AMENDMENT TO TAX SHARING AGREEMENT
This agreement made as of January 1, 1998, amends the Tax Sharing
Agreement (the "Original Agreement") dated as of October 31, 1996, entered into
by Fingerhut Companies, Inc. ("FCI"), Metris Companies Inc. ("Metris"), and the
Metris Affiliates (as defined therein). All terms used herein have the same
meaning as in the Original Agreement.
WHEREAS FCI has submitted a request for a private letter ruling from
the Internal Revenue Service in connection with the spin-off of the Metris Group
to FCI's public shareholders; and
WHEREAS FCI intends to consummate the spin-off upon receiving such
ruling; and
WHEREAS FCI has caused the restructuring of the Metris Group; and
WHEREAS the members of the Consolidated Group desire to update and
expand the scope of the Original Agreement and to allocate the Tax liabilities,
if any, resulting form the spin-off;
NOW, THEREFORE, the Original Agreement is hereby amended as follows,
and the following amendments shall be effective as if included in the Original
Agreement:
(1) Section 1.12 is amended to read as follows:
1.12 . "METRIS AFFILIATE" means any corporation or other entity directly
or indirectly owned or controlled by Metris and which is includible in the
Metris Group.
(2) Section 1.27 is amended to read as follows:
1.27. "TAXES" means Federal Income Taxes and Non-Federal Domestic Taxes.
(3) The following definitions are added to Section 1, and all definitions
in Section 1 are renumbered in alphabetical order:
1.6 "CONTRIBUTION" has the meaning provided in the IRS Ruling Request.
1.9 "DISTRIBUTIONS" means the transaction pursuant to which the FCI
Group will distribute its entire interest in Metris, representing
83% of the common stock of Metris, to the shareholders of FCI on a
pro-rata basis.
1.10 "DISTRIBUTION TAXES" means Taxes of any member of the Consolidated
Group (as in existence on or prior to the date of the
Distributions) resulting from, or arising in connection with, the
failure of the Distributions to be tax-free to such member under
Code Section 355 (including without limitation by reason of the
application of Code Sections 355 (d) or(e)).
1.15 "IDEMNIFIYING PARTY" means a party from which indemnification is
sought under Sections 2.4 or 2.5 of this Agreement.
1.16 "IRS RULING REQUEST" means the request for a private letter
ruling, dated October 23, 1997 (including supplemental
filings with respect thereto), that was submitted to the Internal
Revenue Service in connection with the Distributions.
(4) The following new Section 2.4 is added to the Original Agreement:
2.4 ADDITIONAL STATE, LOCAL AND FOREIGN TAXES.
(a) FCI GROUP LIABILITY FOR ADDITIONAL STATE, LOCAL AND
FOREIGN TAXES. If one or more members of the FCI Group
engages (or is deemed to engage) in any activities in a
state, local or foreign taxing jurisdiction without the
consent of the Metris Group, the members of the FCI Group
shall be liable for and shall indemnify, defend, hold
harmless and make whole on an after-tax basis the members
of the Metris Group from and against any Non-Federal
Domestic Taxes or foreign taxes imposed on, or required to
be withheld by, any member of the Metris Group by
state, local or foreign taxing jurisdiction for any
taxable period (or portion thereof) beginning on or prior
to the date of the Distributions, if the relevant member
of the Metris Group would not have been liable for any
taxes of such type in such jurisdiction for the relevant
taxable period (or portion thereof) but for such
activities of member of the FCI Group in such
jurisdiction. The preceding sentence shall also apply to
sales, use and value added taxes imposed on, or required
to be collected by, members of the Metris Group on sales
to third parties, but only for sales prior to 30 days
after the date that a taxing jurisdiction first claims in
writing that the Metris Group is liable for such taxes,
and thereafter the Metris Group shall be responsible
for charging such taxes to the third parties (but in no
event shall the preceding sentence apply to sales, use
and value added taxes with respect to sales after the date
of the Distributions).
(b) METRIS GROUP LIABILITY FOR ADDITIONAL STATE, LOCAL AND
FOREIGN TAXES. If one or more members of the Metris
Group engages (or is deemed to engage) in any activities
in a state, local or foreign taxing jurisdiction
without the consent of the FCI Group, the members of the
Metris Group shall be liable for and shall indemnify,
defend, hold harmless and make whole on an after-tax basis
the members of the FCI Group from and against any
Non-Federal Domestic Taxes or foreign taxes imposed on,
or required to be withheld by, any member of the FCI
Group by such state, local or foreign taxing jurisdiction
for any taxable period (or portion thereof) beginning
on or prior to the date of the Distributions, if the
relevant member of the FCI Group would not have been
liable for any taxes of such type in such jurisdiction for
the relevant taxable period (or portion thereof) but
for such activities of members of the Metris Group in such
jurisdiction. The preceding sentence shall also
apply to sales, use and value added taxes imposed on, or
required to be collected by, members of the FCI Group
on sales to third parties, but only for sales prior to 30
days after the date that a taxing jurisdiction first
claims in writing that the FCI Group is liable for such
taxes and thereafter the FCI Group shall be responsible
for charging such taxes to the third parties (but in no
event shall the preceding sentence apply to sales, use
and value added taxes with respect to sales after the date
of the Distributions).
