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Exhibit 10.j
TRANSFER AGREEMENT dated as
of [ ], 1996, is entered into by and
between Fingerhut Companies, Inc.
("Fingerhut"), a Minnesota corporation, and
Metris Companies Inc. ("Metris"), a Delaware
corporation and, as of the date hereof, a
wholly-owned subsidiary of Fingerhut.
R E C I T A L S
WHEREAS Fingerhut has in the past and is currently
engaged in the business of providing credit-based products,
extended service plans, and a variety of fee-based products
(collectively, the "Financial Services Business").
WHEREAS the Fingerhut board of directors has
determined that it is in the best interests of Fingerhut and
its stockholders to transfer the Financial Services Business
to Metris on the terms and conditions set forth herein (the
"Transfer").
WHEREAS Fingerhut currently owns, indirectly
through a subsidiary, 100% of the Metris Common Stock.
NOW, THEREFORE, in consideration of the premises
and the mutual promises contained herein and other good and
valuable consideration, the receipt and sufficiency whereof
is hereby acknowledged by the Parties, the Parties agree as
follows:
ARTICLE I
The Transfer
SECTION 1.01. Conditions Precedent to
Effectiveness of the Agreement. Neither the Transfer nor
the related transactions set forth in this Agreement and in
the Transaction Documents shall become effective unless the
following conditions have been satisfied or waived by
Fingerhut on or before the Effective Date:
(a) The Parties shall have executed all of the
Transaction Documents;
(b) No preliminary or permanent injunction or
other order, decree, or ruling issued by a court of
competent jurisdiction or by a government regulatory or
administrative agency or commission, and no statute,
rule, regulation or executive order promulgated or
enacted by any governmental authority shall be in
effect preventing the Transfer; and
(c) Fingerhut or one of its subsidiaries shall be
the sole owner of 100% of the outstanding stock of
Metris.
The satisfaction of the foregoing conditions shall
not create any obligation on the part of Fingerhut to
Metris, or to any other person, to effect the Transfer or in
any way limit Fingerhut's power of termination set forth in
Section 18.08 or alter the consequences of any such
termination from those specified in such Section. Fingerhut
may waive any of the foregoing conditions in whole or in
part, by the execution of a Satisfaction Certificate by its
Chairman, its Chief Financial Officer, or by any person
designated by either of them to act on their behalf with
respect to such waiver certifying specifically which
conditions, if any, in whole or in part, are waived by
Fingerhut.
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SECTION 1.02. Actions to Take Place Before the
Closing. The Transfer and the transactions described in
this Agreement shall be closed (the "Closing") at the time
designated for closing of the Credit Facility, as defined
herein, and shall occur at the place designated by the
Fingerhut board of directors or any officer of Fingerhut
designated by the Fingerhut board of directors for such
purpose. Before the Closing, the transactions set forth in
this Section 1.02 shall be effected by the Parties.
(a) Fingerhut will effect the transfer of the
Transferred Companies required by Section 2.02(a);
(b) Fingerhut and Metris shall take all actions
required with respect to employee benefits, expenses
and liabilities by Article V of this Agreement;
(c) Fingerhut shall cooperate in Metris's securing
external financing as required by Article III; and
(d) Fingerhut and Metris shall perform a closing
of their respective general ledgers as required in
Section 14.01.
SECTION 1.03. Actions to Take Place at the
Closing. At the Closing, the Parties shall execute the
following actions in the order indicated by their appearance
in this Section 1.03. Each action shall be conditional upon
the execution of the prior action, except where expressly
stated otherwise.
(a) Certification of Conditions Precedent. An
authorized officer of Fingerhut designated by the
Fingerhut board of directors shall, if each of the
conditions set forth in Section 1.01 has been satisfied
or is being waived by Fingerhut, execute a certificate
(the "Satisfaction Certificate"), for the benefit of
the lenders under the Credit Facility, certifying the
satisfaction or waiver by Fingerhut of the conditions
set forth in Section 1.01.;
(b) Payment of Inter-Company Debts. Metris shall
make the payment required by Section 4.01.
(c) Fingerhut Capital Contribution. Fingerhut
shall make the capital contribution to Metris set forth
in Section 4.02.
SECTION 1.04. Cooperation. Fingerhut and Metris
agree to cooperate with each other, both before and after
the Effective Date, to enable the Parties to implement the
Transfer, including but not limited to performing the
obligations undertaken by Fingerhut and Metris under this
Agreement. Such cooperation will include but is not limited
to preparing and submitting required financial reports after
the Effective Date that may relate to periods either before
or after the Effective Date and executing such documents and
doing such other acts or things as may be necessary to carry
out the intent of this Agreement.
ARTICLE II
Transfer of Assets and Assumption of Liabilities
SECTION 2.01. Other Provisions. The provisions
of this Article II shall not govern the transfer of Assets
or the assumption of Liabilities governed by more specific
agreements, including but not limited to the Transaction
Documents, or by other provisions of this Agreement.
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SECTION 2.02. Transfer of Specified Assets.
(a) Transfer of the Transferred Companies to Metris.
Fingerhut shall deliver to Metris certificates representing
all of the stock of Metris Direct, Inc., Metris Receivables,
Inc., Direct Merchants Credit Card Bank, National
Association and DMCCB Inc. (collectively, the "Transferred
Companies"), duly endorsed for transfer to Metris or
accompanied by duly executed stock powers in favor of
Metris.
(b) Other Specified Assets. Each member of the
Fingerhut Group named as a Transferor with respect to any
Transferred Asset listed in Schedule I hereby grants,
conveys, transfers, and assigns all its right, title, and
interest, effective as of the Effective Date and subject to
the contingencies set forth in this Agreement, in and to
each Transferred Asset listed in Schedule I to the entity
listed as Transferee of such Transferred Asset in
Schedule I. The entity listed as Transferee of such
Transferred Asset in Schedule I hereby accepts such
transfer.
