders may tender their Old Notes in whole or in part in a principal amount of $1,000 and integral multiples thereof, provided that if any Old Note is tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. The Exchange Offer is not conditioned upon any minimum number of Old Notes being tendered. As of the date of this Prospectus $125,000,000 aggregate principal amount of the Old Notes is outstanding. 25 Holders of Old Notes do not have any appraisal or dissenters' rights in connection with the Exchange Offer. Old Notes which are not tendered for or are tendered but not accepted in connection with the Exchange Offer will remain outstanding and be entitled to the benefits of the Indenture, but will not be entitled to any further registration rights under the Registration Rights Agreement, except under limited circumstances. See "Risk Factors--Consequences of a Failure to Exchange Old Notes" and "Description of Old Notes." If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering holder thereof promptly after the Expiration Date. Holders who tender Old Notes in connection with the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes in connection with the Exchange Offer. The Company will pay all charges and expenses, other than certain applicable taxes described below, in connection with the Exchange Offer. See "--Fees and Expenses." NEITHER THE BOARD OF DIRECTORS OF THE COMPANY NOR THE COMPANY MAKES ANY RECOMMENDATION TO HOLDERS OF OLD NOTES AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER. IN ADDITION, NO ONE HAS BEEN AUTHORIZED TO MAKE ANY SUCH RECOMMENDATION. HOLDERS OF OLD NOTES MUST MAKE THEIR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFER AND, IF SO, THE AGGREGATE AMOUNT OF OLD NOTES TO TENDER AFTER READING THIS PROSPECTUS AND THE LETTER OF TRANSMITTAL AND CONSULTING WITH THEIR ADVISERS, IF ANY, BASED ON THEIR OWN FINANCIAL POSITION AND REQUIREMENTS. EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" means 5:00 p.m., New York City time, on , 199_ unless the Exchange Offer is extended by the Company (in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended). The Company expressly reserves the right in its sole and absolute discretion, subject to applicable law, at any time and from time to time, (i) to delay the acceptance of the Old Notes for exchange, (ii) to terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) if the Company determines, in its sole and absolute discretion, that any of the events or conditions referred to under "--Conditions to the Exchange Offer" have occurred or exist or have not been satisfied, (iii) to extend the Expiration Date of the Exchange Offer and retain all Old Notes tendered pursuant to the Exchange Offer, subject, however, to the right of holders of Old Notes to withdraw their tendered Old Notes as described under "--Withdrawal Rights," and (iv) to waive any condition or otherwise amend the terms of the Exchange Offer in any respect. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, or if the Company waives a material condition of the Exchange Offer, the Company will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. Any such delay in acceptance, extension, termination or amendment will be followed promptly by oral or written notice thereof to the Exchange Agent and by making a public announcement thereof, and such announcement in the case of an extension will be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Without limiting the manner in which the Company may choose to make any public announcement and subject to applicable law, the Company shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. 26 ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF NEW NOTES Upon the terms and subject to the conditions of the Exchange Offer, the Company will exchange, and will issue to the Exchange Agent, New Notes for Old Notes validly tendered and not withdrawn (pursuant to the withdrawal rights described under "--Withdrawal Rights") promptly after the Expiration Date. In all cases, delivery of New Notes in exchange for Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of (i) Old Notes or a book-entry confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at The Depositary Trust Company ("DTC"), (ii) the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and (iii) any other documents required by the Letter of Transmittal. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of Old Notes into the Exchange Agent's account at DTC. Subject to the terms and conditions of the Exchange Offer, the Company will be deemed to have accepted for exchange, and thereby exchanged, Old Notes validly tendered and not withdrawn as, if and when the Company gives oral or written notice to the Exchange Agent of the Company's acceptance of such Old Notes for exchange pursuant to the Exchange Offer. The Exchange Agent will act as agent for the Company for the purpose of receiving tenders of Old Notes, Letters of Transmittal and related documents, and as agent for tendering holders for the purpose of receiving Old Notes, Letters of Transmittal and related documents and transmitting New Notes to validly tendering holders. Such exchange will be made promptly after the Expiration Date. If for any reason whatsoever, acceptance for exchange or the exchange of any Old Notes tendered pursuant to the Exchange Offer is delayed (whether before or after the Company's acceptance for exchange of Old Notes) or the Company extends the Exchange Offer or is unable to accept for exchange or exchange Old Notes tendered pursuant to the Exchange Offer, then, without prejudice to the Company's rights set forth herein, the Exchange Agent may, nevertheless, on behalf of the Company and subject to Rule 14e-1(c) under the Exchange Act, retain tendered Old Notes and such Old Notes may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under "--Withdrawal Rights." Pursuant to the Letter of Transmittal, a holder of Old Notes will warrant and agree in the Letter of Transmittal that it has full power and authority to tender, exchange, sell, assign and transfer Old Notes, that the Company will acquire good, marketable and unencumbered title to the tendered Old Notes, free and clear of all liens, restrictions, charges and encumbrances, and the Old Notes tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by the Company or the Exchange Agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the Old Notes tendered pursuant to the Exchange Offer. PROCEDURES FOR TENDERING OLD NOTES VALID TENDER. Except as set forth below, in order for Old Notes to be validly tendered pursuant to the Exchange Offer, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, must be received by the Exchange Agent at one of its addresses set forth under "--Exchange Agent," and either (i) tendered Old Notes must be received by the Exchange Agent, or (ii) such Old Notes must be tendered pursuant to the procedures for book-entry transfer set forth below and a book-entry confirmation must be received by the Exchange Agent, in each case on or prior to the Expiration Date, or (iii) the guaranteed delivery procedures set forth below must be complied with. 27 If less than all of the Old Notes are tendered, a tendering holder should fill in the amount of Old Notes being tendered in the appropriate box on the Letter of Transmittal. The entire amount of Old Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. THE METHOD OF DELIVERY OF CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. BOOK ENTRY TRANSFER. The Exchange Agent will establish an account with respect to the Old Notes at DTC for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of the Old Notes by causing DTC to transfer such Old Notes into the Exchange Agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at DTC, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, must in any case be delivered to and received by the Exchange Agent at its address set forth under "--Exchange Agent" on or prior to the Expiration Date, or the guaranteed delivery procedure set forth below must be complied with. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT SIGNATURE GUARANTEES. Certificates for the Old Notes need not be endorsed and signature guarantees on the Letter of Transmittal are unnecessary unless (a) a certificate for the Old Notes is registered in a name other than that of the person surrendering the certificate or (b) such registered holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the Letter of Transmittal. In the case of (a) or (b) above, such certificates for Old Notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the Letter of Transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of such Eligible Institution. See Instruction 1 to the Letter of Transmittal. GUARANTEED DELIVERY. If a holder desires to tender Old Notes pursuant to the Exchange Offer and the certificates for such Old Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent on or before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, such Old Notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (i) such tenders are made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the Letter of Transmittal, is received by the Exchange Agent, as provided below, on or prior to Expiration Date; and 28 (iii) the certificates (or a book-entry confirmation) representing all tendered Old Notes, in proper form for transfer, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other documents required by the Letter of Transmittal, are received by the Exchange Agent within five New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail to the Exchange Agent and must include a guarantee by an Eligible Institution in the form set forth in such notice. Notwithstanding any other provision hereof, the delivery of New Notes in exchange for Old Notes tendered and accepted for exchange pursuant to the Exchange Offer will in all cases be made only after timely receipt by the Exchange Agent of Old Notes, or of a book-entry confirmation with respect to such Old Notes, and a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees and any other documents required by the Letter of Transmittal. Accordingly, the delivery of New Notes might not be made to all tendering holders at the same time, and will depend upon when Old Notes, book-entry confirmations with respect to Old Notes and other required documents are received by the Exchange Agent. The Company's acceptance for exchange of Old Notes tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering holder and the Company upon the terms and subject to the conditions of the Exchange Offer. DETERMINATION OF VALIDITY. All questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tendered Old Notes will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. The Company reserves the absolute right, in its sole and absolute discretion, to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer as set forth under "--Conditions to the Exchange Offer" or any condition or irregularity in any tender of Old Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If any Letter of Transmittal, endorsement, bond power, power of attorney, or any other document required by the Letter of Transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and unless waived by the Company, proper evidence satisfactory to the Company, in its sole discretion, of such person's authority to so act must be submitted. A beneficial owner of Old Notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact such entity promptly if such beneficial holder wishes to participate in the Exchange Offer. 29 RESALES OF NEW NOTES The Company is making the Exchange Offer in reliance on the position of the staff of the Division of Corporation Finance of the Commission as set forth in certain interpretive letters addressed to third parties in other transactions. However, the Company has not sought its own interpretive letter and there can be no assurance that the staff of the Division of Corporation Finance of the Commission would make a similar determination with respect to the Exchange Offer as it has in such interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance, and subject to the two immediately following sentences, the Company believes that New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of such New Notes. However, any holder of Old Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distributing New Notes, or any broker-dealer who purchased Old Notes from the Company to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the Commission set forth in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such Old Notes in the Exchange Offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such Old Notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds Old Notes acquired for its own account as a result of market-making or other trading activities and exchanges such Old Notes for New Notes, then such broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of such New Notes. Each holder of Old Notes who wishes to exchange Old Notes for New Notes in the Exchange Offer will be required to represent that (i) it is not an "affiliate" of the Company, (ii) any New Notes to be received by it are being acquired in the ordinary course of its business, (iii) it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such New Notes, and (iv) if such holder is not a broker-dealer, such holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it acquired the Old Notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the Commission in the interpretive letters referred to above, the Company believes that broker-dealers who acquired Old Notes for their own accounts as a result of market-making activities or other trading activities ("Participating Broker-Dealers") may fulfill their prospectus delivery requirements with respect to the New Notes received upon exchange of such Old Notes (other than Old Notes which represent an unsold allotment from the original sale of the Old Notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for an exchange offer so long as it contains a description of the plan of distribution with respect to the resale of such New Notes. Accordingly, this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer during the period referred to below in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such Participating Broker-Dealer for its own account as a result of market-making or other trading activities. Subject to certain provisions set forth in the Registration Rights Agreement, the Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with 30 resales of such New Notes for a period ending 180 days after the Expiration Date (subject to extension under certain limited circumstances described below) or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. See "Plan of Distribution." Any Participating Broker-Dealer who is an "affiliate" of the Company may not rely on such interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each Participating Broker-Dealer who surrenders Old Notes pursuant to the Exchange Offer will be deemed to have agreed, by execution of the Letter of Transmittal, that, upon receipt of notice from the Company of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in this Prospectus untrue in any material respect or which causes this Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference herein, in light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreement, such Participating Broker-Dealer will suspend the sale of New Notes pursuant to this Prospectus until the Company has amended or supplemented this Prospectus to correct such misstatement or omission and has furnished copies of the amended or supplemented Prospectus to such Participating Broker-Dealer or the Company has given notice that the sale of the New Notes may be resumed, as the case may be. If the Company gives such notice to suspend the sale of the New Notes, it shall extend the 180-day period referred to above during which Participating Broker-Dealers are entitled to use this Prospectus in connection with the resale of New Notes by the number of days during the period from and including the date of the giving of such notice to and including the date when Participating Broker-Dealers shall have received copies of the amended or supplemented Prospectus necessary to permit resales of the New Notes or to and including the date on which the Company has given notice that the sale of New Notes may be resumed, as the case may be. WITHDRAWAL RIGHTS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth under "--Exchange Agent" on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if certificates for such Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the Old Notes, if different from that of the person who tendered such Old Notes. If Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Old Notes, the tendering holder must submit the serial numbers shown on the particular Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "--Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described above under "--Procedures for Tendering Old Notes." 31 All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof promptly after withdrawal. INTEREST ON THE NEW NOTES Each New Note will bear interest at the rate of 7.375% per annum from the most recent date to which interest has been paid or duly provided for on the Old Note surrendered in exchange for such New Note or, if no interest has been paid or duly provided for on such Old Note, from September 27, 1996 (the date of original issuance of such Old Notes). Interest on the New Notes will be payable semiannually on March 15 and September 15 of each year, commencing on the first such date following the original issuance date of the New Notes. Holders of Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes for any period from and after the last Interest Payment Date to which interest has been paid or duly provided for on such Old Notes prior to the original issue date of the New Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Old Notes, and will be deemed to have waived the right to receive any interest on such Old Notes accrued from and after such Interest Payment Date or, if no such interest has been paid or duly provided for, from and after September 27, 1996. CONDITIONS TO THE EXCHANGE OFFER Notwithstanding any other provisions of the Exchange Offer, or any extension of the Exchange Offer, the Company will not be required to accept for exchange, or to exchange, any Old Notes for any New Notes, and, as described below, may terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any conditions to or amend the Exchange Offer, if any of the following conditions have occurred or exists or have not been satisfied: (a) there shall occur a change in the current interpretation by the staff of the Commission which permits the New Notes issued pursuant to the Exchange Offer in exchange for Old Notes to be offered for resale, resold and otherwise transferred by holders thereof (other than broker-dealers and any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act provided that such New Notes are acquired in the ordinary course of such holders' business and such holders have no arrangement or understanding with any person to participate in the distribution of such New Notes; or (b) any action or proceeding shall have been instituted or threatened in any court or by or before any governmental agency or body with respect to the Exchange Offer which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (c) any law, statute, rule or regulation shall have been adopted or enacted which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; (d) a banking moratorium shall have been declared by United States federal or Minnesota or New York state authorities which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; 32 (e) trading on the New York Stock Exchange or generally in the United States over-the-counter market shall have been suspended by order of the Commission or any other governmental authority which, in the Company's judgment, would reasonably be expected to impair the ability of the Company to proceed with the Exchange Offer; or (f) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Company, threatened for that purpose any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby; or (g) any change, or any development involving a prospective change, in the business or financial affairs of the Company or any of its subsidiaries has occurred which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer. If the Company determines in its sole and absolute discretion that any of the foregoing events or conditions has occurred or exists or has not been satisfied, the Company may, subject to applicable law, terminate the Exchange Offer (whether or not any Old Notes have theretofore been accepted for exchange) or may waive any such condition or otherwise amend the terms of the Exchange Offer in any respect. If such waiver or amendment constitutes a material change to the Exchange Offer, the Company will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered holders of the Old Notes, and the Company will extend the Exchange Offer to the extent required by Rule 14e-1 under the Exchange Act. EXCHANGE AGENT First Bank National Association, has been appointed as Exchange Agent for the Exchange Offer. Delivery of the Letters of Transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent as follows: First Bank National Association 180 East Fifth Street St. Paul, Minnesota 55108 Attention: Corporate Trust Telephone: (612) 244-0733 Facsimile: (612) 244-0712 Delivery to other than the above addresses or facsimile number will not constitute a valid delivery. FEES AND EXPENSES The Company has agreed to pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The Company will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this Prospectus and related documents to the beneficial owners of Old Notes, and in handling or tendering for their customers. 33 Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. The Company will not make any payment to brokers, dealers or others soliciting acceptances of the Exchange Offer. DESCRIPTION OF THE NEW NOTES GENERAL The Old Notes were issued and the New Notes are to be issued under the Indenture dated as of September 15, 1996 (the "Indenture") between the Company and First Bank National Association, as Trustee (the "Trustee"). The summaries of certain provisions of the Indenture, the Old Notes and the New Notes set forth below and under "Description of the Old Notes" do not purport to be complete and are subject to and are qualified in their entirety by reference to all of the provisions of the Indenture and the forms of the certificates evidencing the Old Notes and the New Notes, which documents have been filed or incorporated by reference as exhibits to the Registration Statement and are incorporated herein by reference. See "Available Information." Certain capitalized terms used herein are defined in the Indenture. As used in this "Description of the New Notes," all references to the "Company" shall mean Fingerhut Companies, Inc., excluding, unless the context shall otherwise require, its subsidiaries. The Indenture does not limit the aggregate principal amount of debt securities which may be issued thereunder and provides that debt securities may be issued thereunder from time to time in one or more series. The Old Notes and the New Notes will constitute a single series of debt securities under the Indenture. If the Exchange Offer is consummated, holders of the Old Notes who do not exchange their Old Notes for New Notes will vote together with the holders of New Notes for all relevant purposes under the Indenture. In that regard, the Indenture requires that certain actions by the holders thereunder (including acceleration following an Event of Default) must be taken, and certain rights must be exercised, by specified minimum percentages of the aggregate principal amount of the outstanding debt securities of the relevant series. In determining whether holders of the requisite percentage in principal amount have given any notice, consent or waiver or taken any other action permitted under the Indenture, any Old Notes which remain outstanding after the Exchange Offer will be aggregated with the New Notes and the holders of such Old Notes and New Notes will vote together as a single series for all such purposes. Accordingly, all references herein to specified percentages in aggregate principal amount of the outstanding Notes shall be deemed to mean, at any time after the Exchange Offer is consummated, such percentage in aggregate principal amount of the Old Notes and New Notes then outstanding. The New Notes and the Old Notes are sometimes referred to as, collectively, the "Notes" and, individually, a "Note." The New Notes will be unsecured and unsubordinated obligations of the Company and will be limited to an aggregate principal amount of $125,000,000. Each New Note will bear interest at the rate of 7.375% per annum from the most recent date to which interest has been paid or duly provided for on the Old Note surrendered in exchange for such New Note or, if no interest has been paid or duly 34 provided for on such Old Note, from March 15, 1997, payable semiannually on March 15 and September 15 of each year (each, an "Interest Payment Date"), commencing with the first Interest Payment Date occurring after the date of original issuance of such New Note, to the person in whose name such New Note is registered at the close of business on the March 1 or September 1 next preceding such Interest Payment Date. Interest on the New Notes will be computed on the basis of a 360-day year of twelve 30-day months. The New Notes will mature on September 15, 1999. The New Notes may not be redeemed prior to maturity and will not be subject to any sinking fund. The New Notes will not provide for any increase in the interest rate thereon. For a discussion of the circumstances in which the interest rate on the Old Notes may be temporarily increased, see "Description of the Old Notes." FORM, DENOMINATION AND REGISTRATION The New Notes will be issued only in fully registered form, without coupons, in denominations of $1,000 and any integral multiple of $1,000 in excess thereof. Principal and interest on the New Notes will be payable, and New Notes may be registered for transfer or exchange, at an office or agency maintained by the Company in New York City, except that, at the option of the Company, interest may be paid by check mailed to the persons entitled thereto. No service charge may be made to a holder for any registration of transfer or exchange of the New Notes, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. In case any New Note shall become mutilated, defaced, destroyed, lost or stolen, the Company will execute and, upon the Company's request, the Trustee will authenticate and deliver a New Note, of like tenor and equal principal amount in exchange and substitution for such New Note (upon surrender and cancellation thereof) or in lieu of and substitution for such New Note. In case such New Note is destroyed, lost or stolen, the applicant for a substituted New Note shall furnish to the Company and the Trustee such security or indemnity as may be required by them to hold each of them harmless, and, in every case of destruction, loss or theft of such New Note, the applicant shall also furnish to the Company or the Trustee satisfactory evidence of the destruction, loss or theft of such New Note and of the ownership thereof. Upon the issuance of any substituted New Note, the Company may require the payment by the registered holder thereof of a sum sufficient to cover fees and expenses connected therewith. RANKING; HOLDING COMPANY STRUCTURE The Old Notes are and the New Notes will be unsecured unsubordinated obligations of the Company and rank and will rank on a parity in right of payment with all other unsecured and unsubordinated indebtedness of the Company for borrowed money. The Old Notes are and the New Notes will be obligations exclusively of the Company. The Company is a holding company substantially all of whose consolidated assets are held by its subsidiaries. Accordingly, the cash flow of the Company and the consequent ability to service its debt, including the Notes, are largely dependent upon the earnings of such subsidiaries. Because the Company is a holding company, the Old Notes are and the New Notes will be effectively subordinated to all existing and future indebtedness, trade payables, guarantees, lease obligations and letter of credit obligations of the Company's subsidiaries. See "Risk Factors--Holding Company Structure; Effective Subordination." 35 RESTRICTIVE COVENANTS LIMITATIONS ON SECURED DEBT. The Indenture provides that the Company will not itself, and will not permit any Restricted Subsidiary (defined below) to, incur, issue, assume or guarantee any notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (herein called "debt"), secured by pledge of, or mortgage or other lien on, any Principal Property (defined below), now owned or hereafter owned by the Company or any Restricted Subsidiary, or any shares of stock or debt of any Restricted Subsidiary (herein called "liens"), without effectively providing that the Debt Securities of each series then Outstanding (together with, if the Company shall so determine, any other debt of the Company or such Restricted Subsidiary then existing or thereafter created which is not subordinate to the Debt Securities of each series then Outstanding) shall be secured equally and ratably with such secured debt. The foregoing restrictions do not apply, however, to (a) liens on any Principal Property acquired, constructed or improved by the Company or any Restricted Subsidiary after the date of the applicable Indenture which are created or assumed contemporaneously with, or within 120 days of, such acquisition, construction or improvement, to secure or provide for the payment of all or any part of the cost of such acquisition, construction or improvement; (b) liens on property, shares of capital stock or debt existing at the time of acquisition thereof, whether by merger, consolidation, purchase, lease or otherwise (including liens on property, shares of capital stock or debt of a corporation existing at the time such corporation becomes a Restricted Subsidiary); (c) liens in favor of the Company or any Restricted Subsidiary; (d) liens in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision thereof, or political entity affiliated therewith, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments; (e) certain liens imposed by law, such as mechanics', workmen's, repairmen's, materialmen's, carriers', warehousemen's, vendors' or other similar liens arising in the ordinary course of business; (f) certain pledges or deposits under workmen's compensation or similar legislation or in certain other circumstances; (g) certain liens in connection with legal proceedings, including certain liens arising out of judgments or awards; (h) liens for certain taxes or assessments; (i) certain liens consisting of restrictions on the use of real property which do not interfere materially with the property's use; (j) liens existing on the first date on which the Debt Securities are authenticated; or (k) any extension, renewal or replacement, as a whole or in part, of any lien referred to in the foregoing clauses (a) to (j), inclusive. (Section 1007) Notwithstanding the restrictions described above, the Company or any Restricted Subsidiary may incur, issue, assume or guarantee debt secured by liens without equally and ratably securing the Debt Securities of each series then Outstanding, provided, that at the time of such incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any debt which is concurrently being retired, the aggregate amount of all outstanding debt secured by liens so incurred (other than liens permitted as described in clauses (a) through (k) above), together with the aggregate amount of Attributable Debt incurred pursuant to the second paragraph under the caption "--Limitations on Sale and Leaseback Transactions" below, does not at such time exceed 25% of Consolidated Net Tangible Assets (defined below) of the Company. (Section 1007) LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS. Sale and leaseback transactions by the Company or any Restricted Subsidiary involving a Principal Property are prohibited unless either (a) the Company or such Restricted Subsidiary would be entitled, without equally and ratably securing the Debt Securities of each series then Outstanding, to incur debt secured by a lien on such property, pursuant to the provisions described in clauses (a) through (k) above under "Limitations on Secured Debt,"; or (b) the Company, within 120 days, applies to the retirement of its Funded Debt (defined below) (subject to credits for certain voluntary retirements of Funded Debt) an amount not less than the greater of (i) the net proceeds of the sale of the Principal Property leased pursuant to such arrangement or (ii) the fair market value of the Principal Property so leased. This restriction will not apply to a sale and leaseback transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries or involving the taking back of a lease for a period of less than three years. 36 Notwithstanding the restrictions described above, the Company or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction, provided, that at the time of such transaction, after giving effect thereto, the aggregate amount of all Attributable Debt (defined below) in respect of sale and leaseback transactions existing at such time (other than sale and leaseback transactions permitted as described above), together with the aggregate amount of all outstanding debt incurred pursuant to the second paragraph under the caption "--Limitations on Secured Debt" above, does not at such time exceed 25% of Consolidated Net Tangible Assets of the Company. (Section 1008) CERTAIN DEFINITIONS. The term "Attributable Debt" means the total net amount of rent (discounted at the rate of interest implicit in the terms of the lease) required to be paid during the remaining term of any lease. (Section 101) The term "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet of the Company and computed in accordance with generally accepted accounting principles. Notwithstanding the foregoing, the term "Consolidated Net Tangible Assets" shall not include any assets nor shall it deduct any liabilities of Metris and its subsidiaries. (Section 101) The term "Funded Debt" means debt which by its terms matures at or is extendible or renewable at the option of the obligor to a date more than 12 months after the date of the creation of such debt. (Section 101) The term "Principal Property" means any plant, office facility, warehouse, distribution center or equipment located within the United States of America (other than its territories or possessions) and owned by the Company or any Subsidiary, the gross book value (without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets, except any such property which is not of material importance to the business conducted by the Company and its subsidiaries, taken as a whole. (Section 101) The term "Restricted Subsidiary" means any subsidiary of the Company, other than Metris or any subsidiary of Metris, which owns or leases a Principal Property. (Section 101) EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default" with respect to the Debt Securities of any series issued pursuant to such Indenture, unless otherwise provided with respect to such series: (1) failure to pay any interest on any Debt Security of that series when due and payable, continued for 30 days; (2) failure to pay principal of or any premium on any Debt Security of that series at its maturity; (3) failure to deposit any sinking fund payment, when and as due, in respect of any Debt Security of that series; (4) failure to perform any other covenant of the Company in the Indenture (other than a covenant included in the Indenture solely for the benefit of a series of Debt Securities other than that series), continued for 60 days after written notice as provided in the Indenture; (5) default under any indenture or instrument (other than the Indenture or any Debt Security) under which the Company or any Restricted Subsidiary shall have outstanding or shall have guaranteed the payment of at least $10,000,000 aggregate principal amount of indebtedness for money borrowed which default (a) is caused by failure to pay the principal of or premium, if any, or interest on such indebtedness prior to the expiration of the grace period provided in such indebtedness on the date of such default or (b) results in acceleration of such indebtedness prior to its express maturity and such acceleration has not been annulled within 10 days after written notice as provided in the Indenture; (6) certain events in 37 bankruptcy, insolvency or reorganization involving the Company; and (7) any other Event of Default provided with respect to Debt Securities of that series. (Section 501) If an Event of Default with respect to any series of Debt Securities Outstanding under the Indenture occurs and is continuing, then either the Trustee or the holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of that series by notice as provided in the Indenture may declare the principal amount of all of the Debt Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Debt Securities of any series has been made, but before a judgment or decree for payment of money has been obtained by the Trustee, the holders of a majority in aggregate principal amount of the Outstanding Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 502) The Indenture provides that, subject to the duty of the Trustee during default to act with the required standard of care, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee reasonable indemnity. (Sections 601, 603) Subject to such provisions for the indemnification of the Trustee, the holders of a majority in aggregate principal amount of the Outstanding Debt Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Debt Securities of that series. (Section 512) The Company is required to furnish to the Trustee annually a statement as to the performance by the Company of certain of its obligations under the Indenture and as to any default in such performance. (Section 704) MODIFICATION AND WAIVER Modifications and amendments of the Indenture may be made by the Company and the Trustee with the consent of the holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series affected by such modification or amendment; PROVIDED, HOWEVER, that no such modification or amendment may, without the consent of the holder of each Outstanding Debt Security affected thereby, change the Stated Maturity of the principal of, or any installment of principal of or interest on, any Debt Security, reduce the principal amount of, or premium or interest on, any Debt Security, reduce the amount of principal of an Original Issue Discount Debt Security due and payable upon acceleration of the Maturity thereof, change the place of payment where or coin or currency in which the principal of, or any premium or interest on, any Debt Security is payable, impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security, reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of the holders of which is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults or modify any of the above provisions. (Section 902) The holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of the holders of all Debt Securities of that series, waive, insofar as that series is concerned, compliance by the Company with certain restrictive provisions of the Indenture. (Section 1010) The holders of not less than a majority in aggregate principal amount of the Outstanding Debt Securities of each series may, on behalf of the holders of all Debt Securities of that series, waive any past default under the Indenture with respect to Debt Securities of that series, except a default (1) in the payment of principal of, or any premium or interest on, any Debt Security of such series, or (2) in respect of a covenant or provision of the Indenture which cannot be modified or amended without the consent of the holder of each Outstanding Debt Security of such series affected. (Section 513) 38 The Indenture provides that, in determining whether the holders of the requisite principal amount of the Outstanding Debt Securities have given any request, demand, authorization, direction, notice, consent or waiver thereunder or whether a quorum is present at a meeting of holders of Debt Securities, (1) the principal amount of an Original Issue Discount Debt Security that will be deemed to be Outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof to such date, and (2) the principal amount of a Debt Security denominated in a foreign currency or currency unit that will be deemed to be Outstanding will be the United States dollar equivalent, determined as of the date of original issuance of such Debt Security, of the principal amount of such Debt Security (or, in the case of an Original Issue Discount Debt Security, the United States