(c) COOPERATION AND CONTESTS. The FCI Group and the Metris
Group agree to keep each other fully informed and fully
cooperate with respect to any Audit or contest with a Tax
Authority relating to taxes indemnified under this
Section 2.4. The indemnifying party or indemnified party
shall each notify the other within 15 business days
of receiving inquiries or information requests from an
applicable Tax Authority. Both parties shall have the
right to participate in all activities and strategic
decisions relating to any such inquiry, request, Audit or
contest. No such Audit or contest shall be settled
without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld. Any
disagreements arising under this Section 2.4 shall be
settled pursuant to the procedures in Section 6.
(5) The following new Section 2.5 is added to the Original Agreement:
2.5 DISTRIBUTION TAXES.
(a) FCI GROUP LIABILITY FOR CERTAIN DISTRIBUTION TAXES. The
members of the FCI Group shall be liable for and shall
indemnify, defend, hold harmless and make whole on any
after-tax basis the members of the Metris Group from and
against any Distribution Taxes that are primarily
attributable to one or more of the following:
(1) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) in the IRS
Ruling Request that relates to the FCI Group;
(2) any action or omission by the FCI Group after the date of
filing of the IRS Ruling Request, including, but not
limited to, an issuance of stock or stock buyback by the
FCI Group following the Distributions;
(3) any acquisition of any stock or assets of the FCI Group by
one or more other persons prior to or following the
Distributions, except such an acquisition described in
Section 2.5 (b) (4) or in the IRS Ruling Request;
(4) any acquisition of any stock or assets of the Metris Group
by one or more persons following the Distributions if,
prior to the Distributions, any formal or informal
negotiations regarding any acquisition of any stock or
assets of the Metris Group (other than by an acquirer
contemplating the acquisition of substantially all the
stock or assets of the FCI Group) had occurred between any
such persons and any member of the FCI Group without the
knowledge of the Chief Executive Officer of the Metris
Group; or
(5) any issuance of stock by FCI, or change in ownership of
stock in FCI, that causes Code Section 355 (d) or
Section 355 (e) to apply to the Distributions.
(b) METRIS GROUP LIABILITY FOR CERTAIN DISTRIBUTION TAXES. The
members of the Metris Group shall be liable for and shall
indemnify, defend, hold harmless and make whole on an
after-tax basis the members of the FCI Group from and
against any Distribution Taxes that are primarily
attributable to one or more of the following:
(1) any inaccurate statement or representation of fact or
intent (or omission to state a material fact) in the IRS
Ruling Request that relates to the Metris Group;
(2) any action or omission by the Metris Group after the date
of filing of the IRS Ruling Request, including, but
not limited to, an issuance of stock or stock buyback by
the Metris Group following the Distributions;
(3) any acquisition of any stock or assets of the Metris Group
by one or more other persons prior to or following
the Distributions, except such an acquisition described in
Section 2.5 (a) (4) or in the IRS Ruling Request;
(4) any acquisition of any stock or assets of the FCI Group by
one or more persons following the Distributions if, prior
to the Distributions, any formal or informal negotiations
regarding any acquisition of any stock or assets of the
FCI Group had occurred between any such persons and any
member of the Metris Group without the knowledge of the
Chief Executive Officer of the FCI Group; or
(5) any issuance of stock by Metris, or change in ownership of
stock in Metris, that causes Code Section 355 (d) or
Section 355(e) to apply to the Distributions.
(c) JOINT LIABILITY FOR REMAINING DISTRIBUTION TAXES. The
liability for any Distribution Taxes not allocated by
Section 2.5 (a) or (b) shall be borne equally by the FCI
Group and the Metris Group.
(d) COOPERATION AND CONTESTS. The FCI Group and the Metris
Group agree to keep each other fully informed and fully
cooperate with respect to any Audit or contest with a Tax
Authority relating to Distribution Taxes. Each party
shall notify the other within 15 business days of
receiving inquiries or information requests concerning
Distribution Taxes from an applicable Tax Authority.
Both parties shall have the right to participate in all
activities and strategic decisions relating to any such
inquiry, request, Audit or contest. No such Audit or
contest shall be settled without the consent of the
Indemnifying Party, which consent shall not be
unreasonably withheld. Any disagreements arising under
this Section 2.5 shall be settled pursuant to the
procedures in Section 6.
(e) TREATMENT OF PAYMENTS. The parties agree that for all tax
and financial accounting purposes any payments made
pursuant to this Section 2.5 shall be treated as
nontaxable payment (dividends or capital contributions, as
the case may be) made immediately prior to the
Distributions.
(f) APPLICABILITY. The provisions of this Section 2.5 shall
apply notwithstanding any other provisions of this
Agreement.
(6) Section 4.1 is amended by (1) in the first sentence thereof,
deleting "Until Deconsolidation," and (2) amending the second
sentence thereof to read as follows: "FCI shall have the sole and
exclusive responsibility for the preparation and filing of any
Consolidated Return or Combined Return for all Pre-Deconsolidation
Periods and Straddle Periods, except that separate Federal legal
entity returns and schedules and separate state legal entity
returns and schedules shall be prepared by the Metris Group for
members of the Metris Group."
IN WITNESS WHEROF, each of the parties hereto has caused this agreement
to be executed by a duly authorized officer as of the date first above written.
FINGERHUT COMPANIES, INC.
By:/s/ Xxxxxx X. Xxxxxx
Title: Executive Vice President and CFO
METRIS COMPANIES INC.
By:/s/ Xxxxxx X. Xxxxxxxxxx
Title: Chief Financial Officer