SECTION 2.03 Agreements with Respect to the
Transfer of Assets. (a) Agreements of Transferors. With
respect to each Transferred Asset transferred by one Party
(the "Transferor") to the other Party (the "Transferee"),
the Transferor:
(i) assigns to the Transferee all its rights,
claims, and causes of action against third parties
related to such Transferred Asset, including any
express or implied warranties with respect to such
Transferred Asset; and
(ii) agrees to execute and deliver to the
Transferee such other instruments, bills of sale,
assignments, conveyances, title registrations, or other
documents as may be necessary to effectuate the
transfer or to confirm the fact of such transfer to
third parties or to the public on the public records;
(b) Agreements of Transferees. With respect to
each Transferred Asset transferred, the Transferee agrees:
(i) that Article II of the Uniform Commercial
Code, as in effect in the governing jurisdiction, shall
not apply to the transfer of the Transferred Asset and
waives any rights thereunder, except those rights not
waiveable thereunder;
(ii) in any event, to accept such Transferred
Asset "as is";
(iii) that no representations or warranties have
been made by the Transferor as to title to, or the
physical condition, merchantability, or fitness for a
particular purpose of, such Transferred Asset;
(iv) to be bound by all covenants, terms,
conditions, and provisions pertaining to such
Transferred Asset; and
(v) to pay any costs, fees, or other expenses
related to the transfer of such Transferred Asset.
SECTION 2.04. Assumption of Liabilities.
(a) Balance Sheet Liabilities. Metris and Fingerhut hereby
agree to assume each and every liability with respect to the
Transferred Companies allocated to their respective balance
sheets pursuant to Article XIV.
(b) Liabilities to Which Transferred Assets are
Subject. The Transferee of each Transferred Asset hereby
agrees to assume each and every liability booked for
financial accounting purposes on or before the Effective
Date to which such Transferred Asset is subject.
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SECTION 2.05. Equitable Transfer and Assumption
at the Effective Date. In the event that the legal transfer
of all such Transferred Assets or the assumption of all such
Liabilities is not accomplished by the Effective Date,
Fingerhut and Metris agree as between the Transferor and the
Transferee that the Transferee shall have de facto control
and equitable ownership of the entities, operations, and
Transferred Assets, and shall equitably assume all
Liabilities intended to be transferred to or assumed
pursuant to this Article II. If any such uncompleted steps
financially affect either Fingerhut or Metris, the Parties
agree to equitably resolve any such financial impact.
SECTION 2.06. Valuation and Payment. Unless
otherwise provided for in this Agreement or agreed to by the
Parties, Transferred Assets and Liabilities transferred or
assumed pursuant to this Article II shall be transferred on
the Parties' respective financial statements at net book
value.
ARTICLE III
External Financing of Metris
SECTION 3.01. Credit Facility. In connection
with Metris's plans to enter into a revolving credit
agreement or similar bank financing in the amount of
$300,000,000 (the "Credit Facility") Fingerhut shall use its
best reasonable efforts to assist Metris in establishing the
Credit Facility by:
(a) making available information necessary for the
lenders under the Credit Facility to perform due
diligence with respect to Fingerhut and the Transferred
Companies;
(b) causing the Metris board of directors to adopt
such resolutions and authorize the execution of such
agreements, certificates, and other documents
reasonably necessary to authorize the Credit Facility;
and
(c) providing any guarantees of transactional
costs with respect to the completion of the Credit
Facility as may be necessary to secure the services of
counsel, agents, and other usual and customary
services.
ARTICLE IV
Intercompany Debt and Capital Contribution
At the Closing, subject to the conditions set
forth in Article I, Fingerhut and Metris shall execute such
agreements, certificates, and other documents as may be
necessary to effect the transactions described in this
Article IV in the order in which such transactions are set
forth in this Article IV.
SECTION 4.01. Payment of Intercompany Debt.
Metris shall pay to Fingerhut an amount equal to the
Intercompany Debt.
SECTION 4.02. Fingerhut Capital Contribution.
Fingerhut, as the sole shareholder of Metris, shall
contribute to the capital of Metris an amount equal to
$[ ].
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ARTICLE V
Employee Benefits, Expenses, and Liabilities
SECTION 5.01. Allocation of Employee Salaries,
Expenses, and Liabilities. Metris Employees who are on the
payroll of Fingerhut Corporation shall remain Fingerhut
Employees until the Employee Transfer Date. Metris will pay
Fingerhut all employee salaries, expenses, and liabilities
accrued for such Metris Employees after the Effective Date
and until the Employee Transfer Date.
SECTION 5.02. Employee Benefit Plans. Metris
Employees will remain participants in certain of Fingerhut's
employee benefit plans through December 31, 1996. Metris
will pay the cost related to such participation. Fingerhut
and Metris will work together to determine the appropriate
course of action to take with respect to Metris employee
benefit plans for periods after January 1, 1997.
SECTION 5.03. Stock Options; Restricted Stock.
All outstanding restricted stock awards in the form of
Fingerhut Common Stock and stock option grants of Metris
Group Employees to purchase Fingerhut Common Stock under the
Fingerhut Stock Option Plans shall remain in full force and
effect so long as Metris remains a subsidiary of Fingerhut.
SECTION 5.04. Fingerhut ESPP. [To come]
SECTION 5.05 Fingerhut Retirement Plans. [To
come]
SECTION 5.06. Short and Long-Term Disability.
(a) Short-Term Disability. [Any employee of Metris
entitled to, or receiving, benefits under Fingerhut's
short-term disability program prior to the Effective Date,
shall continue to be covered under such program after the
Effective Date.]
(b) Long-Term Disability. (i) Post-Transfer
Disabilities.
ARTICLE VI
Representations and Warranties
SECTION 6.01. Representations and Warranties of
Fingerhut. Fingerhut represents, warrants, and covenants
that:
(a) Corporate Power; Authority; Enforceable
Obligation. Fingerhut has the requisite corporate
power and authority to execute this Agreement and the
Transaction Documents and to consummate the
transactions contemplated hereby and thereby.