dollar equivalent, determined as of the date of original issuance of such Debt Security, of the amount determined as provided in (1) above). (Section 101) CONSOLIDATION, MERGER AND SALE OF ASSETS The Company, without the consent of the Holders of any of the Outstanding Debt Securities under the Indenture, may consolidate or merge with or into, or convey, transfer or lease its properties and assets substantially as an entirety to, any Person which is a corporation, partnership or trust organized and validly existing under the laws of any domestic jurisdiction, provided that (1) any successor Person assumes by supplemental indenture the Company's obligations on the Debt Securities and under the Indenture, (2) after giving effect to the transaction no Event of Default, and no event which, after notice or lapse of time, would become an Event of Default, shall have occurred and be continuing under the Indenture, (3) as a result of such transaction the properties or assets of the Company would not become subject to any encumbrance which would not be permitted under the Indenture, and (4) the Company would have delivered an Officers' Certificate and an Opinion of Counsel, each stating that such transaction or supplemental indenture, complies with the Indenture. (Section 801) DEFEASANCE PROVISIONS DEFEASANCE AND DISCHARGE. The Indenture provides that, if principal of and any interest on the Debt Securities are denominated and payable in United States dollars, the Company will be discharged from any and all obligations in respect of the Debt Securities (except for certain obligations to register the transfer or exchange of Debt Securities, to replace stolen, lost or mutilated Debt Securities, to maintain paying agencies and to hold moneys for payment in trust) upon the deposit with the Trustee, in trust, of money, U.S. Government Obligations (as defined) or a combination thereof, which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay any installment of principal of (and premium, if any) and interest on and any mandatory sinking fund payments in respect of the Debt Securities on the Stated Maturity of such payments in accordance with the terms of the Indenture and such Debt Securities. Such discharge may only occur if there has been a change in applicable Federal law or the Company has received from, or there has been published by, the United States Internal Revenue Service a ruling to the effect that such a discharge will not be deemed, or result in, a taxable event with respect to holders of the Debt Securities; and such discharge will not be applicable to any Debt Securities then listed on the New York Stock Exchange if the provision would cause said Debt Securities to be de-listed as a result thereof. (Section 403) The term "U.S. Government Obligations" is defined to mean direct obligations of the United States of America, backed by its full faith and credit. (Section 101) DEFEASANCE OF CERTAIN COVENANTS. The Company may omit to comply with certain restrictive covenants described in Sections 1005 (Maintenance of Properties), 1006 (Payment of Taxes and Other Claims) and 1007 (Restrictions on Liens) of the Indenture. To exercise such option, the Company must deposit with the Trustee money, U.S. Government Obligations or a combination thereof, which through the payment of interest and principal thereof in accordance with their terms will provide money in an amount sufficient to pay any installment of principal of (and premium, if any) and interest on and any mandatory sinking fund payments in respect of the Debt Securities on the Stated Maturity of such payments in accordance with the terms of the Indenture and such Debt Securities. The Company will 39 also be required to deliver to the Trustee an opinion of counsel to the effect that the deposit and related covenant defeasance will not cause the holders of the Debt Securities to recognize income, gain or loss for Federal income tax purposes. (Section 1009) DEFEASANCE AND EVENTS OF DEFAULT. In the event the Company exercises its option to omit compliance with certain covenants of the Indenture and the Debt Securities are declared due and payable because of the occurrence of any Event of Default, the amount of money and U.S. Government Obligations on deposit with the Trustee will be sufficient to pay amounts due on the Debt Securities at the time of their Stated Maturity but may not be sufficient to pay amounts due on the Debt Securities at the time of the acceleration resulting from such Event of Default. However, the Company shall remain liable for such payments. GOVERNING LAW The Indenture and the Notes will be governed by, and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of law principles thereof. REGARDING THE TRUSTEE The Trust Indenture Act contains limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases or to realize on certain property received by it in respect of any such claims, as security or otherwise. The Trustee is permitted to engage in other transactions with the Company and its subsidiaries from time to time, provided that if the Trustee acquires any conflicting interest it must eliminate such conflict upon the occurrence of an Event of Default, or else resign. The Trustee is a lender under the Amended Revolving Credit Facility and the Metris Revolving Credit Facility and also provides other banking services for the Company in the ordinary course of business. DESCRIPTION OF THE OLD NOTES The terms of the Old Notes are identical in all material respects to the New Notes, except that (i) the Old Notes have not been registered under the Securities Act, are subject to certain restrictions on transfer and are entitled to certain registration rights under the Registration Rights Agreement (which rights will terminate upon consummation of the Exchange Offer, except under limited circumstances); (ii) the New Notes are issuable in minimum denominations of $1,000 and integral multiples thereof compared to minimum denominations of $250,000 and integral multiples of $1,000 in excess thereof for the Old Notes; and (iii) the New Notes will not provide for any increase in the interest rate thereon. In that regard, the Old Notes provide that, in the event that the Exchange Offer is not consummated on or prior to January 24, 1997, or a shelf registration statement (the "Shelf Registration Statement") with respect to the resale of the Old Notes is not declared effective within 75 days after the required filing date therefor (the "Effectiveness Date"), additional interest on the principal amount of the Old Notes will accrue at a rate of 0.50% per annum commencing on January 25, 1997 or the Effectiveness Date, as the case may be (the "Additional Interest"); provided, however, that if the Company reasonably requests holders of Old Notes to provide certain information called for by the Registration Rights Agreement for inclusion in any such Shelf Registration Statement, then Old Notes owned by holders who do not deliver such information to the Company as required pursuant to the Registration Rights Agreement will not be entitled to any such Additional Interest. Upon the consummation of the Exchange Offer or the effectiveness of a Shelf Registration Statement, as the case may be, Additional Interest will cease to accrue. The New Notes are not entitled to any such Additional Interest. In addition, the Old Notes and the New Notes will constitute a single series of debt securities under the Indenture. See "Description of the New Notes--General." Accordingly, holders of Old Notes should review the information set forth under "Risk Factors--Certain Consequences of a Failure to Exchange Old Notes" and "Description of the New Notes." 40 CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS The following summary describes certain United States federal income tax considerations to holders of the New Notes who are subject to U.S. net income tax with respect to the New Notes ("U.S. persons") and who will hold the New Notes as capital assets. There can be no assurance that the U.S. Internal Revenue Service (the "IRS") will take a similar view of the purchase, ownership or disposition of the New Notes. This discussion is based upon the provisions of the Internal Revenue Code of 1986, as amended, and regulations, rulings and judicial decisions now in effect, all of which are subject to change. It does not include any description of the tax laws of any state, local or foreign governments or any estate or gift tax considerations that may be applicable to the New Notes or holders thereof. It does not discuss all aspects of federal income taxation that may be relevant to a particular investor in light of such investor's particular investment circumstances or to certain types of investors subject to special treatment under the federal income tax laws (for example, dealers in securities or currencies, S corporations, life insurance companies, tax-exempt organizations, taxpayers subject to the alternative minimum tax and non-U.S. persons) and also does not discuss New Notes held as a hedge against currency risks or as part of a straddle with other investments or as part of a "synthetic security" or other integrated investment (including a "conversion transaction") comprised of a New Note and one or more other investments, or situations in which the functional currency of the holders is not the U.S. dollar. Holders of Old Notes contemplating acceptance of the Exchange Offer should consult their own tax advisors with respect to their particular circumstances and with respect to the effects of state, local or foreign tax laws to which they may be subject. EXCHANGE OF NOTES The exchange of Old Notes for New Notes should not be a taxable event to holders for federal income tax purposes. The exchange of Old Notes for New Notes pursuant to the Exchange Offer should not be treated as an "exchange" for federal income tax purposes because the New Notes should not be considered to differ materially in kind or extent from the Old Notes and because the exchange will occur by operation of the terms of the Old Notes. If, however, the exchange of the Old Notes for the New Notes were treated as an exchange for federal income tax purposes, such exchange should constitute a recapitalization for federal income tax purposes. Accordingly, the New Notes should have the same issue price as the Old Notes, and a holder should have the same adjusted basis and holding period in the New Notes as the holder had in the Old Notes immediately before the exchange. INTEREST ON THE NEW NOTES A holder of a New Note will be required to report interest earned on the New Note as ordinary interest income for federal income tax purposes in accordance with the holder's method of tax accounting. DISPOSITION OF NEW NOTES A holder's tax basis for a New Note generally will be the holder's purchase price for the Old Note. Upon the sale, exchange, redemption, retirement or other disposition of a New Note, a holder will recognize gain or loss equal to the difference (if any) between the amount realized and the holder's tax basis in the New Note. Such gain or loss will be long-term capital gain or loss if the New Note has been held for more than one year and otherwise will be short-term capital gain or loss (with certain exceptions to the characterization as capital gain if the New Note was acquired at a market discount). 41 BACKUP WITHHOLDING A holder of a New Note may be subject to backup withholding at the rate of 31% with respect to interest paid on the New Note and proceeds from the sale, exchange, redemption or retirement of the New Note, unless such holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates that fact or (b) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder of a New Note who does not provide the Company with the holder's correct taxpayer identification number may be subject to penalties imposed by the IRS. A holder of a New Note who is not a U.S. person will generally be exempt from backup withholding and information reporting requirements, but may be required to comply with certification and identification procedures in order to obtain an exemption from backup withholding and information reporting. Any amount paid as backup withholding will be creditable against the holder's federal income tax liability. PLAN OF DISTRIBUTION Each broker-dealer that receives New Notes for its own account in connection with the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by Participating Broker-Dealers during the period referred to below in connection with resales of New Notes received in exchange for Old Notes if such Old Notes were acquired by such Participating Broker-Dealers for their own accounts as a result of market-making activities or other trading activities. The Company has agreed that this Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of such New Notes for a period ending 180 days after the Expiration Date (subject to extension under certain limited circumstances described herein) or, if earlier, when all such New Notes have been disposed of by such Participating Broker-Dealer. See "The Exchange Offer--Resales of New Notes." The Company will not receive any cash proceeds from the issuance of the New Notes offered hereby. New Notes received by broker-dealers for their own accounts in connection with the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or at negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer that resells New Notes that were received by it for its own account in connection with the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act, and any profit on any such resale of New Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 42 VALIDITY OF NEW NOTES The validity of the New Notes being issued in the Exchange Offer will be passed upon for the Company by Dorsey & Whitney LLP, Minneapolis, Minnesota. INDEPENDENT PUBLIC ACCOUNTANTS The consolidated financial statements and schedule of the Company as of December 29, 1995 and December 30, 1994 and for each of the fiscal years in the three-year period ended December 29, 1995, incorporated by reference herein, have been audited and reported upon by KPMG Peat Marwick LLP, independent certified public accountants. Such financial statements and schedule have been incorporated by reference herein in reliance upon the reports of said firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing. 43 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 521 of the Minnesota Business Corporation Act (the "MBCA") (Minn. Stat. Section 302A.521) generally provides that unless its articles or bylaws provide otherwise, a corporation shall indemnify officers and directors made or threatened to be made a party to a proceeding by reason of any such person's present or former capacity as a director or officer against judgments, penalties, fines, settlements and reasonable expenses incurred by the person in connection with the proceeding, if, with respect to the acts or omissions of the person complained of in the proceeding, the person: (1) has not been indemnified by another party for the same amounts; (2) acted in good faith; (3) received no improper personal benefit and the procedures for director conflicts of interest, if applicable, have been satisfied; (4) in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (5) reasonably believed that the conduct was in the best interests of the corporation. The MBCA provides that unless a corporation's articles of incorporation or bylaws provide otherwise, if a person is made or threatened to be made a party to a proceeding, the person is entitled, upon written request to the corporation, to advance payment or reimbursement by the corporation of reasonable expenses (a) upon receipt by the corporation of a written affirmation by the person of a good faith belief that the criteria for indemnification have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the corporation, if it is ultimately determined that the criteria for indemnification have not been satisfied, and (b) after a determination that the facts then known to those making the determination would not preclude indemnification. The MBCA also permits a corporation to purchase and maintain insurance on behalf of a person in that person's official capacity against any liability asserted against and incurred by the person in or arising from that capacity, whether or not the corporation would have been required to indemnify the person against the liability. The Bylaws of the Registrant provide for indemnification of its officers and directors to the fullest extent permitted under the MBCA. The Registrant currently maintains a policy insuring, subject to certain exceptions, its directors and officers and the directors and officers of its subsidiaries against liabilities which may be incurred by such persons acting in such capacities. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 4.1 Indenture dated as of September 15, 1996 between the Company and First Bank National Association , as trustee. 4.2 Registration Rights Agreement, dated as of September 27, 1996, between the Company and Bear, Stearns & Co. Inc., Smith Barney Inc. and First Chicago Capital Markets, Inc. 4.3 Form of Security for 7.375% Senior Notes Due 1999 originally issued by the Company on September 27, 1996. 4.4 Form of Security for 7.375% Senior Notes Due 1999 to be issued by the Company and registered under the Securities Act of 1933. 5 Opinion and consent of Dorsey & Whitney LLP. II-1 12 Computation of Ratio of Earnings to Fixed Charges. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5). 24 Powers of Attorney (included on Page II-5). 25 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of First Bank National Association. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Exchange Agent Agreement. ITEM 22. UNDERTAKINGS Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired or involved therein, that was not the subject of and included in the registration statement when it became effective. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Minnetonka, State of Minnesota, on October 25, 1996. FINGERHUT COMPANIES, INC. By /s/ Theodore Deikel _____________________________ Theodore Deikel (CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT) POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Theodore Deikel, Peter G. Michielutti and Michael P. Sherman and each of them, his true and lawful attorneys-in-fact and agents with full power and substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes and he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dated indicated. SIGNATURE TITLE DATE --------- ----- ---- /s/ Theodore Deikel Chairman of the Board, Chief October 25, 1996 - ------------------------ Executive Officer and President; Theodore Deikel and Director (Principal Executive Officer) /s/ Peter G. Michielutti Senior Vice President, Finance October 25, 1996 - ------------------------ and Chief Financial Officer Peter G. Michielutti (Principal Financial Officer) /s/ Thomas C. Vogt Corporate Controller October 25, 1996 - ------------------------ (Principal Accounting Officer) Thomas C. Vogt /s/ Wendell R. Anderson Director October 25, 1996 - ------------------------ Wendell R. Anderson /s/ Edwin C. Gage Director October 25, 1996 - ------------------------ Edwin C. Gage /s/ Stanley S. Hubbard Director October 25, 1996 - ------------------------ Stanley S. Hubbard /s/ Richard M. Kovacevich Director October 25, 1996 - ------------------------- Richard M. Kovacevich /s/ Dudley C. Mecum Director October 25, 1996 - ------------------------- Dudley C. Mecum /s/ John M. Morrison Director October 25, 1996 - ------------------------- John M. Morrison II-3 EXHIBIT INDEX Number Description Page - ------ ----------- ---- 4.1 Indenture dated as of September 15, 1996 between the Company and First Bank National Association, as trustee. 4.2 Registration Rights Agreement, dated as of September 27, 1996, between the Company and Bear, Stearns & Co. Inc., Smith Barney Inc. and First Chicago Capital Markets, Inc. 4.3 Form of Security for 7.375% Senior Notes Due 1999 originally issued by the Company on September 27, 1996. 4.4 Form of Security for 7.375% Senior Notes Due 1999 to be issued by the Company and registered under the Securities Act of 1933. 5 Opinion and consent of Dorsey & Whitney LLP. 12 Computation of Ratio of Earnings to Fixed Charges. 23.1 Consent of KPMG Peat Marwick LLP. 23.2 Consent of Dorsey & Whitney LLP (included in Exhibit 5). 24 Powers of Attorney (included on Page II-3). 25 Statement of Eligibility under the Trust Indenture Act of 1939 on Form T-1 of First Bank National Association. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Exchange Agent Agreement. II-4 EX-4.1 2 EXHIBIT 4.1 EXHIBIT 4.1 FINGERHUT COMPANIES, INC. TO FIRST BANK NATIONAL ASSOCIATION, TRUSTEE _________________ INDENTURE DATED AS OF SEPTEMBER 15, 1996 _________________ FINGERHUT COMPANIES, INC. Reconciliation and tie between Trust Indenture Act of 1939 and Indenture, dated as of September 15, 1996
Trust Indenture Act Section Indenture Section - --------------- ----------------- Section 310(a)(1) ............................................ 609 (a)(2) ............................................ 609 (a)(3) ............................................ Not Applicable (a)(4) ............................................ Not Applicable (a)(5) ............................................ 609 (b) ............................................ 608, 610 Section 311 ............................................ 613 Section 312(a) ............................................ 701, 702(a) (b) ............................................ 702(b) (c) ............................................ 702(c) Section 313 ............................................ 703 Section 314(a) ............................................ 704 (b) ............................................ Not Applicable (c)(1) ............................................ 102 (c)(2) ............................................ 102 (c)(3) ............................................ Not Applicable (d) ............................................ Not Applicable (e) ............................................ 102 Section 315(a) ............................................ 601 (b) ............................................ 602 (c) ............................................ 601 (d) ............................................ 601 (e) ............................................ 514 Section 316(a) ............................................ 101 (a)(1)(A) ............................................ 502, 512 (a)(1)(B) ............................................ 513 (a)(2) ............................................ Not Applicable (b) ............................................ 508 Section 317(a)(1) ............................................ 503 (a)(2) ............................................ 504 (b) ............................................ 1003 Section 318(a) ............................................ 107
- -------------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be part of the Indenture. i RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION . . . . . . . . . . . . 1 SECTION 101. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Attributable Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Company Request . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Consolidated Net Tangible Assets . . . . . . . . . . . . . . . . . . . . . . . . 3 Corporate Trust Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Funded Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Lien or Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Original Issue Discount Security . . . . . . . . . . . . . . . . . . . . . . . . 5 Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Periodic Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Principal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Required Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ii
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Restricted Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Security Register and Security Registrar . . . . . . . . . . . . . . . . . . . . 8 Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Trust Indenture Act or TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Voting Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 102. Compliance Certificates and Opinions . . . . . . . . . . . . . . . 9 SECTION 103. Form of Documents Delivered to Trustee . . . . . . . . . . . . . . 10 SECTION 104. Acts of Holders . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . 12 SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . 12 SECTION 107. Compliance with Trust Indenture Act . . . . . . . . . . . . . . . 12 SECTION 108. Effect of Headings and Table of Contents . . . . . . . . . . . . . 13 SECTION 109. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 13 SECTION 113. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE TWO SECURITY FORMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 14 SECTION 202. Form of Face of Security . . . . . . . . . . . . . . . . . . . . . 14 SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . 17 SECTION 204. Form of Trustee's Certificate of Authentication . . . . . . . . . 21 SECTION 205. Form of Legend for Global Securities . . . . . . . . . . . . . . . 21 ARTICLE THREE THE SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 301. Amount Unlimited; Issuable in Series . . . . . . . . . . . . . . . 22 SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 303. Execution, Authentication, Delivery and Dating . . . . . . . . . . 25 SECTION 304. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . 28 SECTION 305. Registration, Registration of Transfer and Exchange . . . . . . . 29 SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities . . . . . . . . . 30 SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . 31 SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 309. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
iii SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . 34 SECTION 311. CUSIP Number . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 312. Payment to be in Proper Currency . . . . . . . . . . . . . . . . . 34 ARTICLE FOUR SATISFACTION AND DISCHARGE . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . 34 SECTION 402. Application of Trust Money . . . . . . . . . . . . . . . . . . . . 36 SECTION 403. Defeasance and Discharge of Indenture . . . . . . . . . . . . . . 36 ARTICLE FIVE REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 38 SECTION 502. Acceleration of Maturity; Rescission and Annulment . . . . . . . . 40 SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee . 41 SECTION 504. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . 42 SECTION 505. Trustee May Enforce Claims Without Possession of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 SECTION 506. Application of Money Collected . . . . . . . . . . . . . . . . . . 43 SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 SECTION 509. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . 45 SECTION 510. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . 45 SECTION 511. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . 45 SECTION 512. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . 45 SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . 46 SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . 46 SECTION 515. Waiver of Stay or Extension Laws . . . . . . . . . . . . . . . . . 47 ARTICLE SIX THE TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . 47 SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . 47 SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . 48 SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . 49 SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . 50 SECTION 607. Compensation and Reimbursement . . . . . . . . . . . . . . . . . . 50 SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . 51 SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . 51 SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . . . 51 SECTION 611. Acceptance of Appointment by Successor . . . . . . . . . . . . . . 53
iv SECTION 612. Merger, Conversion, Consolidation or Succession to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . 55 SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . 55 ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY . . . . . . . . . . . . . . . 57 SECTION 701. Company to Furnish Trustee Names and Addresses of Holders . . . . 57 SECTION 702. Preservation of Information; Communications to Holders . . . . . . 57 SECTION 703. Reports by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 58 SECTION 704. Reports by Company . . . . . . . . . . . . . . . . . . . . . . . . 58 ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE . . . . . . . . . . . . . . 59 SECTION 801. Company May Consolidate, Etc., Only on Certain Terms . . . . . . . 59 SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . 60 ARTICLE NINE SUPPLEMENTAL INDENTURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . 61 SECTION 902. Supplemental Indentures with Consent of Holders . . . . . . . . . 62 SECTION 903. Execution of Supplemental Indentures . . . . . . . . . . . . . . . 63 SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . 64 SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . 64 SECTION 906. Reference in Securities to Supplemental Indentures . . . . . . . . 64 SECTION 907. Notice of Supplemental Indentures . . . . . . . . . . . . . . . . 64 ARTICLE TEN COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 SECTION 1001. Payment of Principal, Premium and Interest . . . . . . . . . . . 65 SECTION 1002. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . 65 SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . 65 SECTION 1004. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 SECTION 1005. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . 67 SECTION 1006. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . 67 SECTION 1007. Restrictions on Secured Debt. . . . . . . . . . . . . . . . . . . 68 SECTION 1008. Restriction on Sale and Leaseback Transactions. . . . . . . . . . 70 SECTION 1009. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . 71 SECTION 1010. Defeasance of Certain Obligations . . . . . . . . . . . . . . . . 72 SECTION 1011. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . 73
v ARTICLE ELEVEN REDEMPTION OF SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 SECTION 1101. Applicability of Article . . . . . . . . . . . . . . . . . . . . 74 SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . 74 SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . 75 SECTION 1104. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . 75 SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . 76 SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . 76 SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . 77 ARTICLE TWELVE SINKING FUNDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 SECTION 1201. Applicability of Article . . . . . . . . . . . . . . . . . . . . 77 SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . 77 SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . 78
vi INDENTURE, dated as of September 15, 1996 between Fingerhut Companies, Inc. a corporation duly organized and existing under the laws of the State of Minnesota (herein called the "Company"), having its principal office at 4400 Baker Road, Minnetonka, Minnesota 55343, and First Bank National Association, as Trustee (herein called the "Trustee"). RECITALS OF THE COMPANY The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of its unsecured debentures, notes or other evidences of indebtedness (herein called the "Securities"), to be issued in one or more series as in this Indenture provided. All things necessary to make this Indenture a valid agreement of the Company, in accordance with its terms, have been done. NOW, THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities or of series thereof, as follows: ARTICLE ONE DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION SECTION 101. Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (2) all other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; the following TIA terms used in this Indenture have the following meanings: "INDENTURE SECURITIES" means the Securities; "INDENTURE SECURITY HOLDER" means a Holder; "INDENTURE TO BE QUALIFIED" means this Indenture; "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; (3) any gender used in this Indenture shall be deemed and construed to include correlative words of the masculine, feminine or neuter gender; (4) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted in the United States of America at the date of such computation; and (5) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. Certain terms, used principally in Article Six, are defined in that Article. "Act", when used with respect to any Holder, has the meaning specified in Section 104. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control", when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Attributable Debt" in respect of any Sale and Leaseback Transaction means, at the date of determination, the present value (discounted at the rate of interest implicit in the terms of the lease) of the obligation of the lessee for net rental payments during the remaining term of the lease (including any period for which such lease has been extended or may, at the option of the lessor, be extended). "Net rental payments" under any lease for any period means the sum of the rental and other payments required to be paid in such period by the lessee thereunder, excluding any amounts required to be paid by such lessee (whether or not designated as rental or additional rental) on account of maintenance and repairs, insurance, taxes, assessments, water rates or similar charges required to be paid by such lessee thereunder or any amounts required to be paid by such lessee thereunder contingent upon the amount of sales, maintenance and repairs, insurance, taxes, assessments, water rates or similar charges. -2- "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 614 to act on behalf of the Trustee to authenticate Securities of one or more series. "Board of Directors" means either the board of directors of the Company or any duly authorized committee appointed by that board. "Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification. Where any provision of this Indenture refers to action to be taken pursuant to a Board Resolution (including establishment of any series of the Securities and the forms and terms thereof), such action may be taken by any committee, officer or employee of the Company authorized to take such action by a Board Resolution. "Business Day", when used with respect to any Place of Payment, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions generally in that Place of Payment are authorized or obligated by law or executive order to close, unless otherwise specified in a form of Security. "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Company" means the Person named as the "Company" in the first paragraph of this instrument until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Company" shall mean such successor corporation. "Company Request" or "Company Order" means a written request or order signed in the name of the Company by its Chairman of the Board, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee. "Consolidated Net Tangible Assets" means the aggregate amount of assets (less applicable reserves and other properly deductible items) after deducting therefrom (a) all current liabilities (excluding any indebtedness for money borrowed having a maturity of less than 12 months from the date of the most recent consolidated balance sheet of the Company but which by its terms is renewable or extendable beyond 12 months from such date at the option of the borrower) and (b) all goodwill, trade names, patents, unamortized debt discount and expense and any other like intangibles, all as set forth on the most recent consolidated balance sheet -3- of the Company and computed in accordance with generally accepted accounting principles. Notwithstanding the foregoing, the term "Consolidated Net Tangible Assets" shall not include any assets nor shall it deduct any liabilities of Metris Companies, Inc. and its Subsidiaries. "Corporate Trust Office" means the office of the Trustee in The City of St. Paul, Minnesota at which at any particular time its corporate trust business shall be principally administered. "Corporation" includes corporations, associations, companies, joint stock companies and business trusts. "Debt" has the meaning specified in Section 1007. "Defaulted Interest" has the meaning specified in Section 307. "Depositary" means, with respect to the Securities of any series issuable or issued in whole or in part in the form of one or more Global Securities, the clearing agency registered under the Exchange Act, specified for that purpose as contemplated by Section 301 or any successor clearing agency registered under the Exchange Act as contemplated by Section 305, and if at any time there is more than one such Person, "Depositary" as used with respect to the Securities of any series shall mean the Depositary with respect to the Securities of such series. "Event of Default" has the meaning specified in Section 501. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Funded Debt" means Debt which by its terms matures at or is extendible or renewable at the option of the obligor to a date more than 12 months after the date of the creation of such Debt. "Global Security" means a Security bearing the legend specified in Section 205 evidencing all or part of a series of Securities, issued to the Depositary for such series or its nominee, and registered in the name of such Depositary or nominee. "Holder" means a Person in whose name a Security is registered in the Security Register. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities established as contemplated by Section 301; provided, however, that, if at any time more than one Person is acting as -4- Trustee under this instrument due to the appointment of one or more separate Trustees for any one or more separate series of Securities pursuant to Section 610(e), "Indenture" shall mean, with respect to such series of Securities for which any such Person is Trustee, this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof and shall include the terms of particular series of Securities for which such Person is Trustee established as contemplated by Section 301, exclusive, however, of any provisions or terms which relate solely to other series of Securities for which such Person is not Trustee, regardless of when such terms or provisions were adopted, and exclusive of any provisions or terms adopted by means of one or more indentures supplemental hereto executed and delivered after such Person had become such Trustee but to which such Person, as such Trustee, was not a party. "Interest", when used with respect to an Original Issue Discount Security which by its terms bears interest only after Maturity, means interest payable after Maturity. "Interest Payment Date", when used with respect to any Security, means the Stated Maturity of an installment of interest on such Security. "Lien" or "Liens" has the meaning specified in Section 1007. "Maturity", when used with respect to any Security, means the date on which the principal of such Security or an installment of principal becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Officers' Certificate" means a certificate signed by the Chairman of the Board, the President, a Vice President or an Assistant Vice President of the Company, and by the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Company. "Original Issue Discount Security" means any Security which provides for an amount less than the principal amount thereof to be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502. "Outstanding", when used with respect to Securities, means, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: -5- (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Securities; provided that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; and (iii) Securities which have been paid pursuant to Section 306 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a bona fide purchaser in whose hands such Securities are valid obligations of the Company; provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder or whether a quorum is present at a meeting of Holders of Securities, (i) the principal amount of an Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof pursuant to Section 502, (ii) the principal amount of a Security denominated in one or more foreign currencies or currency units that shall be deemed to be Outstanding shall be the U.S. dollar equivalent, determined in the manner provided as contemplated by Section 301 as of the date of original issuance of such Security, of the principal amount (or, in the case of an Original Issue Discount Security, the U.S. dollar equivalent, determined as of the date of original issuance of such Security, of the amount determined as provided in (i) above) of such Security as determined by the Company pursuant to Section 301, and (iii) Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor. -6- "Paying Agent" means any Person authorized by the Company to pay the principal of (and premium, if any) and/or interest on any Securities on behalf of the Company. "Periodic Offering" means an offering of Securities of a series from time to time the specific terms of which Securities, including without limitation the rate or rates of interest (or formula for determining the rate or rates of interest), if any, thereon, the Stated Maturity or Maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company or its agents upon the issuance of such Securities. "Person" means any individual, Corporation, partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Place of Payment", when used with respect to the Securities of any series, means the place or places where the principal of (and premium, if any) and/or interest on the Securities of that series are payable, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security, and, for the purposes of this definition, any Security authenticated and delivered under Section 306 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security. "Principal Property" means any plant, office facility, warehouse distribution center or equipment located within the United States of America (other than its territories or possessions) and owned by the Company or any Subsidiary, the gross book value (without deduction of any depreciation reserves) of which on the date as of which the determination is being made exceeds 1% of Consolidated Net Tangible Assets of the Company, except any such property which is not of material importance to the business conducted by the Company and its Subsidiaries, taken as a whole (as determined by any two of the following: the Chairman or a Vice Chairman of the Board of the Company, its President, its Chief Financial Officer, its Vice President of Finance, its Treasurer or its Controller). "Redemption Date", when used with respect to any Security to be redeemed, means the date fixed for such redemption pursuant to this Indenture. -7- "Redemption Price", when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Regular Record Date" for the interest payable on any Interest Payment Date on the Securities of any series means the date specified for that purpose as contemplated by Section 301. "Required Currency" has the meaning specified in Section 311. "Responsible Officer", when used with respect to the Trustee, means any officer of the Trustee assigned by it to administer its corporate trust matters. "Restricted Subsidiary" means any Subsidiary of the Company, other than Metris Companies, Inc. or any Subsidiary of Metris Companies, Inc., which owns or leases a Principal Property. "Securities" has the meaning stated in the first recital of this Indenture and more particularly means any Securities authenticated and delivered under this Indenture; provided, however, that if at any time there is more than one Person acting as Trustee under this Indenture, "Securities" with respect to the Indenture as to which such Person is Trustee shall have the meaning stated in the first recital of this Indenture and shall more particularly mean Securities authenticated and delivered under this Indenture, exclusive, however, of Securities of any series as to which such Person is not Trustee. "Security Register" and "Security Registrar" have the respective meanings specified in Section 305. "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 307. "Stated Maturity", when used with respect to any Security or any installment of principal thereof or interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of principal or interest is due and payable. "Subsidiary" means any Corporation of which securities (excluding securities entitled to vote for directors only by reason of the happening of a contingency) entitled to elect at least a majority of the corporation's directors shall at the time be owned, directly or indirectly, by the Company, or one or more Subsidiaries, or by the Company and one or more Subsidiaries. "Trustee" means the Person named as the "Trustee" in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the -8- applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder, and if at any time there is more than one such Person, "Trustee" as used with respect to the Securities of any series shall mean the Trustee with respect to Securities of that series. "Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed, except as provided in Section 905. "U.S. Government Obligations" means direct obligations of the United States of America, backed by its full faith and credit. "Vice President", when used with respect to the Company, means any vice president, whether or not designated by a number or a word or words added before or after the title "vice president". "Voting Stock", when used with respect to a Corporation, means stock of the class or classes having general voting power under ordinary circumstances to elect at least a majority of the board of directors, managers or trustees of such Corporation (irrespective of whether at the time stock or securities of any other class or classes shall have or might have voting power by reason of the happening of any contingency). SECTION 102. Compliance Certificates and Opinions. Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; -9- (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion whether such covenant or condition has been complied with; and (4) a statement whether, in the opinion of each such individual, such condition or covenant has been complied with. SECTION 103. Form of Documents Delivered to Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of any officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such officer's certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. SECTION 104. Acts of Holders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar -10- tenor signed by such Holders in person or by an agent duly appointed in writing, and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 601) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than such signer's individual capacity, such certificate or affidavit shall also constitute sufficient proof of such signer's authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient. (c) The ownership of Securities shall be proved by the Security Register. (d) The Company may fix any day as the record date for the purpose of determining the Holders of Securities of any series entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted to be given or taken by Holders of Securities of such series, but the Company shall have no obligation to do so. If not set by the Company prior to the first solicitation of a Holder of Securities of such series made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 701) prior to such first solicitation or vote, as the case may be. With regard to any record date for action to be taken by the Holders of one or more series of Securities, only the Holders of Securities of such series on such date (or their duly designated proxies) shall be entitled to give or take, or vote on, the relevant action. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, -11- omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security. SECTION 105. Notices, Etc., to Trustee and Company. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with a Responsible Officer of the Trustee at its Corporate Trust Office, Attention: Corporate Trust Department, or (2) the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at the address of its principal office specified in the first paragraph of this instrument (Attention: Treasurer) or at any other address previously furnished in writing to the Trustee by the Company. SECTION 106. Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at such Holder's address as it appears in the Security Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made by or with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. -12- SECTION 107. Compliance with Trust Indenture Act. This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act that are required to be part of this Indenture. If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. SECTION 108. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. SECTION 109. Successors and Assigns. All covenants and agreements in this Indenture by the Company or the Trustee shall bind its successors and assigns, whether so expressed or not. SECTION 110. Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. SECTION 111. Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than the parties hereto, any Authenticating Agent, any Paying Agent, any Securities Registrar, and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture. SECTION 112. Governing Law. This Indenture and the Securities shall be governed by and construed in accordance with the laws of the State of New York. SECTION 113. Legal Holidays. Except as may be otherwise specified with respect to any particular Securities, in any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day at any Place of Payment, then -13- (notwithstanding any other provision of this Indenture or of the Securities) payment of interest or principal (and premium, if any) need not be made at such Place of Payment on such date, but may be made on the next succeeding Business Day at such Place of Payment with the same force and effect as if made on the Interest Payment Date or Redemption Date, or at the Stated Maturity, provided that no interest shall accrue for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be. ARTICLE TWO SECURITY FORMS SECTION 201. Forms Generally. The Securities of each series shall be in substantially the form set forth in this Article, or in such other form as shall be established by or pursuant to a Board Resolution and set forth in an Officers' Certificate or established by one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities, as evidenced by their execution of the Securities. If the form of Securities of any series is established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Company Order contemplated by Section 303 for the authentication and delivery of such Securities. The Trustee's certificates of authentication shall be in substantially the form set forth in this Article with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture. The definitive Securities may be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities, as evidenced by their execution of such Securities. SECTION 202. Form of Face of Security. [INSERT ANY LEGEND REQUIRED BY THE INTERNAL REVENUE CODE AND THE REGULATIONS THEREUNDER.] -14- FINGERHUT COMPANIES, INC. _________________________ No. _________ [$] __________________ Fingerhut Companies, Inc. a corporation duly organized and existing under the laws of Minnesota (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to __________________________________________, or registered assigns, the principal sum of _________________________________ [Dollars] on ___________________________ [IF THE SECURITY IS TO BEAR INTEREST PRIOR TO MATURITY, INSERT --, and to pay interest thereon from ________________ or from the most recent Interest Payment Date to which interest has been paid or duly provided for, [semi-annually in arrears on ____________________ and ________________________ in each year] [annually in arrears on ____________________], commencing _________________________, at the rate of ________% per annum, until the principal hereof is paid or made available for payment [IF APPLICABLE INSERT --, and (to the extent that the payment of such interest shall be legally enforceable) at the rate of ______% per annum on any overdue principal and premium and on any overdue installment of interest]. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be the _____________________________________________ or ______________________________ (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to holders of Securities of this series not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities of this series may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture]. [IF THE SECURITY IS NOT TO BEAR INTEREST PRIOR TO MATURITY, INSERT --. The principal of this Security shall not bear interest except in the case of a default in payment of principal upon acceleration, upon redemption or at Stated Maturity and in such case the overdue principal of this Security shall bear interest at the rate of ______% per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue from the date of such default in payment to the date payment of such principal has been made or duly provided for. Interest on any overdue principal shall be payable on demand. Any such interest on any overdue principal that is not so paid on demand shall bear interest at the rate of ______ % per annum (to the extent that the payment of such interest shall be legally enforceable), which shall accrue -15- from the date of such demand for payment to the date payment of such interest has been made or duly provided for, and such interest shall also be payable on demand.] Payment of the principal of (and premium, if any) and [If applicable, insert -- any such] interest on this Security will be made at the office or agency of the Company maintained for that purpose in ___________________, in such coin or currency [of the United States of America] as at the time of payment is legal tender for payment of public and private debts [IF APPLICABLE, INSERT --; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register]. [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity as described on the reverse hereof.] Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: FINGERHUT COMPANIES, INC. By_______________________ Attest: ____________________________ -16- SECTION 203. Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued and to be issued in one or more series under an Indenture, dated as of September 27, 1996, (herein called the "Indenture"), between the Company and First Bank National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be authenticated and delivered. This Security is one of the series designated on the face hereof [, limited in aggregate principal amount to [$] _______________________]. By the terms of the Indenture, additional Securities [IF APPLICABLE, INSERT -- of this series and] of other separate series, which may vary as to date, amount, Stated Maturity, interest rate or method of calculating the interest rate and in other respects as therein provided, may be issued in an unlimited principal amount. [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity hereof upon not less than 30 days' notice by mail to the Person[s] in whose name[s] [the Securities to be redeemed are/this Security is] registered at the address specified in the Security Register, [IF APPLICABLE, INSERT -- (1) on ____________ in any year commencing with the year ________________ and ending with the year ____________ through operation of the sinking fund for this series at a Redemption Price equal to 100% of the principal amount, and (2)] at any time [on or after ________________], as a whole or in part, at the election of the Company, at the following Redemption Prices (expressed as percentages of the principal amount): if redeemed [on or before ___________, ___________%, and if redeemed] during the 12-month period beginning _____________ of the years indicated,
Redemption Redemption Year Price Year Price ---- ---------- ---- ----------
and thereafter at a Redemption Price equal to ______% of the principal amount, [If APPLICABLE, INSERT -- together in the case of any such redemption [IF APPLICABLE, INSERT -- (whether through operation of the sinking fund or otherwise)] with accrued interest to the Redemption Date, provided, however, that installments of interest whose Stated Maturity is on or prior to such Redemption Date will be payable to the [Holders of such Securities/Holder of this Security] (or one or more Predecessor Securities) of record at the close of business on the relevant Record -17- Dates referred to on the face hereof, all as provided in the Indenture]. [IF THERE IS NO SINKING FUND, INSERT -- [The Securities of this series are/This Security is] not subject to any sinking fund.] [IF APPLICABLE, INSERT -- [The Securities of this series are/This Security is] subject to redemption prior to the Stated Maturity hereof upon not less than 30 days' notice by mail to the Person[s] in whose name[s] [the Securities to be redeemed are/this Security is] registered at the address specified in the Security Register, (1) on _________ in any year commencing with the year ________ and ending with the year ___________ through operation of the sinking fund for this series at the Redemption Prices for redemption through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below, and (2) at any time [on or after ___________________], as a whole or in part, at the election of the Company, at the Redemption Prices for redemption otherwise than through operation of the sinking fund (expressed as percentages of the principal amount) set forth in the table below: If redeemed during the 12-month period beginning __________________ of the years indicated,
Redemption Price for Redemption Redemption Price for Through Operation Redemption Otherwise of the Than Through Operation Year Sinking Fund of the Sinking Fund ---- ----------------- ----------------------
and thereafter at a Redemption Price equal to ___ % of the principal amount [IF APPLICABLE, INSERT --, together in the case of any such redemption (whether through operation of the sinking fund or otherwise) with accrued interest to the Redemption Date, provided, however, that installments of interest whose Stated Maturity is on or prior to such Redemption Date will be payable to the [Holders of such Securities/Holder of this Security] (or one or more Predecessor Securities) of record at the close of business on the relevant Record Dates referred to on the face hereof, all as provided in the Indenture].] [Notwithstanding the foregoing, the Company may not, prior to ____, redeem any Securities of this series as contemplated by [Clause (2) of] the preceding paragraph as a part of, or in anticipation of, any refunding operation by the application, directly or indirectly, of moneys borrowed having an interest cost to the Company (calculated in accordance with generally accepted financial practice) of less than ____% per annum.] [The sinking fund for this series provides for the redemption on _________ in each year beginning with the year _____ and ending with the year ____ of [not less than] -18- [$] ______________________ [("mandatory sinking fund") and not more than [$] _____________] aggregate principal amount of Securities of this series. [Securities of this series acquired or redeemed by the Company otherwise than through [mandatory] sinking fund payments may be credited against subsequent [mandatory] sinking fund payments otherwise required to be made -- in the inverse order in which they become due.]] [In the event of redemption of this Security in part only, a new Security or Securities of this series and of like tenor or an authorized denomination for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof, and, in the event of transfer or exchange, a new Security or Securities of this series and of like tenor and for a like aggregate principal amount will be issued to the Holder, in the case of exchange, or the designated transferee or transferees, in the case of transfer.] [If the Security is not an Original Issue Discount Security, -- If an Event of Default with respect to Securities of this series shall occur and be continuing, the principal of the Securities of this series may (subject to the conditions set forth in the Indenture) be declared due and payable in the manner and with the effect provided in the Indenture.] [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, -- If an Event of Default with respect to Securities of this series shall occur and be continuing, a lesser amount than the principal amount due at the Stated Maturity of the Securities of this series may (subject to the conditions set forth in the Indenture) be declared due and payable in the manner and with the effect provided in the Indenture. The amount due and payable on this Security in the event that this Security is declared due and payable prior to the Stated Maturity hereof shall be -- INSERT FORMULA FOR DETERMINING THE AMOUNT -- or in the event that this Security is redeemed shall be the specified percentage -- INSERT FORMULA FOR DETERMINING THE AMOUNT. Upon payment (i) of the amount of principal so declared due and payable and (ii) of interest on any overdue principal and overdue interest (in each case to the extent that the payment of such interest shall be legally enforceable), all of the Company's obligations in respect of the payment of the principal of and interest, if any, on the Securities of this series shall terminate.] [IF APPLICABLE, INSERT -- The Indenture contains provisions for defeasance at any time of the Company's obligations in respect of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants with respect to this Note, in each case upon compliance with certain conditions set forth therein.] The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent -19- of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected and, for certain purposes, without the consent of the Holders of any Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. [IF THE SECURITY IS AN ORIGINAL ISSUE DISCOUNT SECURITY, -- In determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or whether a quorum is present at a meeting of Holders of Securities, the principal amount of any Original Issue Discount Security that shall be deemed to be Outstanding shall be the amount of the principal thereof that would be due and payable as of the date of such determination upon the acceleration of the Maturity thereof.] No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Security are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or such Holder's attorney duly authorized in writing, and thereupon one or more new Securities of this series and of like tenor of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Securities of this series are issuable only in registered form without coupons in denominations of [$1,000] and any amount in excess thereof which is an integral multiple of [$1,000]. As provided in the Indenture and subject to certain limitations therein set forth, Securities of this series are exchangeable for a like aggregate principal amount of Securities of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. -20- No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered in the Security Register as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. SECTION 204. Form of Trustee's Certificate of Authentication. This is one of the Securities of the series designated therein and issued pursuant to the within-mentioned Indenture. FIRST BANK NATIONAL ASSOCIATION as Trustee By____________________________ Authorized Signatory SECTION 205. Form of Legend for Global Securities. Any Global Security authenticated and delivered hereunder shall, in addition to the provisions contained in Sections 202 and 203, bear a legend in substantially the following form or such similar form as may be required by the Depositary: "Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or to its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR -21- OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. ARTICLE THREE THE SECURITIES SECTION 301. Amount Unlimited; Issuable in Series. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is unlimited. The Securities shall rank equally and pari passu and may be issued in one or more series. There shall be established by or pursuant to a Board Resolution and, subject to Section 303, set forth or determined in the manner provided in an Officers' Certificate or established in one or more indentures supplemental hereto, prior to the initial issuance of Securities of any series, (1) the title of the Securities of the series (which shall distinguish the Securities of the series from Securities of any other series); (2) any limit upon the aggregate principal amount of the Securities of the series which may be authenticated and delivered under this Indenture (except for Securities authenticated and delivered upon registration of transfer of, or in lieu of, other Securities of the series pursuant to Section 304, 305, 306, 906, 1107 and except for any Securities which, pursuant to Section 303, are deemed never to have been authenticated and delivered hereunder); (3) the Person to whom any interest on a Security of the series shall be payable, if other than the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest; (4) the date or dates on which the principal or installments of principal of the Securities of the series is or are payable and any rights to extend such date or dates; (5) the rate or rates at which the Securities of the series shall bear interest, if any, or the formula pursuant to which such rate or rates shall be determined, the date or dates from which such interest shall accrue, the -22- Interest Payment Dates on which such interest shall be payable and the Regular Record Date for the interest payable on any Interest Payment Date; (6) the place or places where the principal of (and premium, if any) and interest on Securities of the series shall be payable, any Securities of the series may be surrendered for registration of transfer or exchange and notices and demands to or upon the Company with respect to the Securities of the series and this Indenture may be served; (7) the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series may be redeemed, in whole or in part, at the option of the Company; (8) the obligation, if any, of the Company to redeem or purchase Securities of the series pursuant to any sinking fund or analogous provisions or at the option of a Holder thereof and the period or periods within which, the price or prices at which and the terms and conditions upon which Securities of the series shall be redeemed or purchased, in whole or in part, pursuant to such obligation; (9) whether the Securities of the series will be convertible into shares of Common Stock and/or exchangeable for other securities, and if so, the terms and conditions upon which such Securities will be so convertible or exchangeable, and any deletions from or modifications or additions to this Indenture to permit or to facilitate the issuance of such convertible or exchangeable Securities or the administration thereof; (10) the identity of each Security Registrar and Paying Agent, if other than or in addition to the Trustee; (11) if the amount of principal of, or any premium or interest on, any Securities of the series may be determined by reference to an index or pursuant to a formula, the manner in which such amounts shall be determined; (12) the applicability of, and any addition to or change in, the covenants and definitions currently set forth in this Indenture; (13) if other than denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000, the denominations in which Securities of the series shall be issuable; (14) if other than the currency of the United States of America, the currency, currencies or currency units in which payment of the principal of -23- and any premium and interest on any Securities of the series shall be payable if other than the currency of the United States of America, the manner of determining the U.S. dollar equivalent of the principal amount thereof for purposes of the definition of "Outstanding" in Section 101, and, if the principal of or any premium or interest on any Securities of the series is to be payable, at the election of the Company or a Holder thereof, in one or more currencies or currency units other than that or those in which the Securities are stated to be payable, the currency, currencies or currency units in which payment of the principal of and any premium and interest on Securities of such series as to which such election is made shall be payable, and the periods within which and the terms and conditions upon which such election is to be made; (15) any other event or events of default applicable with respect to Securities of the series in addition to or in lieu of those provided in Section 501(1)-(7); (16) if less than the principal amount thereof, the portion of the principal amount of Securities of the series which shall be payable upon declaration of acceleration of the Maturity thereof pursuant to Section 502; (17) whether the Securities of the series shall be issued in whole or in part in the form of one or more Global Securities and, if so, (a) the Depositary with respect to such Global Security or Securities and (b) the circumstances under which any such Global Security may be exchanged for Securities registered in the name of, and any transfer of such Global Security may be registered to, a Person other than such Depositary or its nominee, if other than as set forth in Section 305; (18) if principal of or any premium or interest on the Securities of a series is denominated or payable in a currency or currencies other than the currency of the United States of America, whether and under what terms and conditions the Company may be discharged from obligations pursuant to Sections 403 and 1107 with respect to Securities of such series; (19) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 901(5)); (20) if applicable, that the Securities of the series, in whole or any specified part, shall not be defeasible pursuant to Section 902 or Section 903 or both such Sections and, if other than by a Company Order, the manner in which any election by the Company to defend such Securities shall be evidenced; and -24- (21) whether the Securities of the Series will be secured and the type, amount and other terms of, and provisions relating to, the collateral to be provided as such security, and any deletions, additions or modifications to this Indenture to permit the issuance of secured Securities or the administration thereof. All Securities of any one series (other than Securities offered in a Periodic Offering) shall be substantially identical except as to denomination and except as may otherwise be provided by or pursuant to the Board Resolution referred to above and, subject to Section 303, set forth, or determined in the manner provided, in the Officers' Certificate referred to above or in any such indenture supplemental hereto. If any of the terms of the series are established by action taken pursuant to a Board Resolution, a copy of an appropriate record of such action shall be certified by the Secretary or an Assistant Secretary of the Company and delivered to the Trustee at or prior to the delivery of the Officers' Certificate setting forth the terms of the series. With respect to Securities of a series offered in a Periodic Offering, such Board Resolution and Officers' Certificate or supplemental indenture may provide general terms or parameters for Securities of such series and provide either that the specific terms of particular Securities of such series shall be specified in a Company Order or that such terms shall be determined by the Company or its agents in accordance with other procedures specified in a Company Order as contemplated by the third paragraph of Section 303. SECTION 302. Denominations. Unless otherwise provided in the applicable Officers' Certificate or supplemental indenture, the Securities of each series shall be issued in registered form without coupons in such denominations as shall be specified as contemplated by Section 301. In the absence of any such provisions with respect to the Securities of any series, the Securities of such series shall be issuable in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000. SECTION 303. Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Company by its Chairman of the Board, its President or one of its Vice Presidents, under its corporate seal affixed thereto or reproduced thereon attested by its Secretary or one of its Assistant Secretaries. The signature of any of these officers on the Securities may be manual or facsimile. -25- Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities of any series executed by the Company to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities, or, in the case of Securities offered in a Periodic Offering, from time to time in accordance with such other procedures (including, without limitation, the receipt by the Trustee of electronic instructions from the Company or its duly authorized agents, promptly confirmed in writing by the Company) acceptable to the Trustee as may be specified from time to time by a Company Order for establishing the specific terms of particular Securities being so offered, and the Trustee in accordance with the Company Order shall authenticate and deliver such Securities. If the form or forms or terms of the Securities of the series have been established by or pursuant to one or more Board Resolutions as permitted by Sections 201 and 301, in authenticating such Securities and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating, (a) that the form or forms of such Securities have been established in conformity with the provisions of this Indenture; (b) that the terms of such Securities have been established in conformity with the provisions of this Indenture; (c) that such Securities, when authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or transfer and other laws of general applicability relating to or affecting the enforcement of creditors' rights and to general equity principles; (d) that authentication and delivery of such Securities and the execution and delivery of the supplemental indenture, if any, by the Trustee will not violate the terms of the Indenture; -26- (e) that the Company has the corporate power to issue such Securities, and has duly taken all necessary corporate action with respect to such issuance; and (f) that the issuance of such Securities will not contravene the certificate of incorporation or bylaws of the Company or result in any violation of any of the terms or provisions of any law or regulation or of any indenture, mortgage or other agreement known to such Counsel by which the Company is bound; provided, however, that, with respect to Securities of a series offered in a Periodic Offering, the Trustee shall be entitled to receive such Opinion of Counsel in connection only with the first authentication of each form of Securities of such series and that the opinions described in Clauses (b) and (c) above may state, respectively, that (b) if the terms of such Securities are to be established pursuant to a Company Order or pursuant to such procedures as may be specified from time to time by a Company Order, all as contemplated by a Board Resolution or action taken pursuant thereto, such terms will have been duly authorized by the Company and established in conformity with the provisions of this Indenture; and (c) that such Securities, when executed by the Company, completed, authenticated and delivered by the Trustee in accordance with this Indenture, and issued and delivered by the Company and paid for, all in accordance with any agreement of the Company relating to the offering, issuance and sale of such Securities, will be duly issued under this Indenture and will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting generally the enforcement of creditors' rights and to general principles of equity. With respect to Securities of a series offered in a Periodic Offering, the Trustee may rely, as to the authorization by the Company of any of such Securities, the form or forms and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel, Company Order and other documents delivered pursuant to Sections 201 and 301 and this Section, as applicable, in connection with the first authentication of a form of Securities of such series and it shall not be necessary for the Company to deliver such Opinion of Counsel and other documents (except as may be required by the specified other procedures, if any, referred to above) at or prior to the time of authentication of each Security of such series unless and until the Trustee receives notice that such Opinion of Counsel or other documents have been superseded or revoked, and may -27- assume compliance with any conditions specified in such Opinion of Counsel (other than any conditions to be performed by the Trustee). If such form or forms or terms have been so established, the Trustee shall not be required to authenticate such Securities if the issue of such Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication. No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and is entitled to the benefits of this Indenture. Notwithstanding the foregoing, if any Security shall have been authenticated and delivered hereunder but never issued and sold by the Company, and the Company shall deliver such Security to the Trustee for cancellation as provided in Section 309 together with a written statement (which need not comply with Section 102 and need not be accompanied by an Opinion of Counsel) stating that such Security has never been issued and sold by the Company, for all purposes of this Indenture such Security shall be deemed never to have been authenticated and delivered hereunder and shall never be entitled to the benefits of this Indenture. SECTION 304. Temporary Securities. Pending the preparation of definitive Securities of any Series, the Company may execute, and upon Company Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities may determine, as evidenced by their execution of such Securities. In the case of Securities of any series, such temporary Securities may be in the form of Global Securities. If temporary Securities of any series are issued, the Company will cause definitive Securities of that series to be prepared without unreasonable delay. After the preparation of definitive Securities of such series, the temporary Securities of such series shall be exchangeable for definitive Securities of like tenor of such series upon surrender of the temporary Securities of such series at the office or agency of the Company in a Place of Payment for that series, without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities of any series the Company shall execute and the Trustee shall authenticate and deliver in -28- exchange therefor a like principal amount of definitive Securities of the same series and of like tenor and of any authorized denominations. Until so exchanged the temporary Securities of any series shall in all respects be entitled to the same benefits under this Indenture as definitive Securities of such series and tenor. SECTION 305. Registration, Registration of Transfer and Exchange. The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the "Security Register") in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Securities and of transfers of Securities. The Trustee is hereby appointed "Security Registrar" for the purpose of registering Securities and transfers of Securities as herein provided at the Corporate Trust Office. Upon surrender for registration of transfer of any Security of any series at the office or agency of the Company in any Place of Payment for such series, the Company shall execute and the Trustee shall authenticate and deliver (in the name of the designated transferee or transferees) one or more new Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor and bearing a number not contemporaneously outstanding. At the option of the Holder, Securities of any series may be exchanged for other Securities of the same series, of any authorized denominations and of a like aggregate principal amount and tenor, upon surrender of the Securities to be exchanged at the office or agency of the Company in any Place of Payment for such series. Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Securities surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or such Holder's attorney duly authorized in writing. No service charge shall be made for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any -29- registration of transfer or exchange of Securities, other than exchanges pursuant to Section 304, 906 or 1107 not involving any transfer. The Company may but shall not be required (i) to issue, register the transfer of or exchange Securities of any series during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of Securities of that series selected for redemption under Section 1103 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part. Notwithstanding the foregoing, except as otherwise specified as contemplated by Section 301, any Global Security shall be exchangeable pursuant to this Section 305 for Securities registered in the name of Persons other than the Depositary for such Security or its nominee only if (i) such Depositary notifies the Company that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Exchange Act, (ii) the Company executes and delivers to the Trustee a Company Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities of such series. Upon the occurrence in respect of any Global Security of any series of any one or more of the conditions specified in Clauses (i), (ii) or (iii) of the preceding sentence or such other conditions as may be specified as contemplated by Section 301 for such series, such Global Security may be exchanged for Securities not bearing the legend specified in Section 205 and registered in the names of such Persons as may be specified by the Depositary (including Persons other than the Depositary). Notwithstanding any other provision of this Indenture, a Global Security may not be transferred except as a whole by the Depositary for such Global Security to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary. SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Security of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company -30- shall execute and upon its written request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security, including a Global Security if the destroyed, lost or stolen Security was a Global Security, of the same series and of like tenor and principal amount and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become or is about to become due and payable, the Company in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security of any series issued pursuant to this Section in lieu of any destroyed, lost or stolen Security shall constitute an original additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities of that series duly issued hereunder. A new Security shall have such legends as appeared on the old Security unless the Company determines otherwise. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. SECTION 307. Payment of Interest; Interest Rights Preserved. Unless otherwise provided as contemplated by Section 301 with respect to any series of Securities, interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered in the Security Register at the close of business on the Regular Record Date for such Interest Payment Date. Any interest on any Security of any series which is payable but is not punctually paid or duly provided for on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below: -31- (1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security of such series and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder of Securities of such series at such Holder's address as it appears in the Security Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities of such series (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Company may make payment of any Defaulted Interest on the Securities of any series in any other lawful manner not inconsistent with the requirements of any securities exchange on which such Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of, or in exchange for, or in lieu of, any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. -32- SECTION 308. Persons Deemed Owners. Prior to due presentment of a Security for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name such Security is registered in the Security Register as the owner of such Security for the purpose of receiving payment of principal of (and premium, if any) and (subject to Section 307) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary. No holder of any beneficial interest in any Global Security held on its behalf by a Depositary (or its nominee) shall have any rights under this Indenture with respect to such Global Security or any Security represented thereby, and such Depositary may be treated by the Company, the Trustee, and any agent of the Company or the Trustee as the owner of such Global Security or any Security represented thereby for all purposes whatsoever. Notwithstanding the foregoing, with respect to any Global Security, nothing herein shall prevent the Company, the Trustee, or any agent of the Company or the Trustee, from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interest in such Global Security, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominees) as Holder of such Global Security. SECTION 309. Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange or for credit against any sinking fund payment shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly canceled by it. The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and may deliver to the Trustee (or to any other Person for delivery to the Trustee) for cancellation any Securities previously authenticated hereunder which the Company has not issued and sold, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities held by the Trustee shall be destroyed unless otherwise directed by a Company Order. The Trustee is hereby directed by the Company to destroy the cancelled Securities held by the Trustee (subject to the record retention requirements of the Exchange Act), and the Trustee shall provide the Company with a certificate of a Responsible Officer certifying as to the destruction of such Securities. -33- SECTION 310. Computation of Interest. Except as otherwise specified as contemplated by Section 301 for Securities of any series, interest on the Securities of each series shall be computed on the basis of a 360-day year of twelve 30-day months. SECTION 311. CUSIP Number. The Company in issuing the Securities may use "CUSIP" numbers, and if it does so, the Trustee shall use the applicable CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Securities, and that reliance may be placed only on the other identification numbers printed on the Securities. The Company will promptly notify the Trustee of any change in any CUSIP number. SECTION 312. Payment to be in Proper Currency. In the case of any Securities denominated in any currency (the "Required Currency") other than United States of America dollars, except as otherwise provided therein, the obligation of the Company to make any payment of principal, premium or interest thereon shall not be discharged or satisfied by any tender by the Company, or recovery by the Trustee, in any currency other than the Required Currency, except to the extent that such tender or recovery shall result in the Trustee timely holding the full amount of the Required Currency then due and payable. If any such tender or recovery is in a currency other than the Required Currency, the Trustee may take such actions as it considers appropriate to exchange such currency for the Required Currency. The costs and risks of any such exchange, including without limitation the risks of delay and exchange rate fluctuation, shall be borne by the Company, the Company shall remain fully liable for any shortfall or delinquency in the full amount of Required Currency then due and payable, and in no circumstances shall the Trustee be liable therefor except in the case of its negligence or willful misconduct. ARTICLE FOUR SATISFACTION AND DISCHARGE SECTION 401. Satisfaction and Discharge of Indenture. This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of registration of transfer or exchange of Securities herein expressly provided for), and the Trustee, at the expense of the Company, -34- shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 306 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 1003) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year, or (iii) if redeemable at the option of the Company, are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, and the Company, in the case of (i), (ii) or (iii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount, in the currency in which such Securities are payable, sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest to the date of such deposit (in the case of Securities which have become due and payable) or to the respective Stated Maturity or Redemption Date, as the case may be; (2) the Company has paid or caused to be paid all other sums payable hereunder by the Company, and (3) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with. -35- Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 607, the obligations of the Trustee to any Authenticating Agent under Section 614, and, if money shall have been deposited with the Trustee pursuant to Subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 402 and the last paragraph of Section 1003, shall survive. SECTION 402. Application of Trust Money. Subject to provisions of the last paragraph of Section 1003, all money deposited with the Trustee pursuant to Section 401 shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee but such money need not be segregated from other funds except to the extent required by law. SECTION 403. Defeasance and Discharge of Indenture. If principal of and any premium and interest on Securities of any series are denominated and payable in United States of America dollars, the Company shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities of such series on the 91st day after the date of the deposit referred to in subparagraph (d) hereof, and the provisions of this Indenture, as it relates to such Outstanding Securities, shall no longer be in effect (and the Trustee, at the expense of the Company, shall at Company Request, execute proper instruments acknowledging the same), except as to: (a) the rights of Holders of Securities to receive, from the trust funds described in subparagraph (d) hereof, (i) payment of the principal of (and premium, if any) or interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal or interest and (ii) the benefit of any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and the Securities; (b) the Company's obligations with respect to such Securities under Sections 305, 306, 1002 and 1003; and (c) the rights, powers, trusts, duties and immunities of the Trustee hereunder; provided that, the following conditions shall have been satisfied: -36- (d) The Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in the trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (d) money in an amount or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent certified public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and each installment of principal of (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installment of principal and interest and (B) any mandatory sinking fund payments applicable to the Securities on the day on which such payments are due and payable in accordance with the terms of this Indenture and of the Securities; (e) such deposit shall not cause the Trustee with respect to the Securities to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities; (f) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (g) such provision would not cause any Outstanding Securities then listed on the New York Stock Exchange or other securities exchange to be de-listed as a result thereof; (h) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities shall have occurred and be continuing on the date of such deposit or during the period ending on the 91st day after such date; (i) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel to the effect that there has been a change in applicable Federal law such that, or the Company has received from, or there has been published by, the Internal Revenue Service a ruling to the effect that, Holders of the Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposits, defeasance and discharge and will be subject to Federal income tax on the same amount and -37- in the same manner and at the same times, as would have been the case if such deposit, defeasance and discharge had not occurred; and (j) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent relating to the defeasance contemplated by this Section have been complied with. ARTICLE FIVE REMEDIES SECTION 501. Events of Default. "Event of Default", wherever used herein with respect to Securities of any series, and unless otherwise provided with respect to Securities of any series pursuant to Section 301(12), means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security of that series when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security of that series at its Maturity; or (3) default in the deposit of any sinking fund payment, when and as due by the terms of a Security of that series; or (4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has expressly been included in this Indenture solely for the benefit of a series of one or more Securities other than that series), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Outstanding Securities of that series a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder; or -38- (5) a default under any indenture or instrument under which the Company or any Restricted Subsidiary shall have outstanding or shall have guaranteed the payment of at least $10,000,000 aggregate principal amount of indebtedness for money borrowed (other than this Indenture or any Debt Security) shall happen and be continuing which default (a) is caused by a failure to pay the principal of or premium, if any, or interest on such indebtedness prior to the expiration of the grace period provided in such indebtedness on the date of such default or (b) results in the acceleration of such indebtedness so that the same shall be or become due and payable prior to the date on which the same would otherwise have become due and payable, and such acceleration shall not be rescinded or annulled within 10 days after notice thereof shall have been given, by registered or certified mail, to the Company by the Trustee, or to the Company and the Trustee by the Holders of at least 25% in aggregate principal amount of the Securities at the time Outstanding; provided, however, that if such default under such indenture or instrument shall be remedied or cured by the Company or waived by the Holders of such indebtedness, then, unless the Securities of any series shall have been accelerated as provided herein, the Event of Default hereunder by reason thereof shall be deemed likewise to have been thereupon remedied, cured or waived without further action upon the part of either the Trustee or any Holders of the Securities of any series; or (6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any -39- applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action; or (8) any other Event of Default provided with respect to Securities of that series. The term "BANKRUPTCY LAW" means title 11, U.S. Code or any similar Federal or state law for the relief of debtors. The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. A default under clause (4) is not an Event of Default with respect to any series of Securities until the Trustee notifies the Company in writing, or the Holders of at least 25% in principal amount of the then outstanding Securities of such series notify the Company and the Trustee in writing, of the default and the Company does not cure the default within 60 days after receipt of such notice. The written notice must specify the default, demand that it be remedied and state that the notice is a "NOTICE OF DEFAULT." SECTION 502. Acceleration of Maturity; Rescission and Annulment. If an Event of Default with respect to Outstanding Securities of any series occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities of that series may declare the principal amount (or, if any of the Securities of that series are Original Issue Discount Securities, such lesser portion of the principal amount of such Securities as may be specified in the terms thereof) of all of the Securities of that series to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by Holders), and upon any such declaration such principal amount (or specified portion thereof) shall become immediately due and payable. At any time after such a declaration of acceleration with respect to Outstanding Securities of any series has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities of that series, by written notice to the Company and the Trustee, may rescind and annul such declaration and its consequences if -40- (1) the Company has paid or deposited with the Trustee a sum sufficient to pay (A) all overdue interest on all Securities of that series, (B) the principal of (and premium, if any, on) any Securities of that series which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefor in such Securities, (C) to the extent that payment of such interest is lawful, interest upon overdue interest at the rate or rates prescribed therefor in such Securities, and (D) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607; and (2) all Events of Default with respect to Securities of that series, other than the non-payment of the principal of Securities of that series which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 513. No such rescission shall affect any subsequent default or impair any right consequent thereon. SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee. The Company covenants that if (1) default is made in the payment of any interest on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof, the Company will, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Security, the whole amount then due and payable on such Security for principal (and premium, if any) and interest and, to the extent that payment of such interest shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest at the rate or rates prescribed therefor in such Security, and, in addition thereto, such further amount as shall be sufficient -41- to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon such Security and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon such Security, wherever situated. If an Event of Default with respect to Securities of any series occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Securities of such series by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy. SECTION 504. Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Securities or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) or such portion of the principal amount of any series of Original Issue Discount Securities as may be specified in the terms of such series and interest owing and unpaid in respect of the Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607) and of the Holders allowed in such judicial proceeding, and (ii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; -42- and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 607. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. SECTION 505. Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and for any other amounts due the Trustee under Section 607, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. SECTION 506. Application of Money Collected. Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee under Section 607; and SECOND: To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and -43- payable on such Securities for principal (and premium, if any) and interest, respectively; and THIRD: The balance, if any, to the Person or Persons entitled thereto. SECTION 507. Limitation on Suits. No Holder of any Security of any series shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless (1) such Holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Securities of that series; (2) the Holders of not less than 25% in principal amount of the Outstanding Securities of that series shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee, for 60 days after its receipt of such notice, request and offer of indemnity, has failed to institute any such proceeding; and (5) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities of that series; it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or to seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all of such Holders. SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 307) interest on such Security on the Stated Maturity or Maturities expressed in such -44- Security (or, in the case of redemption, on the Redemption Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. SECTION 509. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. SECTION 510. Rights and Remedies Cumulative. Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 306, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 511. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder of any Securities to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. SECTION 512. Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities of any series shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Securities of such series, provided that -45- (1) such direction shall not be in conflict with any rule of law or with this Indenture, and (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. SECTION 513. Waiver of Past Defaults. The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of any series may, on behalf of the Holders of all the Securities of such series, waive any past default hereunder with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest on any Security of such series, or (2) in respect of a covenant or provision hereof which under Article Nine cannot be modified or amended without the consent of the Holder of each Outstanding Security of such series affected. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any past default hereunder. If a record date is fixed, the Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to waive any default hereunder, whether or not such Holders remain Holders after such record date; provided, that unless such majority in principal amount shall have waived such default prior to the date which is 90 days after such record date, any such waiver of such default previously given shall automatically and without further action by any Holder be canceled and of no further effect. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. SECTION 514. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant -46- in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided, however, that the provisions of this Section shall not apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities of any series, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Security on or after the Stated Maturity or Maturities expressed in such Security (or, in the case of redemption, on or after the Redemption Date). SECTION 515. Waiver of Stay or Extension Laws. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE SIX THE TRUSTEE SECTION 601. Certain Duties and Responsibilities. The provisions of TIA Section 315 shall apply to the Trustee. SECTION 602. Notice of Defaults. Within 90 days after the occurrence of any default hereunder with respect to the Securities of any series, the Trustee shall transmit by mail to all Holders of Securities of such series, as their names and addresses appear in the Security Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest on any Security of such series or in the payment of any sinking fund installment with respect to Securities of such series, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determine that the withholding of such notice is in the interest of the Holders of -47- Securities of such series; and provided, further, that in the case of any default of the character specified in Section 501(4) with respect to Securities of such series, no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or lapse of time or both would become, an Event of Default with respect to Securities of such series. SECTION 603. Certain Rights of Trustee. Subject to the provisions of TIA Section 315(a) through 315(d): (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any instruction, request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order or as otherwise expressly provided herein and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) before the Trustee acts or refrains from acting, the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, -48- opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such fact or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; (h) the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith and believed by it to be authorized or within the discretion, rights or powers conferred upon it by this Indenture; and (i) the Trustee shall not be required to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (j) Except with respect to Sections 1001 herein, the Trustee shall have no duty to inquire as to the performance of the Company's covenants in Article 4 hereof. In addition, the Trustee shall not be deemed to have knowledge of any Event of Default except (i) any Event of Default occurring pursuant to Sections 501(1), 501(2) and 1001 herein or (ii) any Event of Default of which the Trustee shall have received written notification or obtained actual knowledge. SECTION 604. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Securities, except the Trustee's certificates of authentication, shall be taken as the statements of the Company, and neither the Trustee nor any Authenticating Agent assumes any responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, except that the Trustee represents that it is duly authorized to execute and deliver this Indenture, authenticate the Securities and perform its obligations hereunder and that the statements made by it in a Statement of Eligibility on Form T-1 supplied to the Company is true and accurate subject to the qualifications set forth therein. The Trustee or any -49- Authenticating Agent shall not be accountable for the use or application by the Company of Securities or the proceeds thereof. SECTION 605. May Hold Securities. The Trustee, any Authenticating Agent, any Paying Agent, any Security Registrar or any other agent of the Company, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to TIA Sections 310(b) and 311, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Security Registrar or such other agent. SECTION 606. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed to in writing by the Company and the Trustee. SECTION 607. Compensation and Reimbursement. The Company agrees (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee and its agents for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. -50- The obligations of the Company under this Section 607 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances shall constitute additional indebtedness hereunder and shall survive the satisfaction and discharge of this Indenture. Such additional indebtedness shall be a senior claim to that of the Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Securities, and the Securities are hereby subordinated to each senior claim. When the Trustee incurs expenses or renders services in connection with an Event of Default specified in Article Five hereof, the expenses (including reasonable fees and expenses of counsel) and the compensation for the service in connection therewith are intended to constitute expenses of administration under any applicable bankruptcy law. The Trustee shall give the Company notice of any claim or liability for which the Trustee might be entitled to indemnification under subparagraph (3) of this Section 607 within a reasonable amount of time after a trust officer of the Trustee becomes aware of such claim or liability. SECTION 608. Disqualification; Conflicting Interests. The provisions of TIA Section 310(b) shall apply to the Trustee. SECTION 609. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be eligible to act under TIA Section 310(a)(1) and shall have a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. The Trustee hereby represents and warrants that it is currently in compliance and at all times will remain in compliance with the requirements of this Section 609. If such Corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Company, nor any Person directly or indirectly controlling, controlled by or under common control with the Company, shall act as Trustee hereunder. SECTION 610. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance -51- of appointment by the successor Trustee in accordance with the applicable requirements of Section 611. (b) The Trustee may resign at any time with respect to the Securities of one or more series by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 611 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (c) The Trustee may be removed at any time with respect to the Securities of any series by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series, delivered to the Trustee and to the Company. (d) If at any time: (1) the Trustee shall fail to comply with TIA Section 310(b) after written request therefor by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 609 and shall fail to resign after written request therefor by the Company or by any such Holder, (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, or (4) the Trustee shall commence a voluntary case under the Federal bankruptcy laws, as now or thereafter constituted, or any other applicable Federal or state bankruptcy, insolvency or similar law or shall consent to the appointment of or taking possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator (or other similar official) of the Trustee or its property or affairs, or shall make an assignment for the benefit of creditors, or shall admit in writing its inability to pay its debt generally as they become due, or shall take corporate action in furtherance of any such action, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee with respect to all Securities, or (ii) subject to Section 514, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent -52- jurisdiction for the removal of the Trustee with respect to all Securities and the appointment of a successor Trustee or Trustees. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, with respect to the Securities of one or more series, the Company, by a Board Resolution, shall promptly appoint a successor Trustee or Trustees with respect to the Securities of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Securities of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Securities of any particular series) and shall comply with the applicable requirements of Section 611. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee with respect to the Securities of any series shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities of such series delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 611, become the successor Trustee with respect to the Securities of such series and to that extent supersede the successor Trustee appointed by the Company. If no successor Trustee with respect to the Securities of any series shall have been so appointed by the Company or the Holders and accepted appointment in the manner required by Section 611, any Holder who has been a bona fide Holder of a Security of such series for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Securities of such series. (f) The Company shall give notice of each resignation and each removal of the Trustee with respect to the Securities of any series and each appointment of a successor Trustee with respect to the Securities of any series by mailing written notice of such event by first-class mail, postage prepaid, to all Holders of Securities of such series as their names and addresses appear in the Security Register. Each notice shall include the name of the successor Trustee with respect to the Securities of such series and the address of its Corporate Trust Office. SECTION 611. Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee with respect to all Securities, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute -53- and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) In case of the appointment hereunder of a successor Trustee with respect to the Securities of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Securities of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Securities, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Securities of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Securities of that or those series to which the appointment of such successor Trustee relates. Whenever there is a successor Trustee with respect to one or more (but less than all) series of securities issued pursuant to this Indenture, the terms "Indenture" and "Securities" shall have the meanings specified in the provisos to the respective definitions of those terms in Section 101 which contemplate such situation. (c) Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in paragraph (a) and (b) of this Section, as the case may be. -54- (d) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. SECTION 612. Merger, Conversion, Consolidation or Succession to Business. Any Corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Corporation succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such Corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities; in case any of the Securities shall not have been authenticated by the Trustee then in office, any successor by merger, conversion or consolidation to such Trustee may authenticate such Securities either in the name of such predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or to authenticate Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation. SECTION 613. Preferential Collection of Claims Against Company. The Trustee shall comply with TIA Section 311(a). A Trustee which has resigned or been removed is subject to TIA Section 311(a) to the extent indicated therein. SECTION 614. Appointment of Authenticating Agent. At any time when any of the Securities remain Outstanding the Trustee, with the concurrence of the Company, may appoint an Authenticating Agent or Agents with respect to one or more series of Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities of such series, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee's certificate of authentication, such reference -55- shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Company and shall at all times be a Corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal, State or District of Columbia authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any Corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any Corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any Corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such Corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall mail written notice of such appointment by first class mail, postage prepaid, to all Holders of Securities of the series with respect to which such Authenticating Agent will serve, as their names and addresses appear in the Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 614. The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 614. -56- If an appointment with respect to one or more series is made pursuant to this Section, the Securities of such series may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternate certificate of authentication in the following form: This is one of the Securities of the series designated herein and issued pursuant to the within-mentioned Indenture. FIRST BANK NATIONAL ASSOCIATION, as Trustee By ------------------------------------- As Authenticating Agent By ------------------------------------- Authorized Signatory ARTICLE SEVEN HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY SECTION 701. Company to Furnish Trustee Names and Addresses of Holders. If the Trustee is not acting as Security Registrar for the Securities of any series, the Company will furnish or cause to be furnished to the Trustee. (a) at intervals of no more than six months commencing after the first issue of such series, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of a date not more than 15 days prior to the time such information is furnished, and (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished. -57- SECTION 702. Preservation of Information; Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 701 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar. The Trustee may destroy any list furnished to it as provided in Section 701 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights and privileges of the Trustee, shall be as provided by TIA Section 312(b). (c) Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 702(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 702(b). SECTION 703. Reports by Trustee. Within 60 days after May 15 of each year commencing with the later of May 15, 1997 or the first May 15 after the first issuance of Securities pursuant to this Indenture, the Trustee shall transmit by mail to all Holders of Securities as provided in TIA Section 313(c) a brief report dated as of such May 15 if required by TIA Section 313(a). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which any Securities are listed, with the Commission and with the Company. The Company will notify the Trustee when any Securities are listed on any stock exchange. SECTION 704. Reports by Company. The Company shall: (1) file with the Trustee, within 15 days after the Company is required to file the same with the Commission, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the Company may be required to file with the Commission pursuant to Section 13 or Section 15 (d) of the Securities Exchange Act of 1934; or, if the Company is not required to file -58- information, documents or reports pursuant to either of said Sections, then it shall file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; notwithstanding anything contrary herein, the Trustee shall have no duty to review such documents for the purposes of determining compliance with any provision of this Indenture; (2) file with the Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information, documents and reports with respect to compliance by the Company with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; (3) transmit by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such summaries of any information, documents and reports required to be filed by the Company pursuant to paragraphs (1) and (2) of this Section as may be required by rules and regulations prescribed from time to time by the Commission; and (4) furnish to the Trustee, within 120 days after the end of each fiscal year of the Company ending after the date hereof, a brief certificate of the Company's principal executive officer, principal financial officer or principal accounting officer as to his or her knowledge of the Company's compliance with all conditions and covenants under this Indenture. For purposes of this paragraph, such compliance shall be determined without regard to any period of grace or requirement of notice provided under this Indenture. ARTICLE EIGHT CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE SECTION 801. Company May Consolidate, Etc., Only on Certain Terms. The Company shall not consolidate with or merge into any other Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person and the Company shall not permit any person to consolidate with or merge into the Company or convey transfer or lease all or substantially all of its properties and assets to the Company, unless: -59- (1) the Person formed by such consolidation or into which the Company is merged or the Person which acquires by conveyance or transfer, or which leases, the properties and assets of the Company substantially as an entirety shall be a Corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of (and premium, if any) and interest on all the Securities and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed; (2) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing; (3) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Company would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by this Indenture, the Company or such successor Person, as the case may be, shall take such steps as shall be necessary to effectively secure the Securities equally and ratably with (or prior to) all indebtedness secured thereby; and (4) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with. SECTION 802. Successor Substituted. Upon any consolidation of the Company with, or merger by the Company into, any other Person or any conveyance, transfer or lease of the properties and assets of the Company substantially as an entirety in accordance with Section 801, the successor Person formed by such consolidation or into which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Securities. -60- ARTICLE NINE SUPPLEMENTAL INDENTURES SECTION 901. Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Company, when authorized by or pursuant to a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or (2) to add to the covenants of the Company for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series of Securities, stating that such covenants are expressly being included solely for the benefit of one or more specified series) or to surrender any right or power herein conferred upon the Company; or (3) to add any additional Events of Default (and if such Events of Default are to be for the benefit of less than all series of Securities, stating that such Events of Default are being included solely for the benefit of such series); or (4) to add to or change any of the provisions of this Indenture to such extent as shall be necessary to permit or facilitate the issuance of Securities in bearer form, registrable or not registrable as to principal, and with or without interest coupons; or (5) to add to, change or eliminate any of the provisions of this Indenture in respect of one or more series of Securities, provided that any such addition, change or elimination (i) shall neither (A) apply to any Security of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Security with respect to such provision or (ii) shall become effective only when there is no such Security Outstanding; or (6) to secure the Securities; or (7) to establish the form or terms of Securities of any series as permitted by Sections 201 and 301; or -61- (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 611(b); (9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided such action shall not adversely affect the interests of the Holders of Securities of any series in any material respect; or (10) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act. SECTION 902. Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of each series affected by such supplemental indenture, by Act of said Holders delivered to the Company and the Trustee, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Securities of such series under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) change the Stated Maturity of the principal of, or any installment of principal of or interest on, any such Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an Original Issue Discount Security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to Section 502, or change any Place of Payment where, or the coin or currency in which, any such Security or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof (or, in the case of redemption or repayment, on or after the Redemption Date or any repayment date), or -62- (2) reduce the percentage in principal amount of the Outstanding Securities of any series, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture, or (3) modify any of the provisions of this Section 902, Section 513 or Section 1010, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; provided however, that this Clause shall not be deemed to require the consent of any Holder with respect to changes in the references to "the Trustee" and concomitant changes in this Section 902 and Section 1010, or the deletion of this proviso, in accordance with the requirements of Sections 611(b) and 901(8). A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Securities, or which modifies the rights of the Holders of Securities of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Securities of any other series. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to any indenture supplemental hereto. If a record date is fixed for such purpose, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to consent to such supplemental indenture, whether or not such Holders remain Holders after such record date; provided, that unless such consent shall have become effective by virtue of the requisite percentage having been obtained prior to the date which is 90 days after such record date, any such consent previously given shall automatically and without further action by any Holder be canceled and of no further effect. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. SECTION 903. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 601) shall be fully protected in relying upon, an Opinion of Counsel stating that the -63- execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. SECTION 904. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby to the extent provided therein. SECTION 905. Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to the requirements of the Trust Indenture Act as then in effect. SECTION 906. Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in a form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Securities of any series so modified as to conform, in the opinion of the Trustee and the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities of such series. SECTION 907. Notice of Supplemental Indentures. Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 902, the Company shall give notice thereof to the Holders of each Outstanding Security so affected, pursuant to Section 106, setting forth in general terms the substance of such supplemental indenture. -64- ARTICLE TEN COVENANTS SECTION 1001. Payment of Principal, Premium and Interest. The Company covenants and agrees for the benefit of each series of Securities that it will duly and punctually pay the principal of (and premium, if any) and interest on the Securities of that series in accordance with the terms of the Securities and this Indenture. In the absence of contrary provisions with respect to the Securities of any series, interest on the Securities of any series may, at the option of the Company, be paid by check mailed to the address of the Person entitled thereto as it appears on the Security Register. SECTION 1002. Maintenance of Office or Agency. The Company will maintain in each Place of Payment for any series of Securities an office or agency where Securities of that series may be presented or surrendered for payment, where Securities of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Securities of that series and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location and any change in the location of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Company hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Company may also from time to time designate one or more other offices or agencies where the Securities of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in each Place of Payment for Securities of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. SECTION 1003. Money for Securities Payments to Be Held in Trust. If the Company shall at any time act as its own Paying Agent with respect to any series of Securities, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities of that series, segregate and hold in trust for the benefit of the Persons entitled thereto a sum in the currency in -65- which such series of Securities is payable sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee of its failure so to act. Whenever the Company shall have one or more Paying Agents for any series of Securities, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities of that series, deposit with a Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of its failure so to act. The Company will cause each Paying Agent for any series of Securities other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities of that series in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Company (or any other obligor upon the Securities of that series) in the making of any payment of principal (and premium, if any) or interest on the Securities of that series; and (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent, and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security of any series and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall -66- be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company on Company Request. SECTION 1004. Existence. Subject to Article Eight, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. SECTION 1005. Maintenance of Properties. The Company will cause all properties used or useful in the conduct of its business or the business material to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business and not disadvantageous in any material respect to the Holders. SECTION 1006. Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (1) all taxes, assessments and governmental charges levied or imposed upon it or upon its income, profits or property, and (2) all lawful claims for labor, materials and supplies which, if unpaid, might by law -67- become a lien upon its property; PROVIDED, HOWEVER, that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith. SECTION 1007. Restrictions on Secured Debt. (a) The Company will not itself, and will not permit any Restricted Subsidiary to, incur, issue, assume or guarantee any notes, bonds, debentures or other similar evidences of indebtedness for money borrowed (notes, bonds, debentures or other similar evidences of indebtedness for money borrowed being hereinafter in this Article called "Debt"), secured by pledge of, or mortgage or other lien on, any Principal Property, now owned or hereafter owned by the Company or any Restricted Subsidiary, or any shares of stock or Debt of any Restricted Subsidiary (pledges, mortgages and other liens being hereinafter in this Article called "Lien" or "Liens"), without effectively providing that the Securities of each series then Outstanding (together with, if the Company shall so determine, any other Debt of the Company or such Restricted Subsidiary then existing or thereafter created which is not subordinate to the Securities of each series then Outstanding) shall be secured equally and ratably with (or prior to) such secured Debt, so long as such secured Debt shall be so secured; PROVIDED, HOWEVER, that this Section shall not apply to, and there shall be excluded from secured Debt in any computation under this Section, Debt secured by: (1) Liens on any Principal Property acquired, constructed or improved by the Company or any Restricted Subsidiary after the date of this Indenture which are created or assumed contemporaneously with such acquisition, construction or improvement, or within 120 days before or after the completion thereof, to secure or provide for the payment of all or any part of the cost of such acquisition, construction or improvement (including related expenditures capitalized for Federal income tax purposes in connection therewith) incurred after the date of this Indenture; (2) Liens of or upon any property, shares of capital stock or Debt existing at the time of acquisition thereof, whether by merger, consolidation, purchase, lease or otherwise (including Liens of or upon property, shares of capital stock or indebtedness of a corporation existing at the time such corporation becomes a Restricted Subsidiary); (3) Liens in favor of the Company or any Restricted Subsidiary; (4) Liens in favor of the United States of America or any State thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any State thereof or political entity -68- affiliated therewith, or in favor of any other country, or any political subdivision thereof, to secure partial, progress, advance or other payments, or other obligations, pursuant to any contract or statute or to secure any Debt incurred for the purpose of financing all or any part of the cost of acquiring, constructing or improving the property subject to such Liens (including Liens incurred in connection with pollution control, industrial revenue or similar financings); (5) Liens imposed by law, such as mechanics', workmen's, repairmen's, materialmen's, carriers', warehousemen's, vendors' or other similar liens arising in the ordinary course of business, or governmental (federal, state or municipal) liens arising out of contracts for the sale of products or services by the Company or any Restricted Subsidiary, or deposits or pledges to obtain the release of any of the foregoing; (6) pledges or deposits under workmen's compensation laws or similar legislation and Liens of judgments thereunder which are not currently dischargeable, or good faith deposits in connection with bids, tenders, contracts (other than for the payment of money) or leases to which the Company or any Restricted Subsidiary is a party, or deposits to secure public or statutory obligations of the Company or any Restricted Subsidiary, or deposits in connection with obtaining or maintaining self-insurance or to obtain the benefits of any law, regulation or arrangement pertaining to unemployment insurance, old age pensions, social security or similar matters, or deposits of cash or obligations of the United States of America to secure surety, appeal or customs bonds to which the Company or any Restricted Subsidiary is a party, or deposits in litigation or other proceedings such as, but not limited to, interpleader proceedings; (7) Liens created by or resulting from any litigation or other proceeding which is being contested in good faith by appropriate proceedings, including Liens arising out of judgments or awards against the Company or any Restricted Subsidiary with respect to which the Company or such Restricted Subsidiary is in good faith prosecuting an appeal or proceedings for review; or Liens incurred by the Company or any Restricted Subsidiary for the purpose of obtaining a stay or discharge in the course of any litigation or other proceeding to which the Company or such Restricted Subsidiary is a party; (8) Liens for taxes or assessments or governmental charges or levies not yet due or delinquent, or which can thereafter be paid without penalty, or which are being contested in good faith by appropriate proceedings; (9) Liens consisting of easements, rights-of-way, zoning restrictions, restrictions on the use of real property, and defects and irregularities in the -69- title thereto, landlords' liens and other similar liens and encumbrances none of which interfere materially with the use of the property covered thereby in the ordinary course of the business of the Company or such Restricted Subsidiary and which do not, in the opinion of the Company, materially detract from the value of such properties; (10) liens existing on the first date on which the Securities are authenticated; or (11) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Lien referred to in the foregoing clauses (1) to (10), inclusive; provided, that (i) such extension, renewal or replacement Lien shall be limited to all or a part of the same property, shares of stock or Debt that secured the Lien extended, renewed or replaced (plus improvements on such property) and (ii) the Debt secured by such Lien at such time is not increased. (b) Notwithstanding the restrictions contained in subdivision (a) of this Section, the Company and its Restricted Subsidiaries, or any of them, may incur, issue, assume or guarantee Debt secured by Liens without equally and ratably securing the Securities of each series then Outstanding, provided, that at the time of such incurrence, issuance, assumption or guarantee, after giving effect thereto and to the retirement of any Debt which is concurrently being retired, the aggregate amount of all outstanding Debt secured by Liens which could not have been incurred, issued, assumed or guaranteed by the Company or a Restricted Subsidiary without equally and ratably securing the Securities of each series then Outstanding except for the provisions of this subdivision (b), together with the aggregate amount of Attributable Debt incurred pursuant to subdivision (b) of Section 1008, does not at such time exceed 25% of Consolidated Net Tangible Assets of the Company. SECTION 1008. Restriction on Sale and Leaseback Transactions. (a) The Company will not itself, and it will not permit any Restricted Subsidiary to, enter into any arrangement with any bank, insurance company or other lender or investor (not including the Company or any Restricted Subsidiary) or to which any such lender or investor is a party, providing for the leasing by the Company or a Restricted Subsidiary for a period, including renewals, in excess of three years of any Principal Property which has been or is to be sold or transferred by the Company or any Restricted Subsidiary to such lender or investor or to any person to whom funds have been or are to be advanced by such lender or investor on the security of such Principal Property (herein referred to as a "Sale and Leaseback Transaction") unless either: -70- (1) The Company or such Restricted Subsidiary would, at the time of entering into such arrangement, be entitled, without equally and ratably securing the Securities of each series then Outstanding, to incur Debt secured by a Lien on such property, pursuant to paragraphs (1) to (10), inclusive, of Section 1007; or (2) the Company within 120 days after the sale or transfer shall have been made by the Company or by a Restricted Subsidiary, applies an amount equal to the greater of (i) the net proceeds of the sale of the Principal Property sold and leased back pursuant to such arrangement or (ii) the fair market value of the Principal Property so sold and leased back at the time of entering into such arrangement (as determined by any two of the following: the Chairman or a Vice Chairman of the Board of the Company, its President, its Chief Financial Officer, its Vice President of Finance, its Treasurer or its Controller) to the retirement of Funded Debt of the Company; provided, that the amount to be applied to the retirement of Funded Debt of the Company shall be reduced by (A) the principal amount of any Securities delivered within 120 days after such sale to the Trustee for retirement and cancellation, and (B) the principal amount of Funded Debt, other than Securities, voluntarily retired by the Company within 120 days after such sale. Notwithstanding the foregoing, no retirement referred to in this clause (a)(2) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or mandatory prepayment provision. (b) Notwithstanding the restrictions contained in subdivision (a) of this Section, the Company and its Restricted Subsidiaries, or any of them, may enter into a Sale and Leaseback Transaction, provided, that at the time of such transaction, after giving effect thereto, the aggregate amount of all Attributable Debt in respect of Sale and Leaseback Transactions existing at such time which could not have been entered into except for the provisions of this subdivision (b), together with the aggregate amount of all outstanding debt incurred pursuant to subdivision (b) of Section 1007, does not at such time exceed 25% of Consolidated Net Tangible Assets of the Company. (c) A Sale and Leaseback Transaction shall not be deemed to result in the creation of a Lien. SECTION 1009. Compliance Certificate. (1) The Company shall deliver to the Trustee, within 120 days after the end of each fiscal year, an Officers' Certificate stating that a review of the activities of the Company and its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether each has kept, observed, performed and fulfilled its -71- obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to his or her knowledge each entity has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions of this Indenture (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge and what action each is taking or proposes to take with respect thereto) and that to his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Securities of any series is prohibited or if such event has occurred, a description of the event and what action each is taking or proposes to take with respect thereto. (2) The Company shall, so long as any of the Securities of any series are Outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware of (a) any Default or Event of Default with respect to such series of Securities or (b) any event of default under any other mortgage, indenture or instrument, an Officers' Certificate specifying such Default, Event of Default or event of default an what action the Company is taking or proposes to take with respect thereto. SECTION 1010. Defeasance of Certain Obligations. The following provisions shall apply to the Securities of each series unless specifically otherwise provided in a Board Resolution, Officers' Certificate or indenture supplemental hereto provided pursuant to Section 301. The Company may omit to comply with any term, provision or condition set forth in Sections 1005 and 1006 and any such omission with respect to Sections 1005 and 1006 shall not be an Event of Default, in each case with respect to the Securities of that series, provided that the following conditions have been satisfied: (1) with reference to this Section 1010, the Company has deposited or caused to be irrevocably deposited with the Trustee (or another trustee satisfying the requirements of Section 609) as trust funds in trust, specifically pledged as security for, and dedicated solely to, the benefit of the Holders of the Securities of that series, (i) money in an amount, or (ii) U.S. Government Obligations which through the payment of interest and principal in respect thereof in accordance with their terms will provide not later than one day before the due date of any payment referred to in clause (A) or (B) of this subparagraph (1) money in an amount, or (iii) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge (A) the principal of (and premium, if any) and -72- each instalment of principal (and premium, if any) and interest on the Outstanding Securities on the Stated Maturity of such principal or installments of principal and interest and (B) any mandatory sinking fund payments or analogous payments applicable to the Securities of such series on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities; (2) such deposit shall not cause the Trustee with respect to the Securities of that series to have a conflicting interest as defined in Section 608 and for purposes of the Trust Indenture Act with respect to the Securities of any series; (3) such deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Company is a party or by which it is bound; (4) no Event of Default or event which with notice or lapse of time would become an Event of Default with respect to the Securities of that series shall have occurred and be continuing on the date of such deposit; (5) the Company has delivered to the Trustee an Opinion of Counsel to the effect that Holders of the Securities of such series will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance of certain obligations and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred; and (6) the Company has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the defeasance contemplated in this Section have been complied with. SECTION 1011. Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Sections 1004 to 1006, inclusive, with respect to the Securities of any series if before the time for such compliance the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities of such series shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such term, provision or condition, but no such waiver shall extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver shall become effective, the -73- obligations of the Company and the duties of the Trustee in respect of any such term, provision or condition shall remain in full force and effect. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to waive any such term, provision or condition. If a record date is fixed for such purpose, the Holders on such record date or their duly designated proxies, and only such Persons, shall be entitled to waive any such term, provision or condition hereunder, whether or not such Holders remain Holders after such record date; provided that unless the Holders of not less than a majority in principal amount of the Outstanding Securities of such series shall have waived such term, provision or condition prior to the date which is 90 days after such record date, any such waiver previously given shall automatically and without further action by any Holder be canceled and of no further effect. ARTICLE ELEVEN REDEMPTION OF SECURITIES SECTION 1101. Applicability of Article. Securities of any series which are redeemable before their Stated Maturity shall be redeemable in accordance with their terms and (except as otherwise specified as contemplated by Section 301 for Securities of any series) in accordance with this Article. SECTION 1102. Election to Redeem; Notice to Trustee. The election of the Company to redeem any Securities shall be evidenced by an Officers' Certificate. The Company shall, at least 45 days prior to the Redemption Date fixed by the Company (unless a shorter notice shall be satisfactory to the Trustee), notify the Trustee of (1) such Redemption Date, (2) if the Securities of such series have different terms and less than all of the Securities of such series are to be redeemed, the terms of the Securities to be redeemed, and (3) if less than all the Securities of such series with identical terms are to be redeemed, the principal amount of such Securities to be redeemed. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this -74- Indenture, the Company shall furnish the Trustee with an Officers' Certificate evidencing compliance with such restriction. SECTION 1103. Selection by Trustee of Securities to Be Redeemed. If less than all the Securities of like tenor of any series are to be redeemed, the particular Securities to be redeemed shall be selected not more than 60 days prior to the Redemption Date by the Trustee, from the Outstanding Securities of like tenor of such series not previously called for redemption, by such method as the Trustee shall deem fair and appropriate and which may provide for the selection for redemption of portions (equal to the minimum authorized denomination for Securities of like tenor of that series or any integral multiple thereof) of the principal amount of Securities of such series of a denomination larger than the minimum authorized denomination for Securities of that series. The Trustee shall promptly notify the Company in writing of the Securities selected for redemption and, in the case of any Securities selected for partial redemption, the principal amount thereof to be redeemed. For all purposes of this Indenture, unless the context otherwise requires, all provisions relating to the redemption of Securities shall relate, in the case of any Securities redeemed or to be redeemed only in part, to the portion of the principal amount of such Securities which has been or is to be redeemed. SECTION 1104. Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date, to each Holder of Securities to be redeemed, at each such Holder's address appearing in the Security Register. All notices of redemption shall state: (1) the Redemption Date, (2) the Redemption Price, (3) if less than all the Outstanding Securities of like tenor of any series are to be redeemed, the identification (and, in the case of partial redemption, the principal amounts) of the particular Securities to be redeemed, -75- (4) that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and, if applicable, that interest thereon will cease to accrue on and after said date, (5) the place or places where such Securities are to be surrendered for payment of the Redemption Price, (6) that the redemption is for a sinking fund, if such is the case, and (7) the CUSIP number of such Security, if any. Notice of redemption of Securities to be redeemed at the election of the Company shall be given by the Company or, at the Company's request, by the Trustee in the name and at the expense of the Company. SECTION 1105. Deposit of Redemption Price. On or prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 1003) an amount of money in immediately available funds sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued interest on, all the Securities which are to be redeemed on that date. SECTION 1106. Securities Payable on Redemption Date. Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued interest) such Securities shall cease to bear interest. Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued interest to the Redemption Date; provided, however, that, unless otherwise specified as contemplated by Section 301, installments of interest whose Stated Maturity is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Regular Record Dates according to their terms and the provisions of Section 307. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. -76- SECTION 1107. Securities Redeemed in Part. Any Security which is to be redeemed in part shall be surrendered at a Place of Payment for such series (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and deliver to the Holder of such Security without service charge, a new Security or Securities of the same series and of like tenor, of any authorized denomination as requested by such Holder, in aggregate principal amount equal to and in exchange for the unredeemed portion of the principal of the Security so surrendered; provided, however, that if a Global Security is so surrendered, such new Security so issued shall be a new Global Security in a denomination equal to the unredeemed portion of the principal of the Global Security so surrendered. ARTICLE TWELVE SINKING FUNDS SECTION 1201. Applicability of Article. The provisions of this Article shall be applicable to any sinking fund for the retirement of Securities of a series except as otherwise specified as contemplated by Section 301 for Securities of such series. The minimum amount of any sinking fund payment provided for by the terms of Securities of any series is herein referred to as a "mandatory sinking fund payment", and any payment in excess of such minimum amount provided for by the terms of Securities of any series is herein referred to as an "optional sinking fund payment". If provided for by the terms of Securities of any series, the cash amount of any sinking fund payment may be subject to reduction as provided in Section 1202. Each sinking fund payment shall be applied to the redemption of Securities of any series as provided for by the terms of Securities of such series. SECTION 1202. Satisfaction of Sinking Fund Payments with Securities. The Company (1) may deliver Outstanding Securities of like tenor of a series (other than any previously called for redemption) and (2) may apply as a credit Securities of like tenor of a series which have been redeemed either at the election of the Company pursuant to the terms of such Securities or through the application of permitted optional sinking fund payments pursuant to the terms of such -77- Securities, in each case in satisfaction of all or any part of any sinking fund payment with respect to the Securities of like tenor of such series required to be made pursuant to the terms of such Securities as provided for by the terms of such series; provided that such Securities have not been previously so credited. Such Securities shall be received and credited for such purpose by the Trustee at the Redemption Price specified in such Securities for redemption through operation of the sinking fund and the amount of such sinking fund payment shall be reduced accordingly. SECTION 1203. Redemption of Securities for Sinking Fund. Not less than 60 days prior to each sinking fund payment date for Securities of like tenor of a series, the Company will deliver to the Trustee an Officers' Certificate specifying the amount of the next ensuing sinking fund payment for such Securities pursuant to the terms of such Securities, the portion thereof, if any, which is to be satisfied by payment of cash and the portion thereof, if any, which is to be satisfied by delivering and crediting Securities of like tenor of that series pursuant to Section 1202 and, at the time of delivery of such Officers' Certificate, will also deliver to the Trustee any Securities to be so delivered. Not less than 45 days before each such sinking fund payment date the Trustee shall select the Securities to be redeemed upon such sinking fund payment date in the manner specified in Section 1103 and cause notice of the redemption thereof to be given in the name of and at the expense of the Company in the manner provided in Section 1104. Such notice having been duly given. the redemption of such Securities shall be made upon the terms and in the manner stated in Sections 1106 and 1107. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. -78- IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and the respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written. FINGERHUT COMPANIES, INC. By /s/ Robert W. Oberrender ------------------------------- Its Vice President ------------------------- Attest: By /s/ Michael P. Sherman ------------------------ Its Secretary -------------------- [SEAL] FIRST BANK NATIONAL ASSOCIATION as Trustee By /s/ Richard H. Prokosch ------------------------------- Its Trust Officer ------------------------ Attest: By /s/ Kathe Barrett ------------------------------ Its Assistant Secretary ------------------------ [SEAL] -79- STATE OF MINNESOTA ) ) SS. COUNTY OF ) On the _______ day of _______ before me personally came _______ to me known, who, being by me duly sworn, did depose and say that he is _______ and _______ of Fingerhut Companies, Inc., one of the Corporations described in and which executed the foregoing instrument; that he knows the seal of said Corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said Corporation, and that he signed his name thereto by like authority. [SEAL] --------------------------- Notary Public STATE OF ) ) SS. COUNTY OF ) On the ______ day of _______ before me personally came _______ to me known, who, being by me duly sworn, did depose and say that he is _______ of First Bank National Association, one of the Corporations described in and which executed the foregoing instrument; that he knows the seal of said Corporation; that the seal affixed to said instrument is such corporate seal; that it was so affixed by authority of the Board of Directors of said Corporation, and that he signed his name thereto by like authority. [SEAL] --------------------------- Notary Public -80- EX-4.2 3 EXHIBIT 4.2 - --------------------------------------------------------------- - --------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT Dated as of September 27, 1996 By and Among FINGERHUT COMPANIES, INC. and BEAR, STEARNS & CO. INC., SMITH BARNEY INC. and FIRST CHICAGO CAPITAL MARKETS, INC. as Initial Purchasers - --------------------------------------------------------------- - --------------------------------------------------------------- $125,000,000 7.375% SENIOR NOTES DUE 1999 TABLE OF CONTENTS Page ---- 1. Definitions................................................. 1 2. Exchange Offer.............................................. 5 3. Shelf Registration.......................................... 9 4. Additional Interest......................................... 10 5. Registration Procedures..................................... 12 6. Registration Expenses....................................... 23 7. Indemnification............................................. 24 8. Rule 144 and 144A........................................... 28 9. Underwritten Registrations.................................. 28 10. Miscellaneous............................................... 29 (a) No Inconsistent Agreements............................ 29 (b) Adjustments Affecting Registrable Notes............................................... 29 (c) Amendments and Waivers................................ 29 (d) Notices............................................... 29 (e) Successors and Assigns................................ 31 (f) Counterparts.......................................... 31 (g) Headings.............................................. 31 (h) Governing Law......................................... 31 (i) Severability.......................................... 31 (j) Notes Held by the Company or Its Affiliates.......................................... 32 (k) Third Party Beneficiaries............................. 32 -i- REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT"), dated as of September 27, 1996, is being entered into by and among Fingerhut Companies, Inc., a Minnesota corporation (the "COMPANY"), and Bear, Stearns & Co. Inc, Smith Barney Inc. and First Chicago Capital Markets, Inc. (the "INITIAL PURCHASERS"). This Agreement is being entered into in connection with the Purchase Agreement, dated September 24, 1996, between the Company and the Initial Purchasers (the "PURCHASE AGREEMENT"), which provides for the sale by the Company to the Initial Purchasers of $125,000,000 aggregate principal amount of the Company's 7.375% Senior Notes Due 1999 (the "NOTES"). In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company has agreed to provide the registration rights set forth in this Agreement for the benefit of the Initial Purchasers and their direct and indirect transferees. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchasers to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: ADDITIONAL INTEREST: See Section 4(a) hereof. ADVICE: See the last paragraph of Section 5 hereof. AGREEMENT: See the first introductory paragraph hereto. APPLICABLE PERIOD: See Section 2(b) hereof. CLOSING DATE: The Closing Date as defined in the Purchase Agreement. COMPANY: See the first introductory paragraph hereto. EFFECTIVENESS DATE: With respect to any Registration Statement, the 75th day after the Filing Date with respect thereto. EFFECTIVENESS PERIOD: See Section 3(a) hereof. -2- EVENT DATE: See Section 4(b) hereof. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. EXCHANGE NOTES: See Section 2(a) hereof. EXCHANGE OFFER: See Section 2(a) hereof. EXCHANGE REGISTRATION STATEMENT: See Section 2(a) hereof. FILING DATE: (A) If no Registration Statement has been filed by the Company pursuant to this Agreement, the 45th day after the Issue Date; PROVIDED, HOWEVER, that if a Shelf Notice is given within 10 days of the Filing Date, then the Filing Date with respect to the initial Shelf Registration shall be the 15th calendar day after the date of the giving of such Shelf Notice; and (B) in each other case (which may be applicable notwithstanding the consummation of the Exchange Offer), the 30th day after the delivery of a Shelf Notice. HOLDER: Any holder of a Registrable Note or Registrable Notes. INDEMNIFIED PERSON: See Section 7(c) hereof. INDEMNIFYING PERSON: See Section 7(c) hereof. INDENTURE: The Indenture, dated as of September 15, 1996 between the Company and First Bank National Association, as trustee, pursuant to which the Notes are being issued, as amended or supplemented from time to time in accordance with the terms thereof. INITIAL PURCHASERS: See the first introductory paragraph hereto. INSPECTORS: See Section 5(o) hereof. ISSUE DATE: The date on which the original Notes were sold to the Initial Purchasers pursuant to the Purchase Agreement. MAJORITY HOLDERS: See Section 3(c) hereof. -3- NASD: See Section 5(s) hereof. NOTES: See the second introductory paragraph hereto. PARTICIPANT: See Section 7(a) hereof. PARTICIPATING BROKER-DEALER: See Section 2(b) hereof. PERSON: An individual, trustee, corporation, partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. PRIVATE EXCHANGE: See Section 2(b) hereof. PRIVATE EXCHANGE NOTES: See Section 2(b) hereof. PROSPECTUS: The prospectus included in any Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement including post- effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. PURCHASE AGREEMENT: See the second introductory paragraph hereto. RECORDS: See Section 5(o) hereof. REGISTRABLE NOTES: Each Note upon original issuance of the Notes and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(iv) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(iv) hereof is applicable, the Exchange Registration Statement) covering such Note, Exchange Note or Private Exchange Note, as the case -4- may be, has been declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144, or (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture. REGISTRATION STATEMENT: Any registration statement of the Company, including, but not limited to, the Exchange Registration Statement, that covers any of the Registrable Notes pursuant to the provisions of this Agreement, including the Prospectus, amendments and supplements to such registration statement, including post-effective amendments, all exhibits, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. RULE 144: Rule 144 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. RULE 144A: Rule 144A promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. RULE 415: Rule 415 promulgated under the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. SECURITIES ACT: The Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. SHELF NOTICE: See Section 2(c) hereof. SHELF REGISTRATION: See Section 3(a) hereof. -5- TIA: The Trust Indenture Act of 1939, as amended. TRUSTEE: The trustee under the Indenture and, if existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. EXCHANGE OFFER (a) The Company agrees to file with the SEC no later than the Filing Date an offer to exchange (the "EXCHANGE OFFER") any and all of the Registrable Notes (other than the Private Exchange Notes, if any) for a like aggregate principal amount of debt securities of the Company, which are identical in all material respects to the Notes (the "EXCHANGE NOTES") (and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA), except that the Exchange Notes (other than Private Exchange Notes, if any) (i) shall have been registered pursuant to an effective Registration Statement under the Securities Act, (ii) shall contain no restrictive legend thereon and (iii) shall not contain any requirement by the Company to pay Additional Interest. The Exchange Offer shall be registered under the Securities Act on the appropriate form (the "EXCHANGE REGISTRATION STATEMENT") and shall comply with all applicable tender offer rules and regulations under the Exchange Act. The Company agrees to use its best efforts to (x) cause the Exchange Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 30 calendar days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) consummate the Exchange Offer on or prior to the 150th day following the Issue Date. If after such Exchange Registration Statement is declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each -6- Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, and that such Holder is not an affiliate of the Company within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and other than in respect of any Exchange Notes as to which clause 2(c)(iv) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Registration Statement. (b) The Company shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "PARTICIPATING BROKER-DEALER"), whether such positions or policies have been publicly disseminated by the Staff of the SEC or such positions or policies, in the judgment of counsel for the Initial Purchasers, represent the prevailing views of the Staff of the SEC. Such "Plan of Distribution" section shall also expressly permit the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker- Dealers may resell the Exchange Notes. If any Participating Broker-Dealer participates in the Exchange Offer and notifies the Company or causes the Company to be notified in writing that it is a Participating Broker-Dealer within 30 days after the last date for which exchanges are accepted pursuant to the Exchange Offer, the Company shall use its reasonable efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by any Participating Broker-Dealer subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with -7- applicable law in connection with any resale of the Exchange Notes; PROVIDED, HOWEVER, that such period shall not exceed 180 days after the last date for which exchanges are accepted pursuant to the Exchange Offer (or such shorter period when all Exchange Notes received by Participating Broker- Dealers in exchange for Registrable Notes acquired for their own account as a result of market-making or other trading activities have been disposed of by such Participating Broker- Dealers or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "APPLICABLE PERIOD"); and Participating Broker-Dealers shall not be authorized by the Company to, and shall not, deliver such Prospectus after such period in connection with resales contemplated by this Section 2(b) or otherwise; it being understood that, notwithstanding anything in this Agreement to the contrary, the Company shall not be required to comply with any provision of this Section 2(b) or any other provision of this Agreement relating to the distribution of Exchange Notes by Participating Broker-Dealers, to the extent that the Company reasonably concludes that compliance with such provision is no longer required by applicable law or interpretation of the Staff of the SEC. If, prior to the last date for which exchanges are accepted pursuant to the Exchange Offer, the Initial Purchasers hold any Notes acquired by them and having the status of an unsold allotment in the initial distribution, the Company shall, upon the request of any of the Initial Purchasers, simultaneously with the delivery of the Exchange Notes in the Exchange Offer issue and deliver to the Initial Purchasers in exchange (the "PRIVATE EXCHANGE") for such Notes held by the Initial Purchasers a like principal amount of debt securities of the Company that are identical in all material respects to the Exchange Notes (the "PRIVATE EXCHANGE NOTES") (and which are issued pursuant to the same indenture as the Exchange Notes) except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and the Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Company shall: -8- (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (1) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event shall provide that (1) the Exchange Notes shall not be subject to the transfer restrictions applicable to the Notes or the requirement of the Company to pay Additional Interest thereon and (2) the Private Exchange Notes shall be subject to the transfer restrictions applicable to the Notes. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will -9- have the right to vote or consent as a separate class on any matter. (c) If (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Company is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 150 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests at any time after the consummation of the Private Exchange or (iv) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act), then the Company shall promptly deliver written notice thereof (the "SHELF NOTICE") to the Trustee and, in the case of clauses (i) and (ii), all Holders, in the case of clause (iii), the Holders of the Private Exchange Notes and, in the case of clause (iv), the affected Holder, and shall file a Shelf Registration pursuant to Section 3 hereof. 3. SHELF REGISTRATION If a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) SHELF REGISTRATION. The Company shall file with the SEC prior to the Filing Date a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "SHELF REGISTRATION"). The Shelf Registration shall be on Form S-3 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, not more than one underwritten offering). The Company shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration. The Company shall use its best efforts to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and shall use its reasonable efforts to keep the Shelf Registration continuously effective under the Securities Act until the date which is three years from the Issue Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "EFFECTIVENESS PERIOD"), or such shorter period ending when all -10- Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration. (b) WITHDRAWAL OF STOP ORDERS. If the Shelf Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof. (c) SUPPLEMENTS AND AMENDMENTS. The Company shall promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount (the "MAJORITY HOLDERS") of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. ADDITIONAL INTEREST (a) The Company and the Initial Purchasers agree that the Holders of Registrable Notes will suffer damages if the Company fails to fulfill its obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay, as liquidated damages, additional interest on the Notes ("ADDITIONAL INTEREST") under the circumstances and to the extent set forth below: (i) if (A) neither the Exchange Registration Statement nor the Shelf Registration has been filed on or prior to the applicable Filing Date or (B) notwithstanding that the Company has consummated or will consummate an Exchange Offer, the Company is required to file a Shelf Registration Statement and such Shelf Registration Statement is not filed on or prior to the Filing Date applicable thereto, then, commencing on the day after the Filing Date applicable thereto, Additional Interest shall accrue on the Notes over and above the stated interest at a rate of 0.50% per annum; (ii) if (A) neither the Exchange Registration Statement nor the Shelf Registration is declared -11- effective by the SEC on or prior to the relevant Effectiveness Date or (B) notwithstanding that the Company has consummated or will consummate the Exchange Offer, the Company is required to file a Shelf Registration and such Shelf Registration is not declared effective by the SEC on or prior to the Effectiveness Date in respect of such Shelf Registration, then, commencing on the day after the such Effectiveness Date, Additional Interest shall accrue on the Notes included or which should have been included in such Registration Statement over and above the stated interest at a rate of 0.50% per annum; and (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 150th day after the Issue Date or (B) the Exchange Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue (over and above any interest otherwise payable on such Notes) at a rate of 0.50% per annum on (x) the 151st day after the Issue Date with respect to the Notes validly tendered and not exchanged by the Company, in the case of (A) above, or (y) the day the Exchange Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration ceases to be effective in the case of (C) above (it being understood and agreed that, notwithstanding any provision to the contrary, so long as any Note which is the subject of a Shelf Notice is then covered by an effective Shelf Registration Statement, no Additional Interest shall accrue on such Note); PROVIDED, HOWEVER, that the Additional Interest rate on any affected Note may not exceed at any one time in the aggregate 0.50% per annum; and PROVIDED, FURTHER, that (1) upon the filing of the Exchange Registration Statement or a Shelf Registration (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement or the -12- Shelf Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes tendered and not validly withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration which had ceased to remain effective (in the case of (iii)(C) of this Section 4(a)), Additional Interest on the affected Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Company shall notify the Trustee within three business days after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "EVENT DATE"). Any amounts of Additional Interest due pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the Holders of affected Notes in cash semi-annually on each March 15 and September 15 (to the holders of record on the March 1 and September 1 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the affected Registrable Notes of such Holders, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. 5. REGISTRATION PROCEDURES In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall effect such registration(s) to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Company hereunder, the Company shall: (a) Prepare and file with the SEC prior to the Filing Date a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, to use its best efforts to cause each such Registration Statement to become effective and to use its reasonable efforts to cause such Registration -13- Statement to remain effective as provided herein; PROVIDED, HOWEVER, that, if (1) such filing is pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall, if requested, furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker- Dealer, as the case may be, one counsel selected by the Majority Holders (the "MAJORITY COUNSEL") and the managing underwriters of an underwritten offering of Registrable Notes, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five business days prior to such filing). The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, if the Majority Holders of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, the Majority Counsel, or the managing underwriters, if any, shall reasonably object. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period or until consummation of the Exchange Offer, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Company will be deemed not to have used its reasonable efforts to cause the Exchange Offer Registration Statement or any Shelf Registration Statement, as the case may be, to remain effective during the Applicable Period or the Effectiveness Period, as the case may -14- be, if the Company voluntarily takes any action that would result in the Holder of Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or Exchange Notes, as the case may be, during that period unless (A) such action is, in the reasonable judgment of the Company, required by applicable law (including, without limitation, any interpretation of the SEC) or (B) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations hereunder), including the acquisition or divestiture of assets, so long as the Company promptly complies with the requirements of Section 5(k) hereof and the last paragraph of this Section 5. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, the Majority Counsel and the managing underwriters of an underwritten offering of Registrable Notes and their counsel, if any, promptly (but in any event within three business days) (i) when a Prospectus or any supplement thereto or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker- Dealers upon written notice by any such Participating Broker-Dealer of a resale the representations and warranties of the Company contained in any agreement (including any underwriting agreement), contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification -15- of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker-Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will 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 that in the case of the Prospectus, it will 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, in light of the circumstances under which they were made, not misleading, and (vi) of the determination by the Company that a post-effective amendment to a Registration Statement would be appropriate. (d) Use its reasonable efforts to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement or the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes for sale in any jurisdiction as soon as practicable. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), or the Majority Holders of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, or counsel for any of them reasonably request to be included therein, (ii) make all required filings of such prospectus supplement or such post-effective amendment as soon as practicable after the Company has received notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is -16- required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests, to the Majority Counsel and to each managing underwriter of an underwritten public offering of Registrable Notes and their counsel, if any, at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, the Majority Counsel, and to the underwriters, if any, and such underwriters' counsel, at the sole expense of the Company, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its reasonable efforts to register or qualify such Registrable Notes (and to cooperate with selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the Majority Counsel, the managing underwriter or underwriters, if any, and such underwriters' counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes) for -17- offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters of an underwritten offering of Registrable Notes shall reasonably request in writing; PROVIDED, HOWEVER, that where Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; PROVIDED, HOWEVER, that the Company shall not be required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends (except any customary legend borne by securities held through The Depository Trust Company or any similar depository) and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations (consistent with the provisions of the Indenture and the officers' certificate establishing the form and terms of the Notes pursuant to the Indenture) and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request. (j) Use its reasonable efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof or the underwriter or underwriters, if any, to dispose of such Registrable Notes, except as may be required solely as a -18- consequence of the nature of a selling Holder's business, in which case the Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state 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. (l) Use its reasonable efforts to cause the Registrable Notes covered by a Registration Statement or the Exchange Notes, as the case may be, to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement or the Exchange Notes, as the case may be, or the managing underwriter or underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (n) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, negotiate in good faith and enter into not more than one underwriting -19- agreement, which shall be in form and scope as is customary in underwritten offerings of debt securities with similar credit ratings to the Notes and take all such other actions as are reasonably requested by the managing underwriter or underwriters in order to facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities with similar credit ratings to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Company (which may be the Company's General Counsel) and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt securities with similar credit ratings to the Notes and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt securities with similar credit ratings to the Notes and such other matters as reasonably requested by the managing underwriter or underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to the Majority Holders of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at the closing under such underwriting agreement, or as and to the extent required thereunder. Notwithstanding the foregoing, the Company shall not be required to (A) enter into (x) more than one -20- underwriting agreement with respect to Registrable Notes registered under the Shelf Registration Statement or (y) any underwriting agreement with respect to the sale of any Private Exchange Notes pursuant to a Shelf Registration Statement or (B) enter into any sales agency agreements, distribution agreements or other similar agreements whatsoever with respect to the Registrable Notes. (o) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, and to the extent customary in connection with a "due diligence" investigation for an offering of debt securities with a similar credit rating, make available for inspection by representatives approved by the Majority Holders of such Registrable Notes being sold, or such Participating Broker-Dealers, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, one counsel to the underwriters, if any (collectively, the "INSPECTORS"), at the offices where normally kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "RECORDS") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities. Records which the Company determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information in such Records has been made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such information is -21- generally available to the public. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Company's sole expense. (p) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and use its reasonable efforts to cause the Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its reasonable efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (q) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule promulgated under the Securities Act) no later than 45 days after the end of any 12-month period (or 90 days after the end of any 12-month period if such period is a fiscal year) (i) commencing at the end of any fiscal quarter in which Registrable Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (r) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Notes that such -22- Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (s) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). (t) Use its reasonable efforts to take all other steps necessary or advisable to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes as to which any Registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller not materially misleading. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Company shall give any such notice, each of the Effectiveness Period -23- and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. 6. REGISTRATION EXPENSES (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Majority Holders of the Registrable Notes included in any Registration Statement or sold by any Participating Broker-Dealer, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and, subject to the provisions of Section 6(b) hereof, reasonable fees and disbursements of counsel for the sellers of Registrable Notes, (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, if any, and any fees associated with making the Registrable Notes or Exchange Notes eligible for trading through The Depository -24- Trust Company, (vii) Securities Act liability insurance, if the Company desires such insurance, (viii) fees and expenses of all other Persons retained by the Company, (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if applicable, and (xii) the expenses relating to printing, word processing and distributing all Registration Statements, any underwriting agreement, indentures and any other documents necessary in order to comply with this Agreement. (b) The Company shall (i) reimburse the Holders of the Registrable Notes being registered pursuant to this Agreement for the reasonable fees and disbursements, in an aggregate amount not to exceed $25,000, of not more than one counsel (in addition to appropriate local counsel) chosen by the Majority Holders of the Registrable Notes to be included in such Registration Statement and (ii) reimburse out-of-pocket expenses (other than legal expenses) of Holders of Registrable Notes incurred in connection with the registration and sale of the Registrable Notes pursuant to a Shelf Registration or in connection with the exchange of Registrable Notes pursuant to the Exchange Offer. 7. INDEMNIFICATION (a) The Company agrees to indemnify and hold harmless each Holder of Registrable Notes offered pursuant to a Shelf Registration Statement and each Participating Broker- Dealer selling Exchange Notes during the Applicable Period, the affiliates, directors, officers, agents, representatives and employees of each such Person or its affiliates, and each other Person, if any, who controls any such Person or its affiliates within the meaning of either Section 15 of the Securities Act or Section 20(a) of the Exchange Act (each, a "PARTICIPANT"), from and against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to reasonable attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages -25- or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement pursuant to which the offering of such Registrable Notes or Exchange Notes, as the case may be, is registered, or in any supplement thereto or amendment thereof, or any related Prospectus, or any supplement thereto or amendment thereof, or any related preliminary Prospectus, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; PROVIDED, HOWEVER, that the Company will not be liable in any such case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information relating to any Participant furnished to the Company in writing by or on behalf of such Participant expressly for use therein; PROVIDED, FURTHER, that such indemnity agreement with respect to any preliminary Prospectus shall not inure to the benefit of any Participant from whom the Person asserting any loss, liability, claim, damage or expense purchased Registrable Notes or Exchange Notes, as the case may be, if a copy of the Prospectus filed as part of an effective Registration Statement (as then amended or supplemented and furnished by the Company to such Participant) was not sent or given by or on behalf of such Participant to such Person, if such is required by law, at or prior to the sale of such Registrable Notes or Exchange Notes, as the case may be, and if such Prospectus (as so amended or supplemented) would have cured the defect giving rise to such loss, liability, claim, damage or expense. This indemnity agreement will be in addition to any liability which the Company may otherwise have including under this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and officers and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Participant, but only (i) with reference to information relating to such Participant furnished to the Company in writing by or on behalf of such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus or (ii) with respect to any untrue -26- statement or representation made by such Participant in writing to the Company. (c) Promptly after receipt by any Person in respect of which indemnity may be sought under subsection (a) or (b) above of notice of the commencement of any action, such Person (the "INDEMNIFIED PERSON") shall, if a claim in respect thereof is to be made against the Person whom such indemnity may be sought (the "INDEMNIFYING PERSON") under such subsection, notify each Indemnifying Person against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an Indemnifying Person shall not relieve it from any liability which it may have under paragraph (a) or (b) above). In case any such action is brought against any Indemnified Person, and it notifies an Indemnifying Person of the commencement thereof, the Indemnifying Person will be entitled to participate therein, and to the extent it may elect by written notice delivered to the Indemnified Person promptly after receiving the aforesaid notice from such Indemnified Person, to assume the defense thereof with counsel satisfactory to such Indemnified Person. Notwithstanding the foregoing, the Indemnified Person or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person or parties unless (i) the employment of such counsel shall have been authorized in writing by one of the Indemnifying Persons in connection with the defense of such action, (ii) the Indemnifying Persons shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such Indemnified Person or Persons shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the Indemnifying Persons (in which case the Indemnifying Persons shall not have the right to direct the defense of such action on behalf of the Indemnified Person or Persons ), in any of which events such fees and expenses shall be borne by the Indemnifying Persons. Anything in this subsection to the contrary notwithstanding, an Indemnifying Person shall not be liable for any settlement of any claim or action effected without its written consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld. (d) In order to provide for contribution in circumstances in which the indemnification provided for in the preceding paragraphs of this Section 7 is for any reason held to be unavailable from any Indemnifying Person or is insufficient -27- to hold harmless an Indemnified Person thereunder, each Indemnifying Person shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company any contribution received by the Company from persons, other than the Indemnified Persons, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, officers and directors of the Company) as incurred to which the Indemnified Party may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Indemnifying Person or Persons, on the one hand, and the Indemnified Person or Persons on the other from the offering of the Notes or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the Indemnifying Person not having received notice as provided in the preceding paragraphs of this Section 7, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Indemnifying Person or Persons, on the one hand, and the Indemnified Person or Persons on the other in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the parties 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 Participant and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this paragraph (d) were determined by pro rata allocation (even if the Participants were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this paragraph (d), (i) in no case shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Securities, as the case may be, exceeds the amount of damages that such Participant has otherwise been required to pay or has paid by reason of such untrue statement or alleged untrue statement -28- or omission or alleged omission, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this paragraph (d) or otherwise. No party shall be liable for contribution with respect to any action or claim settled without its consent; PROVIDED, HOWEVER, that such consent was not unreasonably withheld. 8. RULE 144 AND 144A The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the requirements of the Securities Act and the Exchange Act and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Registrable Notes, make publicly available annual reports and such information, documents and other reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The Company further covenants for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 9. UNDERWRITTEN REGISTRATION If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Majority Holders of such Registrable Notes included in such offering and reasonably acceptable to the Company. -29- No Holder of Registrable Notes may participate in any underwritten registation hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. MISCELLANEOUS (a) NO INCONSISTENT AGREEMENTS. The Company has not entered, as of the date hereof, and the Company will not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The Company has not entered and the Company will not enter into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. (b) ADJUSTMENTS AFFECTING REGISTRABLE NOTES. The Company will not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders pursuant to such Registration Statement; PROVIDED, HOWEVER, that the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. -30- (d) NOTICES. All notices and other communications (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, next-day air courier or facsimile: 1. if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchasers as follows: Bear, Stearns & Co. Inc. 245 Park Avenue New York, New York 10167 Facsimile No: (212) 272-2000 Attention: Capital Markets, 4th Floor with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Facsimile No: (212) 269-5420 Attention: William M. Hartnett, Esq. 2. if to the Initial Purchasers, at the address specified in Section 10(d)(1); 3. if to the Company, as follows: Fingerhut Companies, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 Facsimile No: (612) 936-5412 Attention: General Counsel with copies to: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota Facsimile No: (612) 340-8738 Attention: Elizabeth C. Hinck, Esq. -31- All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto; PROVIDED, HOWEVER, that this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. (f) COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. (i) SEVERABILITY. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants -32- and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) NOTES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) THIRD PARTY BENEFICIARIES. Holders of Registrable Notes and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. FINGERHUT COMPANIES, INC. By:/s/Robert W. Oberrender -------------------------------- Name: Robert W. Oberrender Title: Vice President BEAR, STEARNS & CO. INC. SMITH BARNEY INC. FIRST CHICAGO CAPITAL MARKETS, INC. By: Bear, Stearns & Co. Inc. By:/s/Lee Sachs -------------------------------- Name: Lee Sachs Title: Senior Managing Director EX-4.3 4 EXHIBIT 4.3 Exhibit 4.3 THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF SEPTEMBER 27, 1996 AND THE LAST DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (A)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THIS SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE (D), (E), OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR AND, IF APPLICABLE, THE TRANSFEREE TO THE TRUSTEE. THE HOLDER OF THIS NOTE IS ENTITLED TO THE BENEFITS OF THE REGISTRATION RIGHTS AGREEMENT REFERRED TO BELOW AND, BY ITS ACCEPTANCE HEREOF, AGREES TO BE BOUND BY AND TO COMPLY WITH THE PROVISIONS OF SUCH REGISTRATION RIGHTS AGREEMENT. THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY (AS DEFINED IN THE INDENTURE) OR A NOMINEE THEREOF. THIS NOTE IS EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. REGISTERED FINGERHUT $ NO. COMPANIES, INC. CUSIP 7.375% SENIOR NOTES DUE NO. FINGERHUT COMPANIES, INC., a Minnesota corporation (hereinafter called the "Company", which term includes any successor corporation under the Indenture referred to below), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of ________________________ on September 15, 1999 (the "Maturity Date"), and to pay interest thereon from September 27, 1996 or from the most recent date to which interest has been paid or duly provided for, semiannually on March 15 and September 15 in each year (each, an "Interest Payment Date"), commencing March 15, 1997, and at Maturity, at the rate of 7.375% per annum, until the principal hereof is paid or duly made available for payment. Interest on this Note shall be calculated -2- on the basis of a 360-day year consisting of twelve 30-day months. The interest so payable and punctually paid or duly provided for on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the "Regular Record Date" for such interest, which shall be the March 1 or September 1 (whether or not a Business Day) next preceding such Interest Payment Date; provided, however, that interest payable on the Maturity Date of this Note shall be payable to the Person to whom principal shall be payable. Any such interest which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date shall forthwith cease to be payable to the registered Holder hereof on the relevant Regular Record Date by virtue of having been such Holder, and may be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of this Note not less than 10 days prior to such Special Record Date. In the event that any Interest Payment Date or the Maturity Date is not a Business Day, the interest and, with respect to the Maturity Date, principal otherwise payable on such date will be paid on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or Maturity Date. The Holder of this Note is entitled to the benefits of the Registration Rights Agreement dated as of September 27, 1996 among the Company and the Initial Purchasers named therein (as the same may be amended from time to time, the "Registration Rights Agreement"). (i) If (A) neither the Exchange Offer Registration Statement (as such term is defined in the Registration Rights Agreement) nor the Shelf Registration Statement (as such term is defined in the Registration Rights Agreement) is filed with the Securities and Exchange Commission (the "Commission") on or prior to the 45th day after the Issue Date (as such term is defined in the Registration Rights Agreement) or (B) notwithstanding that the Company has consummated or will consummate an Exchange Offer, the Company is required to file a Shelf Registration Statement and such Shelf Registration Statement is not filed on or prior to the date required by the Registration Rights Agreement, then commencing on the day after either such required filing date, then, as liquidated damages, additional interest ("Additional Interest") shall accrue on the principal amount of the Notes at a rate of .50% per annum; or (ii) If (A) neither the Exchange Offer Registration Statement nor a Shelf Registration Statement is declared effective by the Commission on or prior to the 75th day after the applicable filing date or (B) notwithstanding that the Company has consummated or will consummate an Exchange Offer, the Company is required to file a Shelf Registration Statement and such Shelf Registration Statement is not declared effective by the Commission on or prior to the 75th day after the date such Shelf Registration Statement was required to be filed, then, commencing on the 76th day after the applicable required filing date, Additional Interest shall accrue on the principal amount of the Notes at a rate of .50% per annum; or -3- (iii) If (A) the Company has not exchanged Exchange Notes (as such term is defined in the Registration Rights Agreement) for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 150th day after the date on which the Exchange Offer Registration Statement was declared effective or (B) if applicable, the Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the third anniversary of its effective date (other than after such time as all Notes have been disposed of thereunder), then Additional Interest shall accrue on the principal amount of the Notes at a rate of .50% per annum commencing on (x) the 151st day after such effective date, in the case of (A) above, or (y) the day such Shelf Registration Statement ceases to be effective in the case of (B) above. PROVIDED, HOWEVER, that the Additional Interest rate on the Notes may not exceed in the aggregate .50% per annum; PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in case of clause (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (ii) above), or (3) upon the exchange of Exchange Notes for all Notes tendered (in the case of clause (iii) (A) above), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii) (B) above), Additional Interest on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. Any amounts of Additional Interest due pursuant to clause (i), (ii) or (iii) above will be payable in cash on each Interest Payment Date to the Holders of record on the Regular Record Date. Payment of the principal of and the interest on this Note will be made at the office or agency of the Company maintained for that purpose in The City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that, at the option of the Company, interest may be paid by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register. Payment of the principal of and interest on this Note due on the Maturity Date will be made in immediately available funds upon presentation of this Note. Reference is hereby made to the further provisions of this Note set forth below, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee under the Indenture by the manual signature of one of its authorized signatories, this Note shall not be entitled to any benefits under the Indenture or be valid or obligatory for any purpose. -4- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: FINGERHUT COMPANIES, INC. By _________________________ Name: Peter G. Michielutti Title: Senior Vice President and Chief Financial Officer [SEAL] Attest ______________________ Name: Robert W. Oberrender Title: Vice President and Treasurer TRUSTEE'S CERTIFICATE OF AUTHENTICATION THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED HEREIN AND ISSUED PURSUANT TO THE WITHIN-MENTIONED INDENTURE. FIRST BANK NATIONAL ASSOCIATION, as Trustee By ____________________________ Authorized Signatory -5- [REVERSE SIDE OF NOTE] This Note is one of a duly authorized issue of securities of the Company (herein called the "Notes") issued and to be issued in one or more series under an Indenture dated as of September 15, 1996 (herein called, together with all indentures supplemental thereto, the "Indenture") between the Company and First Bank National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Notes, and the terms upon which the Notes are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, limited in aggregate principal amount to $125,000,000. The Notes are not subject to redemption prior to maturity. If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of the Company's obligations in respect of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants with respect to this Note, in each case upon compliance with certain conditions set forth therein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series issued under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series affected thereby. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of any series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Notes issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Note, at the time, place and rate, and in the coin or currency, herein and in the Indenture prescribed. -6- As provided in the Indenture and subject to certain limitations set forth therein and in this Note, the transfer of this Note is registrable in the registry books of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company maintained for the purpose in any place where the principal of (and premium, if any) and interest on this Note are payable, duly endorsed, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by the Holder hereof or by his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes of this series are issuable only in fully registered form without coupons in denominations of $250,000 and any amount in excess thereof which is an integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith, other than in certain cases provided in the Indenture. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Note shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. -7- _________________________________ ABBREVIATIONS The following abbreviations, when used in this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common TEN ENT--as tenants by the entireties JT TEN--as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT--_______________Custodian_______________ (Cust) (Minor) under Uniform Gift to Minors Act _______________________ (State) Additional abbreviations may be used though not in the above list. _________________________________ -8- FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ________________________________________________________ (Name and address of assignee, including zip code, must be printed or typewritten) ______________________________________________________________________________ the within Note, and all rights thereunder, hereby irrevocably constituting and appointing _____________________________________________________________________ Attorney to transfer said Note on the books of the within Company, with full power of substitution in the premises Dated _______________ _____________________________________________________ _____________________________________________________ NOTICE: The signature to this assignment must correspond with the name as written upon the within Note in every particular, without alteration or enlargement or any change whatever and must be guaranteed by a commercial bank or trust company having its principal office or a correspondent in the City of NEW YORK OR by a member of the New York Stock Exchange (Exchange). -9- CERTIFICATE OF TRANSFER In connection with any transfer of this Note occurring prior to the date that is three years after the later of September 27, 1996 and the last date on which this Note (or any Predecessor Security) was owned by the Company or any affiliate of the Company, the undersigned confirms that this Note is being transferred: CHECK ONE BOX BELOW __ (a) As long as this note is __ (c) to an institutional "accredited eligible for resale pursuant investor" (as defined in Rule to Rule 144 under the Securities 501(a)(1), (2), (3) or (7) under Act of 1933, as amended, to a the Securities Act of 1933, as person the undersigned reasonably amended) that has furnished to the believes is a "qualified Trustee a signed letter containing institutional buyer" (a "QIB") certain representations and as defined in such Rule 144A agreements (the form of which that purchases for its own letter can be obtained from the account or for the account of Trustee); or a QIB to whom notice is given that the transfer is being made in reliance on such Rule 144A; __ (b) pursuant to offers and sales to __ (d) to the Company. non-U.S. persons that occur outside of the United States within the meaning of Regulation S under the Securities Act of 1933, as amended;
Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee under the Indenture by the manual signature of one of its authorized signatories, this Note shall not be entitled to any benefits under the Indenture or be valid or obligatory for any purpose. Dated: ______________________________ SIGNATURE Signature Guaranteed: ______________________________ SIGNATURE -10- TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is acquiring this Note for its own account or an account with respect to which it exercises sole investment discretion and that it or any such account , as the case may be, is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: NOTICE: To be executed by an executive officer _____________________________ -11- EX-4.4 5 EXHIBIT 4.4 EXHIBIT 4.4 This Note is a Global Security within the meaning of the Indenture referred to herein and is registered in the name of a Depositary or a nominee of a Depositary. Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner hereof, Cede & Co., has an interest herein. REGISTERED $ FINGERHUT COMPANIES, CUSIP No. INC. NO. 7.375% SENIOR NOTES DUE 1999 FINGERHUT COMPANIES, INC., a corporation duly organized and existing under the laws of Minnesota (herein called the "Company", which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to ______________, or registered assigns, the principal sum of ________________________ on September 15, 1999, and to pay interest thereon from and including September 27, 1996 or from and including the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on March 15 and September 15 in each year, commencing March 15, 1997 at the rate of 7.375% per annum until the principal hereof is paid or made available for payment. The interest so payable and punctually paid or duly provided for on any Interest Payment Date will as provided in the Indenture be paid to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be the March 1 or September 1 (whether or not a Business Day) next preceding such Interest Payment Date; provided, however, that interest payable on the Maturity Date of this Note shall be payable to the Person to whom principal shall be payable. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder hereof on such Regular Record Date and may be paid to the Person in whose name this Note (or one or more predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to the Holder of this Note not less than 10 days prior to such Special Record Date. In the event that any Interest Payment Date or the Maturity Date is not a Business Day, the interest and, with respect to the Maturity Date, principal otherwise payable on such date will be paid on the next succeeding Business Day with the same force and effect as if made on such Interest Payment Date or Maturity Date. Payment of the principal of and interest on this Note will be made at the office or agency of the Company maintained for that purpose in the City of New York, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. Payment of the principal of and interest on this Note due on the Maturity Date will be made in immediately available funds upon presentation of this Note. Interest on this Note shall be computed on the basis of a 360-day year of twelve 30-day months. Reference is hereby made to the further provisions of this Note set forth below, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by or on behalf of the Trustee identified below, by manual signature, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. -2- IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its corporate seal. Dated: ______________, 199__ FINGERHUT COMPANIES, INC. By ______________________________________ Name: Peter G. Michielutti Title: Senior Vice President and Chief Financial Officer [SEAL] Attest _________________________________ Name: Robert W. Oberrender Title: Vice President and Treasurer TRUSTEE'S CERTIFICATE OF AUTHENTICATION THIS IS ONE OF THE SECURITIES OF THE SERIES DESIGNATED HEREIN AND ISSUED PURSUANT TO THE WITHIN-MENTIONED INDENTURE. FIRST BANK NATIONAL ASSOCIATION, as Trustee By ___________________________ Authorized Signatory -3- FINGERHUT COMPANIES, INC. 7.375% SENIOR NOTES DUE 1999 This Note is one of a duly authorized issue of securities of the Company (herein called the "Securities"), issued or to be issued in one or more series under an Indenture, dated as of September 15, 1996 (the "Indenture"), between the Company and First Bank National Association, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered. This Note is one of the series designated on the face hereof, limited in aggregate principal amount to $125,000,000. If an Event of Default with respect to the Notes shall occur and be continuing, the principal of the Notes may (subject to the conditions set forth in the Indenture) be declared due and payable in the manner and with the effect provided in the Indenture. The Indenture contains provisions for defeasance at any time of the Company's obligations in respect of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants with respect to this Note, in each case upon compliance with certain conditions set forth therein. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Securities of each series to be affected under the Indenture at any time by the Company and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the Securities at the time Outstanding of each series to be affected and, for certain purposes, without the consent of the Holders of any Securities at the time Outstanding. The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities of each series at the time Outstanding, on behalf of the Holders of all Securities of such series, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and -4- unconditional, to pay the principal of (and premium, if any) and interest on this Note at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable in the registry books of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Notes of this series and of like tenor, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. The Notes of this series are issuable only in fully registered form without coupons in denominations of $1,000 and any amount in excess thereof which is an integral multiple of $1,000. As provided in the Indenture and subject to certain limitations therein set forth, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series and of like tenor of a different authorized denomination, as requested by the Holder surrendering the same. No service charge will be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered in the Security Register as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. This Note shall be governed by and construed in accordance with the laws of the State of New York. All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture. -5- ---------------------------------------------- ABBREVIATIONS The following abbreviations, when used in this instrument, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM--as tenants in common TEN ENT--as tenants by the entireties JT TEN--as joint tenants with right of survivorship and not as tenants in common UNIF GIFT MIN ACT--_______________Custodian_______________ (Cust) (Minor) under Uniform Gift to Minors Act ------------------------------------------------- (State) Additional abbreviations may be used though not in the above list. ------------------------------- -6- FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE / /----------------------------------------------------------------------------- (Name and address of assignee, including zip code, must be printed or typewritten) - ---------------------------------------------------------- - ---------------------------------- the within Note, and all rights thereunder, hereby irrevocably constituting and appointing - -------------------------------------------------------------------------------- Attorney to transfer said Note on the books of the within Company, with full power of substitution in the premises Dated --------------- ------------------------------------------- ------------------------------------------- NOTICE: The signature to this assignment must correspond with the name as written upon the within Note in every particular, without alteration or enlargement or any change whatever and must be guaranteed by a commercial bank or trust company having its principal office or a correspondent in the City of New York or by a member of the New York Stock Exchange (Exchange). -7- EX-5 6 EXHIBIT 5 EXHIBIT 5 [Dorsey & Whitney LLP letterhead] The Board of Directors Fingerhut Companies, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 Re: Registration Statement on Form S-4 Ladies and Gentlemen: We have acted as counsel to Fingerhut Companies, Inc., a Minnesota corporation (the "Company"), in connection with a Registration Statement on Form S-4 (the "Registration Statement") relating to the proposed issuance by the Company of $125,000,000 aggregate principal amount of the Company's 7.375% Senior Notes Due 1999 (the "New Notes") registered under the Securities Act of 1933, as amended, in exchange for up to $125,000,000 aggregate principal amount of the Company's outstanding 7.375% Senior Notes Due 1999 (the "Old Notes"). The New Notes are issuable under an Indenture dated as of September 15, 1996 (the "Indenture") between the Company and First Bank National Association, as Trustee (the "Trustee"). We have examined such documents, including resolutions adopted by the Board of Directors of the Company on July 25, 1996, and resolutions, adopted by written consent dated September 24, 1996 (collectively the "Resolution"), and have reviewed such questions of law as we have considered necessary and appropriate for the purposes of our opinion set forth below. In rendering our opinion, we have assumed the authenticity of all documents submitted to us as originals, the genuineness of all signatures and the conformity to authentic originals of all documents submitted to us as copies. We have also assumed the legal capacity for all purposes relevant hereto of all natural persons and, with respect to all parties to agreements or instruments relevant hereto other than the Company, that such parties had the requisite power and authority (corporate or otherwise) to execute, deliver and perform such agreements or instruments, that such agreements or instruments have been duly authorized by all requisite action (corporate or otherwise), executed and delivered by such parties and that such agreements or instruments are the valid, binding and enforceable obligations of such parties. As to questions of fact material to our opinion, we have relied upon certificates of officers of the Company and of public officials. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Indenture incorporated by reference as Exhibits 4.1 to the Registration Statement. Based on the foregoing, we are of the opinion that the New Notes have been duly authorized by all requisite corporate action and, when executed and authenticated as specified in the Indenture and delivered against surrender and cancellation of a like principal amount of Old Notes in the manner described in the Registration Statement, the New Notes will constitute valid and binding obligations of the Company, enforceable in accordance with their terms. The opinion set forth above is subject to the following qualifications and exceptions: (a) Our opinion is subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or other similar law of general application affecting creditors' rights. (b) Our opinion is subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing, and The Board of Directors Fingerhut Companies, Inc. Page 2 other similar doctrines affecting the enforceability of agreements generally (regardless of whether considered in a proceeding in equity or at law). (c) In rendering the opinions set forth above, we have assumed that, at the time of the authentication and delivery of a series of New Notes, the Resolution referred to above will not have been modified or rescinded, there will not have occurred any change in the law affecting the authorization, execution, delivery, validity or enforceability of the New Notes, the Registration Statement will have been declared effective by the Commission and will continue to be effective, none of the particular terms of a series of New Notes will violate any applicable law and neither the issuance and sale thereof nor the compliance by the Company with the terms thereof will result in a violation of any agreement or instrument then binding upon the Company or any order of any court or governmental body having jurisdiction over the Company. (d) Minnesota Statutes Section 290.371, Subd. 4, provides that any corporation required to file a Notice of Business Activities Report does not have a cause of action upon which it may bring suit under Minnesota law unless the corporation has filed a Notice of Business Activities Report and provides that the use of the courts of the State of Minnesota for all contracts executed and all causes of action that arose before the end of any period for which a corporation failed to file a required report is precluded. Insofar as our opinion may relate to the valid, binding and enforceable character of any agreement under Minnesota law or in a Minnesota court, we have assumed that any party seeking to enforce such agreement has at all times been, and will continue at all times to be, exempt from the requirement of filing a Notice of Business Activities Report or, if not exempt, has duly filed, and will continue to duly file, all Notice of Business Activities Reports. Our opinion expressed above is limited to the laws of the States of Minnesota and New York and the federal laws of the United States of America. We hereby consent to your filing of this opinion as an exhibit to the Registration Statement, and to the reference to our firm under the caption "Validity of New Notes" contained in the Prospectus included therein. Dated: November 1, 1996 Very truly yours, DORSEY & WHITNEY LLP /s/Dorsey & Whitney LLP ECH EX-12 7 EXHIBIT 12 EXHIBIT 12 FINGERHUT COMPANIES, INC. COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
Six Months Ended Fiscal Year Ended ------------------ ------------------------------------------------ June 28, June 30, Dec. 29, Dec. 30, Dec. 31, Dec. 25, Dec. 27, 1996 1995 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- -------- -------- Earnings before income taxes $148 $18,545 $76,306 $70,926 $111,879 $93,930 $81,398 Add: Fixed charges: Interest on indebtedness, and amortization of debt expense, including amounts capitalized 17,188 13,589 29,353 25,711 34,852 33,987 25,016 Interest factor of rental expense 5,995 6,349 12,865 13,279 13,027 11,375 8,603 -------- -------- -------- -------- -------- -------- -------- Total fixed charges 23,183 19,938 42,218 38,990 47,879 45,362 33,619 Deduct: Capitalized interest 1,592 802 2,233 - - 451 750 -------- -------- -------- -------- -------- -------- -------- Total available earnings $21,739 $37,681 $116,291 $109,916 $159,758 $138,841 $114,267 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Ratio of earnings to fixed charges (a) 1.89 2.75 2.82 3.34 3.06 3.40
- -------------------- (a) For the six months ended June 28, 1996, earnings were insufficient to cover fixed charges by $1.4 million. EX-23.1 8 EXHIBIT 23.1 EXHIBIT 23.1 AUDITOR'S CONSENT The Board of Directors Fingerhut Companies, Inc.: We consent to the use of our reports incorporated by reference in the Form S-4 Registration Statement dated November 1, 1996 of Fingerhut Companies, Inc. and to the references to our firm under the headings "Selected Consolidated Financial Information" and "Experts" in the Registration Statement. Our report covering the basic consolidated financial statements refers to a change in the method of accounting for long-lived assets in fiscal 1995. /s/ KPMG Peat Marwick LLP Minneapolis, Minnesota November 1, 1996 EX-25 9 EXHIBIT 25 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 __________ FORM T-1 Statement of Eligibility and Qualification Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee FIRST BANK NATIONAL ASSOCIATION (Exact name of Trustee as specified in its charter) United States 41-0256895 (State of Incorporation) (I.R.S. Employer Identification No.) First Trust Center 180 East Fifth Street St. Paul, Minnesota 55101 (Address of Principal Executive Offices) (Zip Code) FINGERHUT COMPANIES, INC. (Exact name of registrant as specified in its charter) Minnesota 41-1396490 (State of Incorporation) (I.R.S. Employer Identification No.) 4400 Baker Road Minnetonka, Minnesota 55343 (Address of Principal Executive Offices) (Zip Code) 7.375% SENIOR NOTES DUE 1999 (Title of the Indenture Securities) GENERAL 1. GENERAL INFORMATION Furnish the following information as to the Trustee. (a) Name and address of each examining or supervising authority to which it is subject. Comptroller of the Currency Washington, D.C. (b) Whether it is authorized to exercise corporate trust powers. Yes 2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS If the obligor or any underwriter for the obligor is an affiliate of the Trustee, describe each such affiliation. None See Note following Item 16. Items 3-15 are not applicable because to the best of the Trustee's knowledge the obligor is not in default under any Indenture for which the Trustee acts as Trustee. 16. LIST OF EXHIBITS List below all exhibits filed as a part of this statement of eligibility and qualification. Each of the exhibits listed below is incorporated by reference from registration number 33-90786. 1. Copy of Articles of Association. 2. Copy of Certificate of Authority to Commence Business. 3. Authorization of the Trustee to exercise corporate trust powers (included in Exhibits 1 and 2; no separate instrument). 4. Copy of existing By-Laws. 5. Copy of each Indenture referred to in Item 4. N/A. 6. The consents of the Trustee required by Section 321(b) of the act. 7. Copy of the latest report of condition of the Trustee published pursuant to law or the requirements of its supervising or examining authority. NOTE The answers to this statement insofar as such answers relate to what persons have been underwriters for any securities of the obligors within three years prior to the date of filing this statement, or what persons are owners of 10% or more of the voting securities of the obligors or affiliates, are based upon information furnished to the Trustee by the obligors, While the Trustee has no reason to doubt the accuracy of any such information, it cannot accept any responsibility therefor. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, First Bank National Association, an Association organized and existing under the laws of the United States, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Saint Paul and State of Minnesota on the 10th day of October, 1996. FIRST BANK NATIONAL ASSOCIATION [SEAL] /s/ Richard Prokosch --------------------------------- Richard Prokosch Trust Officer /s/ Kathe Barrett - ------------------- Kathe Barrett Assistant Secretary EXHIBIT 6 CONSENT In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, FIRST BANK NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor. Dated: October 10, 1996 FIRST BANK NATIONAL ASSOCIATION /s/ Richard Prokosch ----------------------------------- Richard Prokosch Trust Officer BYLAWS OF FIRST BANK NATIONAL ASSOCIATION ARTICLE I. MEETINGS OF SHAREHOLDERS The regular annual meeting of the shareholders for the election of directors and for the transaction of such other business as properly may come before the meeting shall be held at the main banking house of the Association in the City of Minneapolis, Minnesota, or other convenient place duly authorized by the Board of Directors (hereinafter referred to as the "Board"), on the last Thursday in February of each year at 9:30 o'clock A.M. of said day, or such other date or time which the Board may designate at any Board meeting held prior to the required date for sending notice of the annual meeting to the shareholders. The holders of a majority of the outstanding shares entitled to vote, and represented at any annual or special meeting of the shareholders, may choose persons to act as Chairman and as Secretary of the meeting. ARTICLE II. BOARD OF DIRECTORS Section 1. NUMBER. As provided in the Articles of Association, the Board of this Association shall consist of not less than five nor more than twenty-five members. At any meeting of the shareholders held for the purpose of electing directors, or changing the number thereof, the number of directors may be determined by a majority of the votes cast by the shareholders in person or by proxy. Any vacancy occurring in the Board shall be filled by the remaining directors. Between meetings of the shareholders held for the purpose of electing directors, the Board by a majority vote of the full Board may increase the size of the Board by not more than four directors in any one year, but not to more than a total of twenty-five directors, and fill any vacancy so created in the Board. All directors shall hold office until their successors are elected and qualified. Section 2. POWERS. The Board shall have and may exercise all of the powers granted to or conferred upon it by the Articles of Association and Bylaws of the Association and by law. The Board may appoint from time to time one or more committees for any purposes and with such powers as the Board may determine. Section 3. ORGANIZATION. The President or the Chairman of the Board shall notify the directors-elect of their election and of the time at which they are required to meet for the purpose of organizing the new Board. If, at the time fixed for such meeting, there is not a quorum in attendance, the members present may adjourn from time to time until a quorum is secured, and no business shall be transacted until a majority of the directors-elect shall have taken the oath of office prescribed by law and shall otherwise duly qualified. The Board shall appoint one of its members President of this Association, who shall be Chairman of the Board, but the Board may appoint a Director in lieu of the President, to be Chairman of the Board, in which case the latter shall preside at all meetings and shall perform such other duties as may be designated by the Board. If a Chairman of the Board is so appointed in lieu of the President, in his absence the President shall preside at meetings of the Board. In the absence of a presiding officer, the Board shall appoint a Chairman pro tem. The Board shall appoint a recording officer who shall keep a record of the meetings and proceedings of the Board. The recording officer need not be a member of the Board. Section 4. MEETINGS. The regular meetings of the Board shall consist of the annual meeting following the annual election of directors by the shareholders, and quarterly meetings which shall be held at such place and at such time as the Chairman or President from time to time may designate. When the date of any regular meeting of the Board falls on a holiday, the meeting shall be held on the next ensuing business day other than a Saturday, or on such day and at such time as may have been ordered. Special meetings of the Board shall be held at any time upon the call of the Chairman of the Board, a Vice Chairman, the President, or the acting Chief Executive Officer, or upon written request of any three (3) directors. Notice of all meetings of the Board, whether regular or special, shall be given to each director either orally in person or by mail, telegraph or telephone, on or before the day of the meeting. Meetings of the Board or shareholders may be held by conference telephone or similar communication device by means of which all persons participating in the meeting can simultaneously hear each other. Participating in such a meeting shall constitute presence in person at such meeting. Section 5. QUORUM. A majority of all the qualified directors shall constitute a quorum and shall be necessary for the transaction of business, but, if at any meeting there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is in attendance. Section 6. ADVISORY BOARD OF DIRECTORS. The Board may appoint persons, who need not be shareholders or directors, to -2- serve as advisory directors on an Advisory Board of Directors established to serve this bank or a group of affiliated banks of which this bank is one. An advisory director shall have such power and duties as may be determined by the Board, provided that advisory directors shall have no power to vote on matters presented to the Board for final decision and, provided further, that the Board's responsibility for the affairs of the Association shall in no respect be delegated or diminished. Section 7. DIRECTORS' FEES, ETC. The Board shall have the power to fix and vote fees and compensation to directors and advisory directors of the Association for their services as directors and advisory directors, and also for their services as member of any committee or committees of the Association contemplated by these Bylaws or otherwise created or appointed by the Board, the Executive Committee, or the President of the Association. Nothing herein contained shall be construed to preclude any director or advisory director from serving the Association in any other capacity and being paid compensation therefor by the Association. ARTICLE III. OFFICERS Section 1. OFFICERS. The Board may elect a Chairman of the Board of Directors and one (1) or more Vice Chairmen. The Board shall also elect a President. The Board shall elect, as appropriate, such additional officers as it may determine, including Executive Vice Presidents or Senior Vice Presidents. The Chief Executive Officer or in the absence of the Chief Executive Officer, the President, may appoint such other officers necessary to conduct the affairs of the Association. Section 2. CHIEF EXECUTIVE OFFICER. The Board of Directors may designate a Chief Executive Officer of the Association, who shall be either the President or Chairman of the Board. The Board may also designate an officer or director to serve as acting Chief Executive Officer in the absence or incapacity of the Chief Executive Officer. Subject to the law and the control of the Board and the Executive Committee, the Chief Executive Officer, or, in the absence of the Chief Executive Officer, the President shall have authority to manage the affairs and business of the Association and prescribe and define the duties of its officers, agents and employees. Section 3. TERM OF OFFICE. Any officer elected by the Board shall hold his office for the current year for which the Board by which he is elected was elected, unless he shall resign, become disqualified or be removed. The Chairman, Vice Chairman, and President can be removed by action of a majority of the Board. All other elected officers can be removed by order -3- of the Chief Executive Officer, or in his absence, the President. Any other officer shall hold his office at the pleasure of the Chief Executive Officer, or, in his absence, the President. Section 4. BONDS. All officers, agents or employees as the business of the Association may require, shall give bond with surety to be approved and in a sum to be fixed by the Board or the Chairman or the President, conditioned upon the faithful and honest discharge of their respective duties. ARTICLE IV. STOCK CERTIFICATES Section 1. FORMS. Certificates of stock, signed by any elected officer and any other officer, shall be issued to the shareholders, and each certificate shall state upon its face that such stock is transferable only upon the books of the Association. Section 2. TRANSFERS. Certificates of stock of this Association shall be assignable and transferable only on the books of this Association subject to the restrictions and provisions of the national banking laws, and a transfer book shall be provided in which all assignments and transfers of stock shall be made. When stock is transferred, the certificates representing the same shall be returned to the bank, canceled and preserved, and new certificates issued. Section 3. DIVIDENDS. Transfers of stock shall not be suspended preparatory to the declaration of dividends; and, unless an agreement to the contrary shall be expressed in the assignment or assignments, dividends shall be paid to the shareholders in whose name the stock shall stand at the date of declaration of dividends. ARTICLE V. MINUTE BOOK The organization papers of this Association, the Bylaws as revised or amended from time to time and the proceedings of all regular and special meetings of the shareholders and the directors shall be recorded in a minute book or books. All reports of committees required to be made to the Board shall be recorded in a minute book or shall be filed by the recording officer. The minutes of each meeting of the shareholders and the Board shall be signed by the recording officer and approved by the Chairman of the meeting. -4- ARTICLE VI. CONVEYANCES, CONTRACTS, ETC. All transfers and conveyances of real estate, mortgages, and transfers, endorsements or assignments of stock, bonds, notes, debentures or other negotiable instruments, securities or personal property shall be signed by any elected or appointed officer. All checks, drafts, certificates of deposit, mortgage satisfactions, releases, all types of loans, all obligations of the Association, and all funds of the Association held in its own or in a fiduciary capacity may be paid out by an order, draft or check bearing the manual or facsimile signature of any elected or appointed officer of the Association or of such other employees or agents as may be designated by the Chief Executive Officer or the President. All other instruments not hereinabove specifically provided for, whether to be executed in a fiduciary capacity or otherwise, may be signed on behalf of the Association by any officer thereof. The Secretary of the Association or other proper officer may execute and certify that required action or authority has been given or has taken place by resolution of the Board under this Bylaw without the necessity of further action by the Board. ARTICLE VII. SEAL The following is an impression of the seal if this Association. ARTICLE VIII. INDEMNIFICATION OF DIRECTORS, OFFICERS, AND EMPLOYEES Section 1. The Association shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, or proceeding, whether civil, criminal, administrative, or investigative -5- (other than an action by or in the right of the pertinent corporation) by reason of the fact that he is or was a director, advisory director or officer of the Association, or is or was serving at the request of the Association as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees), judgments, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the pertinent corporation. The termination of any action, suit, or proceeding by judgment, order, settlement, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the pertinent corporation. Section 2. The Association shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action or suit by or in the right of the pertinent corporation to procure a judgment in its favor by reason of the fact that he is or was a director, advisory director or officer of the Association, or is or was serving at the request of the Association as a director or officer of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the pertinent corporation and except that no indemnification shall be made in respect to any claim, issue, or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the pertinent corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnify for such expenses which such court shall deem proper. Section 3. To the extent that a director, advisory director, or officer has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to in Sections 1 or 2 of this Article, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. -6- Section 4. Any indemnification under Sections 1 and 2 of this Article (unless ordered by a court) shall be made by the Association only upon a determination that indemnification of the director, advisory director, or officer is proper in the circumstances because he has met the applicable standards of conduct set fourth in said Sections 1 and 2. Such determination shall be made: (a) by the Board of the Association by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding; or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel (who may be regular counsel for the Association or pertinent corporation) in a written opinion; or (c) by the stockholders of the Association. Section 5. Expenses incurred by any person who may have a right of indemnification under this Article in defending a civil or criminal action, suit, or proceeding may be paid by the Association in advance of the final disposition of such action, suit, or proceeding as authorized by its Board upon receipt of an undertaking by or on behalf of such person, to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Association pursuant to this Article. Section 6. The indemnification provided by this Article is in addition to and independent of and shall not be deemed exclusive of any other rights to which any person may be entitled under any certificate of incorporation, articles of incorporation, articles of association, bylaw, agreement, vote of stockholders, or disinterested directors, or otherwise, both as to action in his official capacity and as to action in another while holding such office, and shall continue as to a person who has ceased to be a director, advisory director, or officer and shall inure to the benefit of the heirs, executors, and administrators of such a person; provided, that any indemnification realized other than under this Article shall apply as a credit against any indemnification provided by this Article. Section 7. The Association may purchase and maintain insurance on behalf of any person who is or was a director, advisory director, officer, employee, or agent of the Association, or is or was serving at the request of the Association as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, if the Association would have the power to indemnify him against such liability under the provisions of the Article or of applicable law, if and whenever the Board of the Association deems it to be in the best interest of the Association to do so. -7- Section 8. For purposes of this Article and indemnification hereunder, any person who is or was a director or officer of any other corporation of which the Association owns or controls or at the time owned or controlled directly or indirectly a majority of the shares of stock entitled to vote for election of directors of such other corporation shall be conclusively presumed to be serving or to have served as such director or officer at the request of the Association. Section 9. The Association may provide indemnification under this Article to any employee or agent of the Association or of any other corporation of which the Association owns or controls or at the time owned or controlled directly or indirectly a majority of the shares of stock entitled to vote for election of directors or to any director, officer, employee, or agent of any other corporation, partnership, joint venture, trust, or other enterprise in which the Association)'n has or at the time had an interest as an owner, creditor, or otherwise, if and whenever the Board of the Association deems it in the best interest of the Association to do so. Section 10. The Association may, to the fullest extent permitted by applicable law from time to time in effect, indemnify any and all persons whom the Association shall have power to indemnify under said law from and against any and all of the expenses, liabilities, or other matters referred to in or covered by said law, if and whenever the Board of the Association deems it to be in the best interest of the Association to do so. ARTICLE IX. AMENDMENTS These Bylaws, or any of them, may be added to, altered, amended or repealed by the Board at any regular or special meeting of the Board. -8- (Adopted July 19, 1990) EX-99.1 10 EXHIBIT 99.1 EXHIBIT 99.1 LETTER OF TRANSMITTAL FINGERHUT COMPANIES, INC. OFFER TO EXCHANGE ITS 7.375% SENIOR NOTES DUE 1999 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 7.375% NOTES DUE 1999 PURSUANT TO THE PROSPECTUS DATED , 1996 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 199__, UNLESS THE OFFER IS EXTENDED. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: FIRST BANK NATIONAL ASSOCIATION BY MAIL/OVERNIGHT DELIVERY/HAND: First Bank National Association Attn: Phyllis Meath Specialized Finance Group 180 East Fifth Street St. Paul, Minnesota 55101 TO CONFIRM BY TELEPHONE OR FOR INFORMATION: (612) 244-1197 FACSIMILE TRANSMISSIONS: (612) 244-1537 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). This Letter of Transmittal is to be completed by holders of Old Notes (as defined below) either if Old Notes are to be forwarded herewith or if tenders of Old Notes are to be made by book-entry transfer to an account maintained by First Bank National Association (the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. Holders of Old Notes whose certificates (the "Certificates") for such Old Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY ALL TENDERING HOLDERS COMPLETE THIS BOX
- --------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED - --------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT OF PLEASE PRINT NAME AND ADDRESS OF OLD NOTES TENDERED OLD NOTES TENDERED REGISTERED HOLDER CERTIFICATE (ATTACH ADDITIONAL LIST (IF PRINCIPAL AMOUNT (PLEASE FILL IN IF BLANK) NUMBER(S)* IF NECESSARY) OF OLD NOTES LESS THAN ALL)** - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- TOTAL AMOUNT TENDERED: - ---------------------------------------------------------------------------------------------------------