Fingerhut has taken or will take, as appropriate, all
necessary corporate actions to approve all actions
required on its part to implement the Transfer,
including but not limited to (i) the approval by its
board of directors of the terms of this Agreement,
(ii) the performance of its obligations under this
Agreement, and (iii) the making of all registrations
and filings and the undertaking of any other actions,
whether before or after the Effective Date. This
Agreement has been duly executed and delivered by
Fingerhut and constitutes, and each Transaction
Document will be duly executed and delivered by
Fingerhut at or prior to the Closing and when so
executed and delivered will constitute, a legal, valid
and binding obligation of Fingerhut enforceable in
accordance with its terms.
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(b) Pending Litigation. Except as otherwise
provided in this Agreement, there is no lawsuit, action
or proceeding pending, or, to Fingerhut's knowledge,
threatened, against Fingerhut relating to the
Transferred Companies which is reasonably likely to be
adversely determined and which if adversely determined
would have a material adverse effect on the business or
financial condition of the Transferred Companies.
Fingerhut is not in default under any material
judgment, order, injunction, rule, or decree of any
governmental entity or arbitrator relating to the
Transferred Companies.
SECTION 6.02. Representations and Warranties of
Metris. Metris represents, warrants, and covenants that:
(a) Corporate Existence. Metris is a
corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in
which it is incorporated and has the requisite
corporate power and authority to carry on its business
as now being conducted.
(b) Corporate Power; Authority; Enforceable
Obligation. Metris has the requisite corporate power
and authority to execute this Agreement and the
Transaction Documents and to consummate the
transactions contemplated hereby and thereby. Metris
has taken or will take, as appropriate, all necessary
corporate actions to approve all actions required on
its part to implement the Transfer, including but not
limited to (i) the approval by its board of directors
of the terms of this Agreement, (ii) the performance of
its obligations under this Agreement, and (iii) the
making of all registrations and filings and the
undertaking of any other actions, whether before or
after the Effective Date. This Agreement has been duly
executed and delivered by Metris and constitutes, and
each Transaction Document will be duly executed and
delivered by Metris at or prior to the Closing and when
so executed and delivered will constitute, a legal,
valid and binding obligation of Metris enforceable in
accordance with its terms.
ARTICLE VII
Related Agreements
On or prior to the date of the Closing, Fingerhut
and Metris shall enter into, or cause their respective
subsidiaries to enter into, as appropriate, a Database
Access Agreement, a Data Sharing Agreement, an Extended
Service Plan Agreement, a Co-Brand Credit Card Agreement, an
Administrative Services Agreement, a Tax Sharing Agreement,
and a Registration Rights Agreement, each in substantially
the form included in Exhibit A hereto.
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ARTICLE VIII
Insurance
SECTION 8.01. Casualty Insurance. All policies
of liability, fire, workers' compensation and other forms of
insurance insuring the products, properties, assets and
operations of Metris will continue to be maintained by
Fingerhut and shall continue in full force and effect until
such date as Fingerhut and Metris agree that Metris will
obtain its own insurance coverage. Metris will pay its
allocated cost of the insurance premiums as provided in [the
Administrative Services Agreement.]
SECTION 8.02. Liability Insurance. With respect
to public and products liability insurance plans, Metris
shall be liable for payment of all claims and expenses
arising out of incidents related to the business or
operations of Metris, known or unknown, reported or
unreported. Any reserves or similar credit under the
insured programs of public and products liability relating
to the business or operations of Metris for periods ending
on or prior to the Effective Date shall be owned by and be a
Transferred Asset of Metris. Such reserve or credit shall
be included as Transferred Assets or Liabilities of Metris
as described in Article II and any variance (charge or
credit) to the reserves shall be Metris's responsibility.
SECTION 8.03. Worker's Compensation Claims. With
respect to insured or self-insured workers' compensation
plans, Metris shall be liable for payment of benefits and
expenses arising out of claims, known or unknown, reported
or unreported, with respect to persons that were employees
of any member of the Metris Group at the time the acts or
omission giving rise to the claim occurred. Any reserves or
similar credits under the insured or self-insured programs
of workers' compensation relating to periods ending on or
prior to the Effective Date shall be owned by and be a
Transferred Asset of Metris. Such reserves or credits shall
be included as Transferred Assets or Liabilities of Metris
as described in Article II, and any variance (charge or
credit) to the reserves shall be Metris's responsibility.
[SECTION 8.04. Auto Liability Insurance. With
respect to automobile liability insurance plans, Metris
shall be liable for payment of claims and expenses arising
out of incidents related to the business or operations of
Metris, known or unknown, reported or unreported. Any
reserves or similar credit under the insured program of
automobile liability relating to periods ending on or prior
to the Effective Date shall be Metris's responsibility and a
Transferred Asset thereof.]
SECTION 8.05. Risk of Loss on Certain Assets.
The Transferee of any Transferred Assets deemed transferred
pursuant to Section 2.02 or 2.05 shall assume the risk of
loss with respect to such assets as of the Effective Date
and shall insure against such losses in a manner consistent
with insurance coverage with respect to assets actually
transferred.
ARTICLE IX
Deleted
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ARTICLE X
Books, Records, and Access to Information
SECTION 10.01. Fingerhut Required To Deliver
Certain Business Records. Fingerhut shall arrange for the
transportation at its cost of existing corporate records in
its possession relating to the Financial Services Business
included within the affiliated group of which Metris is the
parent corporation, including original corporate minute
books, stock ledgers and certificates, and corporate seals
of each corporation included in the affiliated group of
Metris and all active agreements, deeds to real property,
active litigation files and filings with foreign
governments, if any, to the Metris address set forth in
Section 18.05 hereof.
SECTION 10.02. Mutual Obligation To Disclose
Other Business Information at the Request of the Other
Party. (a) Obligation To Disclose Certain Information.
From and after the Effective Date, each of the Parties (the
"Disclosing Party") shall provide to the other Party (the
"Receiving Party") and its authorized accountants, counsel,
and other designated representatives reasonable access to
all records, books, contracts, instruments, data, and other
information relating to the Receiving Party and reasonably
needed by the Receiving Party to comply with any legal
reporting requirement, to administer its employee benefit
plans, to prepare its financial statements, or to conduct
litigation not involving Fingerhut as a party (collectively,
"Disclosed Information"). The Disclosing Party need not
gather information not in the Disclosing Party's possession
(or in the possession of any persons or firms possessing
information as the Disclosing Party's agent).
(b) Manner of Disclosure. The Disclosing Party
may fulfill its obligation to disclose information (a) by
delivering to the Receiving Party original records embodying
the Disclosed Information, (b) by delivering to the
Receiving Party copies of the original records, or (c) by
providing to employees or agents of the Receiving Party
access, during normal business hours, to original records
for the purpose of copying such records.
(c) Confidentiality of Disclosed Information.
Each party agrees to keep confidential, and to use its best
efforts to cause its respective agents and representatives
to keep confidential, the Confidential Information (as
defined below) of the other party and all copies thereof,
extracts therefrom and analyses or other materials based
thereon, except that each party shall be permitted to
disclose Confidential Information (i) with the prior written
consent of the other party, (ii) to such of its respective
officers, directors, employees, agents, affiliates and
representatives as need to know such Confidential
Information, (iii) to the extent required by applicable
laws, regulations, subpoena or similar legal process
including but not limited to securities and banking laws and
regulations, (iv) to the extent reasonably necessary, in the
opinion of counsel, in connection with any suit, action or
proceeding to enforce its rights under this agreement, or
(v) to the extent such Confidential Information (x) becomes
publicly available other than as a result of a breach of
this Section 10.02(c) or (y) becomes lawfully available to
the party on a nonconfidential basis from a source other
than the other party; provided, however, that with respect
to clauses (iii) and (iv) above, the party shall notify the
other party of the need for such disclosure as promptly as
practicable and shall cooperate with the other party in
taking all reasonable measures to assure confidential
treatment of such Confidential Information. Each party
agrees not to use, and to use its best efforts to cause its
respective agents and representatives not to use, the
Confidential Information for any purpose other than as
expressly permitted hereunder. This Section 10.02(c) shall
remain operative and in full force and effect regardless of
the expiration and term of this Agreement.
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For the purposes of this Section 10.02(c),
"Confidential Information" shall mean (i) all trade secrets,
data, computer programs and other confidential business
information learned in the course of performance by either
party of its obligations hereunder, and (ii) any other
information that is disclosed to one party by the other
under or in contemplation of this Agreement regardless of
whether identified as confidential; provided, however, that
any of the foregoing that were available to a party on a
nonconfidential basis prior to its disclosure thereto by the
other party shall not be Confidential Information.
(d) Costs of Disclosure. The Disclosing Party
may require the Receiving Party to pay the cost of shipping
or duplicating its records for the purpose of disclosing
information to the Receiving Party. Each Party, as a
Receiving Party, shall bear the costs of transporting and
compensating its own agents and employees for the purpose of
gathering Disclosed Information. Each party, as a
Disclosing Party, shall bear the costs of compensating its
own agents and employees in fulfilling its obligation to
disclose Disclosed Information.
(e) Destruction of Records. (i) Records Other
than Certain Tax Records. Neither party, as a Disclosing
Party, may destroy any records that would reasonably be
required to enable it to fulfill its obligation to disclose
information hereunder until 24 months after the Effective
Date unless:
(A) it offers to deliver such records to the
Receiving Party in a writing describing the records in
sufficient detail to inform the Receiving Party of
their contents; and
(B) the Receiving Party either declines to accept
the records or fails to respond within 90 days.
(ii) Records Governed by Tax Sharing Agreement.
This Section 10.02(e) shall not apply to the destruction of
records to the extent such records are governed by
provisions contained in the Tax Sharing Agreement.
SECTION 10.03. Witness Availability. At all
times from and after the Effective Date, each Party will use
its reasonable best efforts to make available to the other,
upon written request, its officers, directors, employees and
agents as witnesses in connection with any legal,
administrative, or other proceedings in which the requesting
party may from time to time be involved to the extent that
the testimony of such officer, director, employee, or agent
may reasonably be required due to their personal knowledge
of the facts relating to the subject matter of the
proceeding.
SECTION 10.04. Out-Of-Pocket Costs. Except as
provided in Section 10.02 above, a Party providing
information or witnesses to the other hereunder shall be
entitled to receive from the recipient, upon the
presentation of invoices therefor, payments for such amounts
relating to supplies, disbursements, salaries or wages, and
such other costs and out-of-pocket expenses, as may be
incurred in providing such information or witnesses.
Invoices shall be due and payable within thirty (30) days of
receipt.
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ARTICLE XI
Contingent Liabilities
The Parties agree that the amount of Contingent
Liabilities resulting from an Action filed or asserted in
writing within four years of the Effective Date shall be
allocated between Fingerhut and Metris in accordance with
this Article XI unless specifically allocated pursuant to
some other provision of this Agreement or an Agreement
attached hereto as an Exhibit. For purposes of this
Article XI any Action asserted against an Indemnified Person
of either Party shall be treated as an action asserted
against such Party.
SECTION 11.01. Defense of Actions. The Parties
will cooperate and consult with each other in connection
with the defense of any Action in which Fingerhut and Metris
are, or potentially may be, involved (even if not Named
Parties in the Action), including but not limited to Actions
that might result in Contingent Liabilities.
If both Fingerhut and Metris are Named Parties in
an Action, they shall agree on the responsibility for both
the defense of the Action and the costs of the defense until
such time as the costs become subject to allocation as a
Contingent Liability pursuant to this Article XI. The
agreement shall take into account, and if reasonably
predictable shall follow, the manner in which any Contingent
Liability resulting from the Action would be allocated under
this Article XI.
Each Party shall bear its own internal costs,
including the salaries of in-house legal counsel, incurred
in connection with the defense of any Action until such time
as such costs become subject to allocation pursuant to this
Article XI.
SECTION 11.02. Allocation of Contingent
Liabilities. (a) Judgments and Settlement to which
Allocation Applies. The allocation rules set forth in
Section 11.02(b) shall apply to all Contingent Liabilities
arising out of a Judgment or a settlement to which both
Parties consent unless allocation of such liability is
provided for in the Tax Sharing Agreement or elsewhere in
this Agreement. If either Party enters into a settlement
without the consent of the other Party, the resulting
Contingent Liability shall be borne entirely by such Party.