- ------------ * Need not be completed by book-entry holders. ** Old Notes may be tendered in whole or in part in denominations of $1,000 and integral multiples thereof, provided that if any Old Notes are tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. All Old Notes held shall be deemed tendered unless a lesser number is specified in this column. - -------------------------------------------------------------------------------- (BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY) / / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution ------------------------------------------ DTC Account Number ------------------------------------------------------ Transaction Code Number ------------------------------------------------- / / CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A -2- NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holders(s) ------------------------------------------- Window Ticket Number (if any) ------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ---------------------- Name of Institution which Guaranteed Delivery --------------------------- If Guaranteed Delivery is to be made By Book-Entry Transfer: Name of Tendering Institution ------------------------------------------- DTC Account Number ------------------------------------------------------ Transaction Code Number ------------------------------------------------- / / CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. / / CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: ------------------------------------------------------------------------ Address: --------------------------------------------------------------------- -3- Ladies and Gentlemen: The undersigned hereby tenders to Fingerhut Companies, Inc., a Minnesota corporation (the "Company"), the above described aggregate principal amount of the Company's 7.375% Senior Notes Due 1999 (the "Old Notes") in exchange for a like aggregate principal amount of the Company's 7.375% Senior Notes Due 1999 (the "New Notes") which have been registered under the Securities Act of 1933 (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer"). Subject to and effective upon the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Company all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Company in connection with the Exchange Offer) with respect to the tendered Old Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Old Notes to the Company together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (ii) present Certificates for such Old Notes for transfer, and to transfer the Old Notes on the books of the Company, and (iii) receive for the account of the Company all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the Exchange Offer. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE COMPANY WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE COMPANY OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The name(s) and address(es) of the registered holder(s) of the Old Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Old Notes. The Certificate number(s) and the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If any tendered Old Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Old Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Old Notes will be returned (or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. -4- The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus and in the instructions hereto will, upon the Company's acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Company may not be required to accept for exchange any of the Old Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver New Notes to the undersigned at the address shown below the undersigned's signature. BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF THE COMPANY, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER- DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). THE COMPANY HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR A PERIOD ENDING 180 DAYS AFTER THE EXPIRATION DATE (SUBJECT TO EXTENSION UNDER CERTAIN LIMITED CIRCUMSTANCES DESCRIBED IN THE PROSPECTUS) OR, IF EARLIER, WHEN ALL SUCH NEW NOTES HAVE BEEN DISPOSED OF BY SUCH PARTICIPATING BROKER-DEALER. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM THE COMPANY OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY -5- STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE COMPANY HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF THE COMPANY GIVES SUCH NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH THE COMPANY HAS GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. Holders of Old Notes whose Old Notes are accepted for exchange will not receive accrued interest on such Old Notes for any period from and after the last Interest Payment Date to which interest has been paid or duly provided for on such Old Notes prior to the original issue date of the New Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Old Notes, and the undersigned waives the right to receive any interest on such Old Notes accrued from and after such Interest Payment Date or, if no such interest has been paid or duly provided for, from and after March 15, 1997. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable. -6- - -------------------------------------------------------------------------------- HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 14) (NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) Must be signed by registered holder(s) exactly as name(s) appear(s) on Certificate(s) for the Old Notes hereby tendered or on a security position listing, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Company or the Trustee for the Old Notes to comply with the restrictions on transfer applicable to the Old Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. )-----------------------------------------------------------------------------( )-----------------------------------------------------------------------------( (SIGNATURE(S) OF HOLDER(S)) Date: , 1996 ------------------------ Name(s) ---------------------------------------------------------------------- ---------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) -------------------------------------------------------- Address ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------- - -------------------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBERS(S)) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 2 AND 5) )-----------------------------------------------------------------------------( (AUTHORIZED SIGNATURE) Date: , 1996 ------------------------ Name of Firm ------------------------------------------------------------------- Capacity (full title) -------------------------------------------------------- (PLEASE PRINT) Address ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ----------------------------------------------- - -------------------------------------------------------------------------------- -7- - -------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if the New Notes are to be issued in the name of someone other than the registered holder of the Old Notes whose name(s) appear(s) above. Issue New Notes to: / / Old Notes not tendered / / Exchange Notes, to: Name(s) ---------------------------------- Address ---------------------------------- ---------------------------------- ---------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------- - -------------------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBERS(S)) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if New Notes are to be sent to someone other than the registered holder of the Old Notes whose name(s) appear(s) above, or such registered holder(s) at an address other than that shown above. Mail New Notes to: / / Old Notes not tendered / / Exchange Notes, to: Name(s) ---------------------------------- Address ---------------------------------- ---------------------------------- ---------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------- - -------------------------------------------------------------------------------- (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBERS(S)) - -------------------------------------------------------------------------------- -8- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. Certificates, or timely confirmation of a book-entry transfer of such Old Notes into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at its address set forth herein on or prior to the Expiration Date. Old Notes may be tendered in whole or in part in the principal amount of $1,000 and integral multiples of $1,000, provided that, if any Old Notes are tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Old Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Company, must be received by the Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates (or a book-entry confirmation (as defined in the Prospectus)) representing all tendered Old Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within five New York Stock Exchange, Inc. trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. -9- The Company will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Old Notes" is inadequate, the Certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be accepted only in the principal amount of $1,000 and integral multiples thereof, provided that if any Old Notes are tendered for exchange in part, the untendered principal amount thereof must be $250,000 or any integral multiple of $1,000 in excess thereof. If less than all the Old Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Old Notes which are to be tendered in the box entitled "Principal Amount of Old Notes Tendered (if less than all)." In such case, new Certificate(s) for the remainder of the Old Notes that were evidenced by your old Certificate(s) will only be sent to the holder of the Old Note, promptly after the Expiration Date. All Old Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above or in the Prospectus on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if Certificates for Old Notes have been tendered) the name of the registered holder of the Old Notes as set forth on the Certificate for the Old Notes, if different from that of the person who tendered such Old Notes. If Certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Old Notes, the tendering holder must submit the serial numbers shown on the particular Certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering Old Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be -10- retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in the Prospectus under "The Exchange Offer--Procedures for Tendering Old Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Company, in its sole discretion, whose determination shall be final and binding on all parties. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder promptly after withdrawal. 5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Old Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Company, in its sole discretion, of such persons' authority to so act. When this Letter of Transmittal is signed by the registered owner(s) of the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless New Notes are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Old Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Company or the Trustee for the Old Notes may require in accordance with the restrictions on transfer applicable to the Old Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if New Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. 7. IRREGULARITIES. The Company will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Company reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Company, be unlawful. The Company also reserves the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange Offer" or any conditions or irregularity in any tender of Old Notes of any particular holder -11- whether or not similar conditions or irregularities are waived in the case of other holders. The Company's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Company, any affiliates or assigns of the Company, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which holders are exempt from backup withholding. -12- Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Old Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed. 11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. -13- TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS (SEE INSTRUCTION 9) PAYER'S NAME: FIRST BANK NATIONAL ASSOCIATION
- ------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART 1-PLEASE PROVIDE YOUR TIN ON THE TIN FORM W-9 LINE AT RIGHT AND CERTIFY BY SIGNING ----------------- AND DATING BELOW SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFICATION NUMBER -------------------------------------------------------------------------------------- DEPARTMENT OF THE TREASURY NAME (PLEASE PRINT) INTERNAL REVENUE SERVICE PART 2 ADDRESS Awaiting PAYOR'S REQUEST FOR TAXPAYER TIN / / IDENTIFICATION NUMBER (TIN) CITY STATE ZIP CODE AND CERTIFICATION --------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- Part 3 - CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding either because (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. SIGNATURE DATE ----------------- ------- You must cross out item (iii) in Part (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the New Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number. Signature Date , 1996 -------------------------- ------------------ - -------------------------------------------------------------------------------- -14- EX-99.2 11 EXHIBIT 99.2 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF 7.375% SENIOR NOTES DUE 1999 OF FINGERHUT COMPANIES, INC. This Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the Exchange Offer (as defined below) if (i) certificates for the Company's (as defined below) 7.375% Senior Notes Due 1999 (the "Old Notes") are not immediately available, (ii) Old Notes, the Letter of Transmittal and all other required documents cannot be delivered to First Bank National Association (the "Exchange Agent") on or prior to the Expiration Date (as defined in the Prospectus referred to below) or (iii) the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent. See "The Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: FIRST BANK NATIONAL ASSOCIATION BY MAIL/OVERNIGHT DELIVERY/HAND: First Bank National Association Attn: Phyllis Meath Specialized Finance Group 180 East Fifth Street St. Paul, Minnesota 55101 TO CONFIRM BY TELEPHONE OR FOR INFORMATION: (612) 244-1197 FACSIMILE TRANSMISSIONS: (612) 244-1537 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. Ladies and Gentlemen: The undersigned hereby tenders to Fingerhut Companies, Inc., a Minnesota corporation (the "Company"), upon the terms and subject to the conditions set forth in the Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus"), and the related Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which is hereby acknowledged, the aggregate principal amount of Old Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Procedures for Tendering Old Notes." Aggregate Principal Name(s) of Registered Holder(s): Amount Tendered: Certificate No(s). Address(es): (if available): Area Code and Telephone Number(s): If Old Notes will be tendered by book-entry transfer, provide the following information: Signature(s): ------------------------------------------------------------------- DTC Account Number: ------------------------------------------------------------- Date: --------------------------------------------------------------------------- THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED -2- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm or other entity identified in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, as an "eligible guarantor institution," including (as such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal securities broker, municipal securities dealer, government securities broker, government securities dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association recognized program (each of the foregoing being referred to as an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent, at one of its addresses set forth above, either the Old Notes tendered hereby in proper form for transfer, or confirmation of the book-entry transfer of such Old Notes to the Exchange Agent's account at The Depositary Trust Company ("DTC"), pursuant to the procedures for book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letter(s) of Transmittal (or facsimile thereof) and any other required documents within five business days after the date of execution of this Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letter(s) of Transmittal and the Old Notes tendered hereby to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned. Name of Firm -------------------------------------------------------------------- (Authorized Signature) ---------------------------------------------------------- (Title) Address ------------------------------------------------------------------------- ------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number -------------------------------------------------- Date: ---------------------- NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF OLD NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. -3- EX-99.3 12 EXHIBIT 99.3 EXHIBIT 99.3 [FORM OF EXCHANGE AGENCY AGREEMENT] ______________, 1996 First Bank National Association c/o First Trust 180 East Fifth Street St. Paul, Minnesota 55101 Ladies and Gentlemen: Fingerhut Companies, Inc. (the "Company"), a Minnesota corporation, hereby appoints First Bank National Association ("FBNA") to act as exchange agent (the "Exchange Agent") in connection with an exchange offer by the Company to exchange up to $125,000,000 aggregate principal amount of its 7.375% Senior Notes Due 1999 (the "New Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of its outstanding 7.375% Senior Notes Due 1999 (the "Old Notes" and together with the New Notes, the "Notes"). The terms and conditions of the exchange offer are set forth in a Prospectus dated , 1996 (as the same may be amended or supplemented from time to time, the "Prospectus") and in the related Letter of Transmittal, which together constitute the "Exchange Offer." The registered holders of the Notes are hereinafter referred to as the "Holders." Capitalized terms used herein and not defined shall have the respective meanings described thereto in the Prospectus. On the basis of the representations, warranties and agreements of the Company and FBNA contained herein and subject to the terms and conditions hereof, the following sets forth the agreement between the Company and FBNA as Exchange Agent for the Exchange Offer: 1. APPOINTMENT AND DUTIES AS EXCHANGE AGENT. a. The Company hereby authorizes FBNA to act as Exchange Agent in connection with the Exchange Offer and FBNA agrees to act as Exchange Agent in connection with the Exchange Offer. As Exchange Agent, FBNA will perform those services as are outlined herein or which are customarily performed by an exchange agent in connection with an exchange offer of like nature, including, but not limited to, accepting tenders of Old Notes, assisting the Company in the preparation of the documentation necessary to effect the transactions herein contemplated (without assuming responsibility for such documentation, unless such information has been furnished to the Company in writing by FBNA) and communicating generally regarding the Exchange Offer with brokers, dealers, commercial banks, trust companies and other persons, including Holders of the Old Notes. b. The Company acknowledges and agrees that FBNA has been retained pursuant to this Agreement to act solely as Exchange Agent in connection with the Exchange Offer, and in such capacity, FBNA shall perform such duties as are outlined herein and which are specifically set forth in the section of the Prospectus captioned "The Exchange Offer" and in the Letter of Transmittal; provided, however, that in no way will FBNA's general duty to act in good faith and without gross negligence or willful misconduct be discharged by the foregoing. c. FBNA will examine each of the Letters of Transmittal and certificates for Old Notes and any other documents delivered or mailed to FBNA by or for Holders of the Old Notes, and any book-entry conformations (as defined in the Prospectus) received by FBNA with respect to the Old Notes, to ascertain whether: (i) the Letters of Transmittal and any such other documents are duly executed and properly completed in accordance with the instructions set forth therein and that such book-entry confirmations are in due and proper form and contain the information required to be set forth therein, and (ii) the Old Notes have otherwise been properly tendered. In each case where the Letters of Transmittal or any other documents have been improperly completed or executed or where book-entry confirmations are not in due and proper form or omit certain information, or any of the certificates for Old Notes are not in proper form for transfer or some other irregularity in connection with the tender or acceptance of the Old Notes exists, FBNA will endeavor, subject to the terms and conditions of the Exchange Offer, to advise the tendering Holders of the irregularity and to take any other action as may be necessary or advisable to cause such irregularity to be corrected. Notwithstanding the above, FBNA shall not be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. d. With the approval of the President, any Senior Vice President, any Executive Vice President, any Vice President or the Treasurer or any Assistant Treasurer of the Company, (such approval, if given orally, to be confirmed in writing) or any other party designated by any such officer, FBNA is authorized to waive any irregularities in connection with any tender of Old Notes pursuant to the Exchange Offer. e. Tenders of Old Notes may be made only as set forth in the Letter of Transmittal and in the section of the Prospectus captioned "The Exchange Offer" and Old Notes shall be considered properly tendered only when tendered in accordance with such procedures set forth therein. Notwithstanding the provisions of this paragraph, Old Notes which the President, any Senior Vice President, any Executive Vice President, any Vice President or the Treasurer, any Assistant Treasurer or any other designated officer of the Company, shall approve (such approval, if given orally, to be confirmed in writing) as having been properly tendered shall be considered to be properly tendered. f. FBNA shall advise the Company with respect to any Old Notes received as soon as possible after 5:00 p.m., New York City time, on the Expiration Date and accept its instructions with respect to disposition of such Old Notes. g. FBNA shall ensure (i) that each Letter of Transmittal and, if required pursuant to the terms of the Exchange Offer, the related Old Notes or a bond power are duly executed (with signatures guaranteed where required) by the appropriate parties in accordance with the terms of the Exchange Offer; (ii) in those instances where the person executing the Letter of Transmittal (as indicated on the Letter of Transmittal) is acting in a fiduciary or a representative capacity, proper evidence of his or her authority so to act is submitted; (iii) in those instances where Old Notes are tendered by persons other than the registered holder of such Old Notes, that customary transfer requirements, including any applicable transfer taxes, and the requirements imposed by the transfer restrictions on the Old Notes (including any applicable requirements for certifications, legal opinions or other information) are fulfilled; (iv) that Old Notes tendered in part are tendered in principal amounts of $1,000 and integral multiples thereof and that if any Old Notes are tendered for exchange in part, the untendered principal amount thereof is $250,000 or any integral multiple of $1,000 in excess thereof; and (v) FBNA shall deliver certificates for Old Notes tendered in part to the transfer agent for split-up and shall return any untendered Old Notes or Old Notes which have not been accepted by the Company to the Holders promptly after the expiration or termination of the Exchange Offer. h. Upon acceptance by the Company of any Old Notes duly tendered pursuant to the Exchange Offer (such acceptance if given orally, to be confirmed in writing), FBNA will cause New Notes in exchange therefor to be issued as promptly as possible (subject to receipt from the Company of appropriate certificates under the related Indenture) and FBNA will deliver such New Notes on -2- behalf of the Company at the rate of $1,000 principal amount of New Notes for each $1,000 principal amount of Old Notes tendered as promptly as possible after acceptance by the Company of the Old Notes for exchange and notice (such notice if given orally, to be confirmed in writing) of such acceptance by the Company; provided, however, that in all cases, Old Notes tendered pursuant to the Exchange Offer will be exchanged only after timely receipt by FBNA of certificates for such Old Notes (or a book-entry confirmation), a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees and any other required documents. Unless otherwise instructed by the Company, FBNA shall issue New Notes only in denominations of $1,000 or any integral multiple thereof. i. Tenders pursuant to the Exchange Offer are irrevocable, except that, subject to the terms and the conditions set forth in the Prospectus and the Letter of Transmittal, Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time on or prior to the Expiration Date in accordance with the terms of the Exchange Offer. j. Notice of any decision by the Company not to exchange any Old Notes tendered shall be given by the Company either orally (if given orally, to be confirmed in writing) or in a written notice to FBNA. k. If, pursuant to the Exchange Offer, the Company does not accept for exchange all or part of the Old Notes tendered because of an invalid tender, the occurrence of certain other events set forth in the Prospectus under the caption "The Exchange Offer--Certain Conditions to the Exchange Offer" or otherwise, FBNA shall, upon notice from the Company (such notice if given orally, to be confirmed in writing), promptly after the expiration or termination of the Exchange Offer return such certificates for unaccepted Old Notes (or effect appropriate book-entry transfer), together with any related required documents and the Letters of Transmittal relating thereto that are in FBNA's possession, to the persons who deposited such certificates. l. Certificates for reissued Old Notes, unaccepted Old Notes or New Notes shall be forwarded by (a) first-class certified mail, return receipt requested under a blanket surety bond obtained by FBNA protecting FBNA and the Company from loss or liability arising out of the non-receipt or non-delivery of such certificates or (b) by registered mail insured by FBNA separately for the replacement value of each such certificate. m. FBNA is not authorized to pay or offer to pay any concessions, commissions or solicitation fees to any broker, dealer, commercial bank, trust company or other nominee or to engage or use any person to solicit tenders. n. As Exchange Agent, FBNA: (i) shall have no duties or obligations other than those specifically set forth in the Prospectus, the Letter of Transmittal or herein or as may be subsequently agreed to in writing; (ii) will make no representations and will have no responsibilities as to the validity, value or genuineness of any of the certificates for the Old Notes deposited pursuant to the Exchange Offer, and will not be required to and will make no representation as to the validity, value or genuineness of the Exchange Offer; PROVIDED, HOWEVER, that in no way will FBNA's general duty to act in good faith and without gross negligence or willful misconduct be limited by the foregoing; (iii) shall not be obligated to take any legal action hereunder which might in FBNA's reasonable judgment involve any expense or liability, unless FBNA shall have been furnished with reasonable indemnity; -3- (iv) may reasonably rely on and shall be protected in acting in reliance upon any certificate, instrument, opinion, notice, letter, telegram or other document or security delivered to FBNA and reasonably believed by FBNA to be genuine and to have been signed by the proper party or parties; (v) may reasonably act upon any tender, statement, request, comment, agreement or other instrument whatsoever not only as to its due execution and validity and effectiveness of its provisions, but also as to the truth and accuracy of any information contained therein, which FBNA believes in good faith to be genuine and to have been signed or represented by a proper person or persons acting in a fiduciary or representative capacity (so long as proper evidence of such fiduciary's or representative's authority so to act is submitted to FBNA) and FBNA examines and reasonably concludes that such evidence properly establishes such authority; (vi) may rely on and shall be protected in acting upon written or oral instructions from the President, any Senior Vice President, any Executive Vice President, any Vice President, the Treasurer, any Assistant Treasurer or any other designated officer of the Company; (vii) may consult with its own counsel with respect to any questions relating to FBNA's duties and responsibilities and the written opinion of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by FBNA hereunder in good faith and in accordance with the written opinion of such counsel; and (viii) shall not advise any person tendering Old Notes pursuant to the Exchange Offer as to whether to tender or refrain from tendering all or any portion of its Old Notes or as to the market value, decline or appreciation in market value of any Old Notes that may or may not occur as a result of the Exchange Offer or as to the market value of the New Notes. FBNA shall take such action as may from time to time be requested by the Company (and such other action as FBNA may reasonably deem appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the Notice of Guaranteed Delivery or such other forms as may be approved from time to time by the Company, to all persons requesting such documents and to accept and comply with telephone requests for information relating to the Exchange Offer, provided that such information shall relate only to the procedures for tendering into (or withdrawing from) the Exchange Offer. The Company will furnish you with copies of such documents at your request. p. FBNA shall advise orally and promptly thereafter confirm in writing to the Company and such other person or persons as the Company may request, daily (and more frequently during the week immediately preceding the Expiration Date and if otherwise reasonably requested) up to and including the Expiration Date, the aggregate principal amount of Old Notes which have been duly tendered pursuant to and in compliance with the terms of the Exchange Offer and the items received by FBNA pursuant to the Exchange Offer and this Agreement, separately reporting and giving cumulative totals as to items properly received and items improperly received. In addition, FBNA will also provide, and cooperate in making available to the Company, or any such other person or persons upon request (such request if made orally, to be confirmed in writing) made from time to time, such other information as the Company may reasonably request. Such cooperation shall include, without limitation, the granting by FBNA to the Company, and such person or persons as the Company may request, access to those persons on FBNA's staff who are responsible for receiving tenders, in order to ensure that immediately prior to the Expiration Date the Company shall have received adequate information in sufficient detail to enable the Company to decide whether to extend the Exchange Offer. FBNA shall prepare a final list of all persons whose tenders were accepted, the aggregate principal -4- amount of Old Notes tendered, the aggregate principal amount of Old Notes accepted and deliver said list to the Company. q. Letters of Transmittal, book-entry confirmations and Notices of Guaranteed Delivery shall be stamped by FBNA as to the date and the time of receipt thereof and shall be preserved by FBNA for a period of time at least equal to the period of time FBNA preserves other records pertaining to the transfer of securities, or one year, whichever is longer, and thereafter shall be delivered by FBNA to the Company. FBNA shall dispose of unused Letters of Transmittal and other surplus materials by returning them to the Company. r. FBNA hereby expressly waives any lien, encumbrance or right of set-off whatsoever that FBNA may have with respect to funds deposited with it for the payment of transfer taxes by reasons of amounts, if any, borrowed by the Company, or any of its subsidiaries or affiliates pursuant to any loan or credit agreement with FBNA or for compensation owed to FBNA hereunder or for any other matter. 2. COMPENSATION. Pursuant to a letter agreement, dated as of , 1996 (the "Bond Trusteeships Fee Schedule"), between the Company and FBNA, no additional compensation will be payable to FBNA in its capacity as Exchange Agent, it being understood and agreed that the Acceptance Fee and the Annual Administration Fee payable pursuant to the Bond Trusteeships Fee Schedule are intended to cover, among other things, the services of FBNA as Exchange Agent; provided, further, that FBNA reserves the right to receive reimbursement from the Company for any reasonable out-of-pocket expenses incurred as Exchange Agent in performing the services described herein, provided, however, that FBNA shall not be entitled to reimbursement for the fees or disbursements of its legal counsel without the prior written consent of the Company. 3. INDEMNIFICATION. a. The Company hereby agrees to protect, defend, indemnify and hold harmless FBNA against and from any and all costs, losses, liabilities, expenses (including reasonable counsel fees and disbursements) and claims imposed upon or asserted against FBNA on account of any action taken or omitted to be taken by FBNA in connection with its acceptance of or performance of its duties under this Agreement and the documents related thereto as well as the reasonable costs and expenses of defending itself against any claim or liability arising out of or relating to this Agreement and the documents related thereto. This indemnification shall survive the release, discharge, termination, and/or satisfaction of this Agreement. Anything in this Agreement to the contrary notwithstanding, the Company shall not be liable for indemnification or otherwise for any loss, liability, cost or expense to the extent arising out of FBNA's bad faith, gross negligence or willful misconduct. In no case shall the Company be liable under this indemnification agreement with respect to any claim against FBNA unless the Company shall be notified by FBNA, by letter, of the written assertion of a claim against FBNA or of any other action commenced against FBNA, promptly after FBNA shall have received any such written assertion or shall have been served with a summons in connection therewith. The Company shall be entitled to participate at its own expense in the defense of any such claim or other action, and, if the Company so elects, the Company may assume the defense of any pending or threatened action against FBNA in respect of which indemnification may be sought hereunder, in which case the Company shall not thereafter be responsible for the fees and disbursements of legal counsel for FBNA under this paragraph; provided that the Company shall not be entitled to assume the defense of any such action if the named parties to such action include both the Company and FBNA and representation of both parties by the same legal counsel would, in the written opinion of counsel for FBNA, be inappropriate due to actual or potential conflicting interests between them. It is understood that the Company shall not be liable under this paragraph for the fees and disbursements of more than -5- one legal counsel for FBNA. In the event that the Company shall assume the defense of any such suit, the Company shall not therewith be liable for the fees and expenses of any counsel retained by FBNA. b. FBNA agrees that, without the prior written consent of the Company (which consent shall not be unreasonably withheld), it will not settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding in respect of which indemnification could be sought in accordance with the indemnification provision of this Agreement (whether or not FBNA or the Company or any of its directors, officers and controlling persons is an actual or potential party to such claim, action or proceeding), unless such settlement, compromise or consent includes an unconditional release of the Company and its directors, officers and controlling persons from all liability arising out of such claim, action or proceeding. 4. TAX INFORMATION. a. FBNA shall arrange to comply with all requirements under the tax laws of the United States, including those relating to missing Tax Identification Numbers, and shall file any appropriate reports with the Internal Revenue Service. The Company understands that FBNA is required, in certain instances, to deduct 31% with respect to interest paid on the New Notes and proceeds from the sale, exchange, redemption or retirement of the New Notes from Holders who have not supplied their correct Taxpayer Identification Number or required certification. Such funds will be turned over by FBNA to the Internal Revenue Service. b. FBNA shall notify the Company of the amount of any transfer taxes payable in respect of the exchange of Old Notes and, upon receipt of written approval from the Company shall deliver or cause to be delivered, in a timely manner, to each governmental authority to which any transfer taxes are payable in respect of the exchange of Old Notes, a check in the amount of all transfer taxes so payable, and the Company shall reimburse FBNA for the amount of any and all transfer taxes payable in respect of the exchange of Old Notes; PROVIDED, HOWEVER, that FBNA shall reimburse the Company for amounts refunded to it in respect of its payment of any such transfer taxes, at such time as such refund is received by FBNA. 5. GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that state. 6. NOTICES. Any communication or notice provided for hereunder shall be in writing and shall be given (and shall be deemed to have been given upon receipt) by delivery in person, telecopy, or overnight delivery or by registered or certified mail (postage prepaid, return receipt requested) to the applicable party at the addresses indicated below: If to the Company: Fingerhut Companies, Inc. 4400 Baker Road Minnetonka, Minnesota 55343 Telecopier No.: (612) 936-5412 Attention: Michael P. Sherman, General Counsel and Secretary -6- With a copy to: Dorsey & Whitney LLP Pillsbury Center South 220 South Sixth Street Minneapolis, Minnesota 55402 Telecopier No.: (612)-340-8738 Attention: Elizabeth C. Hinck If to First Bank National Association: c/o First Trust 180 East Fifth Street St. Paul, Minnesota 55101 Telecopier No.: (612) 244-0711 Attention: Richard Prokosch With a copy to: Attention: or, as to each party, at such other address as shall be designated by such party in a written notice complying as to delivery with the terms of this Section. 7. PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. Without limitation to the foregoing, the parties hereto expressly agree that no holder of Old Notes or New Notes shall have any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 8. COUNTERPARTS; SEVERABILITY. This Agreement may be executed in one or more counterparts, and by different parties hereto on separate counterparts, each of which when so executed shall be deemed an original, and all of such counterparts shall together constitute one and the same agreement. If any term or other provision of this Agreement or the application thereof is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the agreements contained herein is not affected in any manner adverse to any party. Upon such determination that any term or provision or the application thereof is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the agreements contained herein may be performed as originally contemplated to the fullest extent possible. 9. CAPTIONS. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. -7- 10. ENTIRE AGREEMENT; AMENDMENT. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof. This Agreement may not be amended or modified nor may any provision hereof be waived except in writing signed by each party to be bound thereby. 11. TERMINATION. This Agreement shall terminate upon the earlier of (a) the 90th day following the expiration, withdrawal, or termination of the Exchange Offer, (b) the close of business on the date of actual receipt of written notice by FBNA from the Company stating that this Agreement is terminated, (c) one year following the date of this Agreement, or (d) the time and date on which this Agreement shall be terminated by mutual consent of the parties hereto. 12. MISCELLANEOUS. a. FBNA hereby acknowledges receipt of the Prospectus and the Letter of Transmittal and the Notice of Guaranteed Delivery and further acknowledges that it has examined each of them. Any inconsistency between this Agreement, on the one hand, and the Prospectus and the Letter of Transmittal and the Notice of Guaranteed Delivery (as they may be amended or supplemented from time to time), on the other hand, shall be resolved in favor of the latter three documents, except with respect to the duties, liabilities and indemnification of FBNA as Exchange Agent which shall be controlled by this Agreement. Kindly indicate your willingness to act as Exchange Agent and FBNA's acceptance of the foregoing provisions by signing in the space provided below for that purpose and returning to the Company a copy of this Agreement so signed, whereupon this Agreement and FBNA's acceptance shall constitute a binding agreement between FBNA and the Company. Very truly yours, FINGERHUT COMPANIES, INC. By: ___________________________ Name: _________________________ Title: ________________________ Accepted and agreed to as of the date first written above: FIRST BANK NATIONAL ASSOCIATION By: _____________________________ Name: ___________________________ Title: __________________________ -8- -----END PRIVACY-ENHANCED MESSAGE-----