(b) Allocation Rules. Contingent Liabilities
subject to allocation hereunder shall be allocated between
the Parties in accordance with the following rules:
(i) SEC Rule. If the Contingent Liability is
based upon or arises out of any violation or alleged
violation of any state or federal securities law or any
duties or obligations under any other statute or common
law with respect to any information contained in or
omitted from the Form S-1 Registration Statement for
the initial public offering of Metris, or any other
Metris disclosure document including but not limited to
reports on Form 10 (collectively, the "Disclosure
Documents"), the Contingent Liability shall be
allocated entirely to Metris unless the Contingent
Liability arises from a misstatement or omission in one
of the sections of the Disclosure Documents listed in
Schedule III of this Agreement, in which case the
Contingent Liability shall be allocated solely to
Fingerhut. If the foregoing allocation rule is held
not to be enforceable in a final judgment by a court of
competent jurisdiction as against public policy or
unavailable for any reason, then the Contingent
Liability shall be allocated to each Party based on the
relative fault of each Party in connection with the
statements or omissions that resulted in the Contingent
Liability, assigning fault entirely to the Party
supplying the information in cases arising from a
misstatement of information in the Disclosure
Documents.
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(ii) Employee Rule. If the Contingent Liability
arose from an employment-related claim made by an
employee or a former employee of either Fingerhut or
Metris, the Contingent Liability shall be allocated
entirely to the Party that directly employed such
employee at the time the events giving rise to the
claim occurred.
(iii) Fingerhut Companies Rule. Otherwise, if
the Contingent Liability arose solely out of the Acts
or Omissions of an employee of Fingerhut and no
employee of Metris received a substantial Benefit from
such Acts or Omissions, the Contingent Liability shall
be allocated solely to Fingerhut.
(iv) Metris Rule. Otherwise, if the Contingent
Liability arose solely out of the Acts or Omissions of
an employee of Metris and no employee of Fingerhut
received a substantial Benefit from such Acts or
Omissions, the Contingent Liability shall be allocated
solely to Metris.
(v) Joint Rule. Otherwise, if either (1) the
Contingent Liability arose out of the Acts or Omissions
of employees of both Fingerhut and Metris or (2) the
Contingent Liability arose out of the Acts or Omissions
of an employee of one Party and a member of the other
Party received a substantial Benefit from such Acts or
Omissions, the Parties shall use their best efforts to
agree on an equitable means of allocating the
Contingent Liability that reasonably reflects both the
nature of each Party's Acts or Omissions and the
Benefit received by each Party. If the Parties are
unable to agree on an allocation, either Party may
submit the dispute to arbitration pursuant to
Article XVI.
(vi) Named Party Rule. If none of the foregoing
rules apply and an employee of only one Party is a
Named Party in the Action giving rise to the Contingent
Liability, the Contingent Liability shall be allocated
solely to that Party.
(c) Costs to be Allocated. The costs of a
Contingent Liability subject to allocation under this
Article XI shall include the amount of any Judgment, the
costs of defending the related Action (including court
costs, attorneys' fees, the reasonable cost of in-house
counsel, experts' fees, and all other external expenses),
and the amount of any interest or penalties with respect to
any such Judgment.
SECTION 11.03. Notice of Actions. (a) Actions
Known as of the Date of this Agreement. Attached as
Schedule IV hereto is a list a Actions, known to the Parties
as of the date of this Agreement, that the Parties
reasonably believe would be allocable under the provisions
of this Article XI, a brief statement of the nature of the
Action, the amount claimed as damages against the Named
Parties by the person bringing the Action, and the
applicable allocation rule under Section 11.02(b).
(b) Notice of Future Actions. The Named Party in
an Action in which an adverse Judgment is reasonably likely
to result in a Contingent Liability allocable under this
Article XI shall notify the other Party of the Action within
90 days after the service of process on, or other written
notice of the Action to, the Named Party. The Notice shall
include at least the following information:
12
(i) the caption of the Action, including the
jurisdiction, court, docket number, and other
identifying information;
(ii) the names of the parties to the Action if not
obvious from the caption;
(iii) a brief statement of the claim alleged;
(iv) the amount of liability alleged, if known;
and
(v) the allocation rule of Section 11.02(b)
believed by the Named Party to be applicable.
(c) Failure of Notice. Failure to provide the
notice in the manner or in the time required by this
Section 11.03(b) shall not relieve a Party of its
obligations under this Article XI unless such Party
demonstrates by a preponderance of the evidence that it was
substantially prejudiced by such failure.
(d) Rule Named in Notice Not Binding. The
designation provided in Schedule IV or in any notice
pursuant to Section 11.03(b) of the applicable allocation
rule of Section 11.02(b) is for informational purposes only
and shall not be binding on either Party.
SECTION 11.04. Obligation to Pay Allocated Costs.
(a) Payments Between the Parties. Each Party (the
"Indemnifying Party") agrees to pay to the other Party (the
"Indemnified Party") and each Indemnified Person of the
Indemnified Party the full amount of any costs allocated to
the Indemnifying Party pursuant to this Article XI on
demand, any time after the allocation of costs becomes
final.
(b) Payment Obligation Excess of Insurance.
Notwithstanding anything to the contrary in this Agreement
or in the Agreements attached hereto, the agreement of the
Parties to indemnify, defend, and hold harmless the other
Party or its Indemnified Persons against Contingent
Liabilities from and after the Effective Date:
(i) is supplemental to and in excess of any valid
and collectible insurance covering the Contingent
Liabilities, including without limitation policies of
insurance listed in Schedule V or any renewals or
extensions thereof (the "Insurance Coverage") or any
agreements or obligations of either Party to indemnify,
defend, or hold harmless the Indemnified Persons of
either Party pursuant to their respective articles of
incorporation, bylaws, resolution, or other agreement
(the "Corporate Indemnification");
(ii) is not to be used as a source of contribution
to or as a substitute for the Insurance Coverage or as
a basis for recoupment by the insurers of payment of
the Contingent Liabilities made pursuant to the
Insurance Coverage; and
(iii) shall become operative, and payments shall
be required to be made by the Parties thereunder, only
if and to the extent that the Contingent Liabilities
have not been fully paid from the Insurance Coverage or
the Corporate Indemnification.
13
ARTICLE XII
Mutual Release of Pre-Transfer Liability
SECTION 12.01. Release of Claims Between the
Parties. Each of Fingerhut and Metris, their successors and
assigns, remise, release, and forever discharge the other,
and all persons who at any time before the Effective Date
have been their shareholders, directors, officers, agents,
or employees, together with each such person's heirs,
executors, administrators, and assigns, from any and all
claims, debts, demands, actions, causes of action, or suits
whatsoever, both at law and in equity (collectively
"Claims") arising from any events on or before the Effective
Date, including the Transfer and all transactions and
actions taken in connection with the Transfer except for:
(i) any Claim with respect to a Liability or any
Contingent Liability expressly transferred, assigned,
or allocated in accordance with this Agreement or any
of the Transaction Documents;
(ii) any Claim resulting from any agreement
between the Parties not terminated pursuant to this
Agreement; and
(iii) any Claim for unpaid amounts owed with
respect to the sale, lease, construction, or receipt of
goods, property, or services obtained or used by it in
the ordinary course of business.
SECTION 12.02. Limitation of Liability for
Inaccurate Information. Neither Party shall be liable to
the other Party for any claim or cause of action arising out
of or based on the inaccuracy of any information provided to
the other Party pursuant to this Agreement if such
information is an estimate, projection, or forecast, or is
based on an estimate, projection or forecast in the absence
of the willful misstatement of such information by the Party
providing such information.
ARTICLE XIII
Banking and Other Arrangements
The responsibility for bank accounts used by
Metris and its Affiliates shall be transferred from
Fingerhut to Metris as of or immediately prior to the
Effective Date. Normal procedures will be followed for
receipts and disbursements funding prior to the Effective
Date.
ARTICLE XIV
Closing of Books and Post-Separation True-Ups
SECTION 14.01. Closing of Metris General Ledger.
Financial statements of Metris, which shall be comprised of
the consolidated accounting ledgers of Metris and its
subsidiaries and divisions as of the Effective Date, will be
prepared jointly by Metris and Fingerhut in accordance with
generally accepted accounting principles, applied in a
manner consistent with the practice of Fingerhut for prior
periods. The general ledger of Metris as of the Effective
Date shall take into account the effect of the repayment of
the Intercompany Debt and the contributions to capital
provided for in Article IV and the transfer of assets and
assumption of liabilities pursuant to Articles II and V on a
basis satisfactory to Fingerhut.
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SECTION 14.02. True-Up Adjustments. The Parties
acknowledge and agree that the preparation of separate
financial statements for Metris will necessarily require the
Parties to estimate certain items of income, loss, assets,
and liabilities. The Parties agree that they will cooperate
after the Effective Date to true-up such estimates to take
into account actual experience or information learned after
the Effective Date. The Parties also agree to cooperate in
the correction of the financial reporting of any
transactions found by the Parties, after the Effective Date,
to have been erroneously reported in the preparation of
separate financial statements of Metris.
Any adjustment after the Effective Date made to
reflect the true-up of liabilities between the Parties,
either to correct an estimate or an error made as of the
Effective Date, shall be settled by the Parties in
accordance with this Section 14.02.
(a) Insurance Reserves. With respect to the
true-up of estimated reserves for insurance claims and
expenses for which Metris retains responsibility pursuant to
Article VIII, any excess of claims or expenses over the
amount reserved therefor on the Effective Date shall be paid
at the end of each calendar quarter by Metris to Fingerhut
in cash.
(b) Medical Plan Claims Incurred but not
Reported. [With respect to claims incurred but not reported
under the Fingerhut Medical Plan, any excess of claims or
expenses over the amount reserved therefor on the Effective
Date shall be paid at the end of each calendar month by
Metris to Fingerhut in cash; any excess of such reserves
over cumulative claims at the end of the 24th whole calendar
month following the Effective Date shall be treated by
Fingerhut as an adjustment to the amount contributed to the
capital of Metris pursuant to Section 4.02.]
(c) Other Liabilities. With respect to all other
liabilities required to be adjusted after the Effective
Date, any liability of Metris in excess of the amount
estimated or assumed shall be paid to Fingerhut in cash, and
any liability of Metris less than the amount estimated or
assumed shall be treated as a decrease in the amount
contributed to the capital of Metris pursuant to
Section 4.02 until such capital contribution amounts shall
have been reduced to zero by prior adjustments made pursuant
to this Section 14.02. Thereafter such true-ups shall be
settled by a cash payment from Fingerhut to Metris.
ARTICLE XV
Indemnification
SECTION 15.01. Indemnification by Fingerhut.
Fingerhut shall indemnify Metris, its affiliates and their
respective officers, directors, employees, stockholders,
agents and representatives against, and agrees to hold them
harmless from, any loss, liability, claim, damage or expense
(including reasonable legal fees and expenses) ("Losses"),
as incurred (payable promptly upon written request), for or
on account of or arising from or in connection with or
otherwise with respect to (i) any breach of any
representation or warranty of Fingerhut contained in this
Agreement, and (ii) any breach of any covenant of Fingerhut
contained in this Agreement.
SECTION 15.02. Indemnification by Metris.
Metris shall indemnify Fingerhut, its affiliates and their
respective officers, directors, employees, stockholders,
agents and representatives against, and agrees to hold them
harmless from, any Loss, as incurred (payable promptly upon
written request), for or on account of or arising from or in
connection with or otherwise with respect to (i) any breach
of any representation or warranty of Metris contained in
this Agreement, (ii) any breach of any covenant of Metris
contained in this Agreement.
15
ARTICLE XVI
Intentionally left blank.
ARTICLE XVII
Definitions
SECTION 17.01. Defined Terms. The following
terms have the meanings set forth herein for purposes of
this Agreement and all Exhibits to the Agreement unless the
context indicates otherwise.
"Action" means any litigation or other judicial,
regulatory, or administrative proceeding.
"Acts or Omissions" means significant active and
direct participation by a person in the conduct that
resulted in a Contingent Liability but does not include the
mere approval, disapproval, or rejection of profit plans,
business plans, or other corporate plans.
"Administrative Services Agreement" means the
Administrative Services Agreement between Metris, Direct
Merchants Credit Card Bank, National Association, and
Fingerhut Corporation in substantially the form included in
Exhibit A.
"Affiliate" means, with respect to any person, any
entity that, directly or indirectly, controls, is controlled
by, or is under common control with, such person.
"Agreement" means this Transfer Agreement.
"Benefit" means a significant, identifiable
financial benefit (not including dividends paid by Metris to
Fingerhut) that directly flows to a person from the Acts or
Omissions that resulted in a Contingent Liability.
"Claims" is defined in Section 12.01.
"Closing" is defined in Section 1.02.
"Co-Brand Credit Card Agreement" means the
Co-Brand Credit Card Agreement among Metris, Direct
Merchants Credit Card Bank, National Association, and
Fingerhut Corporation in substantially the form included in
Exhibit A.
"Code" means the Internal Revenue Code of 1986, as
amended from time to time.
"Confidential Information" is defined in
Section 10.02(c).
"Contingent Liability" means a liability, to the
extent not covered by insurance, of either Fingerhut or
Metris that was not booked for financial accounting purposes
on or before the Effective Date that is attributable to
(i) an Act or Omission that occurred before the
Effective Date;
(ii) a condition that existed before the Effective
Date; or
(iii) an Act or Omission that occurred after the
Effective Date but was attributable to the Transfer.
"Corporate Indemnification" is defined in
Section 11.04(b)(i).
"Credit Facility" is defined in Section 3.01.
"Database Access Agreement" means the Database
Access Agreement between Metris and Fingerhut Corporation in
substantially the form included in Exhibit A.
16
"Data Sharing Agreement" means the Data Sharing
Agreement between Metris and Fingerhut Corporation in
substantially the form included in Exhibit A.
"Disclosed Information" is defined in
Section 10.02(a).
"Disclosing Party" is defined in Section 10.02(a).
"Disclosure Documents" is defined in
Section 11.02(b)(i).
"Effective Date" means [ ], 1996.
"Employee Transfer Date" means January 1, 1997.
"Extended Service Plan Agreement" means the
Extended Service Plan Agreement between Metris and Fingerhut
in substantially the form included in Exhibit A.
"Financial Services Business" is defined in the
first recital.
"Fingerhut" is defined in the preamble.
"Fingerhut Common Stock" means the common stock,
par value $.01 per share.
"Fingerhut Employees" means [ ].
"Fingerhut ESPP" means [ ].
"Fingerhut Group" means Fingerhut and its
controlled subsidiaries, controlled partnerships, and other
controlled business entities, excluding such entities that
are members of the Metris Group.
"Fingerhut Group Employees" means those persons
employed by any member of Fingerhut immediately after the
Effective Date and, in addition, with respect to benefit
plans in which directors may participate, any persons who is
a director of any member of the Fingerhut Group immediately
after the Effective Date.
"Fingerhut Pension Plan" is defined in
Section 5.06.
"Fingerhut Stock Options Plans" means the
Fingerhut Companies, Inc. Stock Option Plan, the Fingerhut
Companies, Inc. Performance Enhancement Investment Plan, and
the Fingerhut Companies, Inc. 1995 Long-Term Incentive and
Stock Option Plan
"Indemnified Party" is defined in
Section 11.04(a).
"Indemnified Person" means, with respect to any
person, such person's officer's, directors, shareholders,
employees, or agents, past or present, or others, however
designated, that perform or performed a similar function
with respect to such person.
"Indemnifying Party" is defined in
Section 11.04(a).
"Insurance Coverage" is defined in
Section 11.04(b)(i).
"Intercompany Debt" means the total principal
amount of intercompany debt owed by Metris to Fingerhut, as
a result of Metris's borrowings through Fingerhut's
intercompany financing arrangements as of the time
immediately before the effectiveness of any of the
transactions set forth in Article IV.
17
"IRS" is defined in Section 5.05(c).
"Judgment" shall mean any determination of
liability entered by a court or a regulatory or
administrative body in any contested Action. A stipulated
judgment or order of dismissal (or equivalent) by which a
court approves a settlement of an Action entered into by
only one of the Parties is not a Judgment.
"Liabilities" means liabilities, other than
Contingent Liabilities, that have been booked for financial
accounting purposes on or before the Effective Date and that
are to be assumed by one Party from another Party under this
Agreement.
"Losses" is defined in Section 15.01.
"Named Party" means, with respect to any Action,
the person or persons named as defendants in such Action.
"Metris" is defined in the preamble.
"Metris Common Stock" means the common stock par
value $0.01 of Metris, and such stock as adjusted pursuant
to this Agreement.
"Metris Employees" means (i) those persons
employed by any member of Metris immediately after the
Effective Date and (ii) with respect to benefit plans in
which directors may participate, any person who is a
director of any member of Metris immediately after the
Effective Date.
"Metris Group" means Metris and, as of the
Effective Date:
(i) its controlled subsidiaries, controlled
partnerships, and [ ] business entities;
(ii) those entities transferred to any member of
the Metris [ ] to this Agreement; and
(iii) those non-public corporations, partnerships,
and other business entities in which Metris owns a
non-controlling interest but with respect to which
Metris is entitled to exercise voting rights.
Metris agrees, with respect to entities described
in clause (iii), to exercise its voting rights to the
maximum extent possible to cause such entities to abide by
the intent and provisions of this Agreement.
"Metris Group Employees" means [ ].
"Parties" means (i) Fingerhut and its successors
and (ii) Metris and its successors.
"Registration Rights Agreement" means the
Registration Rights Agreement between Metris and Fingerhut
in substantially the form included in Exhibit A.
"Receiving Party" is defined in Section 10.02(a).
"Satisfaction Certificate" is defined in
Section 1.03(a).
"SEC" means the Securities and Exchange
Commission.
"Tax Sharing Agreement" is defined in Article VI.
"Transaction Documents" means the Database Access
Agreement, the Data Sharing Agreement, the Extended Service
Plan Agreement, the Co-Brand Credit Card Agreement, the
Registration Rights Agreement, the Administrative Services
Agreement and the Tax Sharing Agreement.
18
"Transfer" is defined in the second recital.
"Transferee" and "Transferor" are defined in
Section 2.03(a).
"Transferred Assets" mean the properties, claims,
and rights, whether real or personal, tangible or
intangible, that are to be assigned to Metris by Fingerhut
or by Metris to Fingerhut pursuant to this Agreement in
connection with the Transfer.
"Transferred Business Taxable Period" means [ ].
"Transferred Companies" is defined in
Section 2.02(a).
"Transferred Company Taxable Period" means [ ].
ARTICLE XVIII
Other Provisions
SECTION 18.01. Expenses. Except as otherwise
provided in this Agreement or agreed to by the Parties, each
Party shall bear its own expenses in connection with the
Transfer, and the Parties shall agree on an equitable
allocation of costs where any item of expense is not clearly
allocable to one Party or the other.
SECTION 18.02. Entire Agreement. This Agreement
represents the entire agreement among the Parties, and no
prior representations or agreements, whether written or
oral, shall be binding on any Party unless incorporated into
this Agreement or agreed to by such Party in a writing
signed by such Party on or after the date of this Agreement.
SECTION 18.03. Survival of Representations. The
representations and warranties contained in this Agreement
and in any document delivered in connection herewith shall
survive the Closing Date solely for purposes of Article XV
and shall terminate at the close of business one year
following the Closing Date.
SECTION 18.04. Governing Law. The validity,
interpretation, and enforcement of this Agreement shall be
governed by the laws of the State of Minnesota, other than
the choice of law provisions thereof.
SECTION 18.05. Notices. Any notice, demand,
claim or other communication under this Agreement shall be
in writing and shall be deemed to have been given:
(a) upon the delivery or mailing thereof, as the
case may be, if delivered personally or sent by
registered or certified mail, return receipt requested,
postage prepaid;
(b) on the date on which delivery thereof is
guaranteed by the carrier if delivered by a national
courier guaranteeing delivery within a fixed number of
days of sending;
(c) five days after the mailing thereof if mailed
postage paid by any other method; or
(d) on the date on which facsimile transmission
thereof is confirmed "OK" by the receiving machine if
transmitted by facsimile machine and confirmed by
delivery by one of the prior methods
but, in each case, only if addressed to the Parties in the
following manner at the following addresses or facsimile
numbers ("FAX") (or at such other address or other number as
a Party may specify by notice to the other):
19
If to Fingerhut: If to Metris:
Fingerhut Companies, Inc. Metris Companies Inc.
0000 Xxxxx Xxxx Xxxxxxxxxxx Xxxxxxxx
Xxxxxxxxx, XX 00000 000 Xxxxx Xxxxxxx 000,
Xxxxx 000
Xx. Xxxxx Xxxx, XX 00000
Attn: General Counsel Attn: General
Counsel
FAX: (000) 000-0000 FAX: [ ]
Any notice to Fingerhut shall be deemed notice to Affiliates
and Subsidiaries, all members of Fingerhut, and any notice
to Metris shall be deemed notice to all Affiliates and
Subsidiaries.
SECTION 18.06. Priority of Agreements. If there
is a conflict between any provision of this Agreement and a
similar provision in any of the agreements attached as
exhibits hereto, the provisions of the attached agreements
shall control unless specifically provided otherwise in this
Agreement or in the attached agreement.
SECTION 18.07. Amendment. This Agreement may not
be amended except by a writing executed by the Parties.
SECTION 18.08. Termination. This Agreement may
be terminated and the Transfer abandoned at any time before
delivery of the Satisfaction Certificate pursuant to
Section 1.03(a) by and in the sole discretion of the
Fingerhut board of directors without the approval of Metris
or any other person. In the event of such termination, no
Party shall have any liability of any kind to any other
Party on account of such termination.
SECTION 18.09. No Third-Party Beneficiaries.
Except for the provisions of Article XI with respect to
indemnification of Indemnified Persons, this Agreement is
solely for the benefit of the Parties hereto and should not
be construed to confer upon third parties (including any
employees of either Fingerhut or Metris or any Affiliate or
Subsidiary thereof) any remedy, claim, reimbursement, claim
of action, or other right in addition to those existing
without reference to this Agreement.
SECTION 18.10. Titles and Headings. Titles and
headings to sections herein are for convenience of reference
only and are not intended to be a part of or affect the
meaning of this Agreement.
SECTION 18.11. Publicity. Neither Fingerhut nor
Metris shall refer to the post-Transfer plans or business
activities of each other in publicity releases, or in each
similar external communications, without first securing the
prior written approval of each other. After the Transfer,
neither Fingerhut nor Metris shall express or imply each
other's sponsorship or endorsement of a particular position
or view in any external communication without first securing
the prior written approval of each other.
SECTION 18.12. Assignability. No Party shall
assign its rights or delegate its duties under this
Agreement without the written consent of the other Party.
Any attempted assignment or delegation in contravention of
this provision shall be void.
SECTION 18.13. Partial Invalidity. Any provision
of this Agreement that is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining provisions
of this Agreement or affecting the validity or
enforceability of any of the provisions of this Agreement in
any other jurisdiction. If any provision of this Agreement
is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
20
SECTION 18.14. Force Majeure. No Party shall be
deemed in default or breach of this Agreement to the extent
that any delay or failure in the performance of its
obligations under this Agreement results from any cause
beyond its reasonable control and without its fault or
negligence, such as acts of God, acts of civil or military
authority, embargoes, epidemics, war, riots, insurrections,
fires, explosions, earthquakes, floods, unusually severe
weather conditions, or labor problems. In the event of any
such excused delay, the time for performance shall be
extended for a period equal to the time lost by reason of
the delay.
IN WITNESS WHEREOF, the Parties hereto have
executed and delivered this Agreement as of the date first
above written.
Fingerhut Companies, Inc.,
by
Name:
Title:
Metris Companies Inc.,
by
Name:
Title:
