<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Metris Companies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
April 3, 2000
Dear Shareholder:
I am pleased to invite you to attend the Company's 2000 Annual Meeting of
Shareholders to be held at the Hyatt Regency Minneapolis, 1300 Nicollet Mall,
Minneapolis, Minnesota on Tuesday, May 9, 2000, at 10:00 a.m. Central Time.
On the page following this letter you will find the Notice of Meeting, which
lists the matters to be considered at the meeting. Following the Notice is the
Proxy Statement, which describes these matters and provides other information
concerning management of the Company. Also enclosed is your proxy card, which
allows you to vote on the matters, and the Company's Annual Report.
Your vote and participation this year is important to us. Please complete
and mail in your proxy card promptly, even if you plan to attend the meeting.
You can attend the meeting and vote in person, even if you have sent in a proxy
card.
The Board of Directors recommends that shareholders vote FOR the nominee and
FOR each of the proposals.
The rest of the Board and I look forward to seeing you at the meeting.
Sincerely,
/s/ Ronald N. Zebeck
Ronald N. Zebeck
President and Chief Executive
Officer
<PAGE>
METRIS COMPANIES INC.
600 South Highway 169
Suite 1800
St. Louis Park, Minnesota 55426
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
BY ORDER OF THE BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
TIME..................... 10:00 a.m. on Tuesday, May 9, 2000
PLACE.................... Hyatt Regency Minneapolis
1300 Nicollet Mall
Minneapolis, Minnesota
ITEMS OF BUSINESS........ 1) To elect one director for a three-year term.
2) To approve an increase in the number of shares
reserved for issuance under the Metris
Companies Inc. Amended and Restated Long-Term
Incentive and Stock Option Plan.
3) To ratify KPMG LLP as the Company's independent
auditors for the year ending December 31, 2000.
4) To transact such other business as may properly
come before the Meeting and any adjournment or
postponement thereof.
RECORD DATE.............. You can vote if you were a shareholder of record on
March 24, 2000.
PROXY VOTING............. It is important that your shares be represented and
voted at the Meeting. Please vote in one of two
ways:
(1) Attend the Meeting and cast your ballot; or
(2) MARK, SIGN, DATE AND PROMPTLY RETURN the
enclosed proxy card in the postage paid
envelope.
/s/ Z. Jill Barclift
Z. Jill Barclift
Secretary
April 3, 2000
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
IN THE ENCLOSED ENVELOPE
<PAGE>
- --------------------------------------------------------------------------------
Table of Contents
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ATTENDANCE AND VOTING MATTERS.............................................. 1
CORPORATE GOVERNANCE....................................................... 4
COMPANY STOCK OWNED BY OFFICERS AND DIRECTORS.............................. 7
PERSONS OWNING MORE THAN FIVE PERCENT OF COMPANY'S COMMON STOCK............ 9
COMPENSATION TABLES AND COMPENSATION MATTERS............................... 10
PERFORMANCE GRAPH.......................................................... 17
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.................... 18
PROPOSAL ONE: ELECTION OF DIRECTOR......................................... 21
PROPOSAL TWO: APPROVAL OF AN INCREASE IN THE NUMBER OF SHARES RESERVED FOR
ISSUANCE PURSUANT TO THE AMENDED AND RESTATED LONG-TERM INCENTIVE AND
STOCK OPTION PLAN......................................................... 23
PROPOSAL THREE: RATIFICATION OF KPMG LLP AS INDEPENDENT AUDITORS FOR THE
COMPANY FOR THE YEAR ENDING DECEMBER 31, 2000............................. 27
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.................... 27
REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS,
NOMINATIONS OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS............... 27
</TABLE>
<PAGE>
METRIS COMPANIES INC. PROXY STATEMENT
- --------------------------------------------------------------------------------
Attendance and Voting Matters
- --------------------------------------------------------------------------------
Why Did You Send Me This Proxy Statement?
We sent you this Proxy Statement and the enclosed proxy card because the
Board of Directors (the "Board") of Metris Companies Inc. ("we," "us," "Metris"
or our "Company") is soliciting your proxy to vote at the 2000 Annual Meeting
of Shareholders (the "Annual Meeting"). This Proxy Statement summarizes
information concerning the director nominees and proposals and provides you
information concerning our performance and the compensation of our officers and
directors. This information will help you to make an informed vote at the
Annual Meeting.
We began sending this Proxy Statement, the attached Notice of Annual Meeting
and the enclosed proxy card on April 3, 2000.
Who is Entitled to Vote?
Holders of our Common Stock. Shareholders of record of the Company's common
stock, par value $.01 (the "Common Stock"), at the close of business on March
24, 2000 (the "record date") are entitled to vote at the Annual Meeting. A
holder of Common Stock is entitled to: (a) one vote for the nominee to the
Board (but not for nominees for election to represent the holders of our Series
C Perpetual Convertible Preferred Stock, as discussed below) to be elected for
a three-year term; and (b) one vote for each of the proposals for each share of
Common Stock held on the record date. There is no cumulative voting.
Holders of our Series C Preferred Stock. The holders of our Series C
Perpetual Convertible Preferred Stock are entitled to vote on all matters voted
on by holders of our capital stock, voting as a single class, except the
election of directors. With respect to a vote on any matter other than the
election of directors, each share of Series C Preferred Stock entitles its
holder to cast the same number of votes he or she would have been able to cast
if such share of Series C Preferred Stock was converted into Common Stock on
the record date. One share of Series C Preferred Stock is convertible into 20
shares of Common Stock, plus a premium amount designed to guarantee
approximately 14% of seven years' worth of dividends at a 9% annual rate.
Affiliates of the Thomas H. Lee Company hold 100% of the outstanding shares
of our Series C Preferred Stock. So long as they or their affiliates own at
least 25% of the originally issued Series C Preferred Stock (or any shares of
Common Stock issued upon conversion thereof), the holders of a majority of the
shares of Series C Preferred Stock are entitled to elect four of eleven
directors of the Board. So long as they or their affiliates: (a) own any shares
of Series C Preferred Stock (or any shares of Common Stock issued upon
conversion thereof); and (b) are entitled to elect four directors, the Thomas
H. Lee Equity Fund IV, L.P. has the right to appoint one of the four directors.
So long as they or their affiliates own at least 10% but less than 25% of the
originally issued Series C Preferred Stock (or any shares of Common Stock
issued upon conversion thereof), the holders of a majority of the shares of
Series C Preferred Stock are entitled to elect one director.
On the record date, the total shares outstanding were: (a) 38,689,906 shares
of Common Stock; and (b) 885,177.7 shares of Series C Preferred Stock, which
are immediately convertible into 19,442,385 shares of Common Stock, including
accrued dividends and a premium amount designed to guarantee approximately 14%
of seven years' worth of dividends at a 9% annual rate, or approximately 33.4%
of the Common Stock on a diluted basis.
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Annual Meeting and for ten days prior to the Annual Meeting at
our corporate headquarters during normal business hours.
1
<PAGE>
How Do I Vote?
Unless you hold your shares in the Metris Retirement Plan 401(k), you can
vote on matters to come before the Annual Meeting in one of two ways:
. You can come to the Annual Meeting and cast your vote there; or
. You can vote by marking, signing and returning the enclosed proxy card.
If you do so, the individuals named as proxies on the card will vote
your shares in the manner you indicate.
If you vote by proxy, you may choose to vote for all of the nominees for
directors and each proposal by simply signing, dating and returning the
enclosed proxy card without further direction. All signed and returned proxies
that contain no direction as to vote will be voted FOR each of the nominees for
director and FOR each of the proposals.
The Board of Directors has selected Ronald N. Zebeck and Z. Jill Barclift,
the persons named on the proxy card accompanying this Proxy Statement, to serve
as proxies for the Annual Meeting. Mr. Zebeck and Ms. Barclift are officers of
the Company.
If you plan to attend the Annual Meeting and vote in person, you should
request a ballot when you arrive. HOWEVER, IF YOUR SHARES ARE HELD IN THE NAME
OF YOUR BROKER, BANK OR OTHER NOMINEE, THE INSPECTORS OF ELECTION WILL REQUIRE
YOU TO PRESENT A POWER OF ATTORNEY FROM YOUR BROKER, BANK OR OTHER NOMINEE FOR
YOU TO VOTE SUCH SHARES AT THE ANNUAL MEETING. Please contact your broker, bank
or nominee.
What Shares are Included on my Proxy Card?
Your proxy card represents all shares registered to your account in the same
social security number and address, including shares you own under the Metris
Companies Inc. Employee Stock Purchase Plan and the Metris Retirement Plan
401(k).
How Do Employees in the Metris Companies Inc. Employee Stock Purchase Plan
Vote?
If you hold shares of Common Stock under the Metris Companies Inc. Employee
Stock Purchase Plan, you can vote such shares in either of the ways described
above.
How Do Employees in the Metris Retirement Plan 401(k) Vote?
If you hold shares of Common Stock in the Metris Retirement Plan 401(k), an
employee benefit plan of the Company, please return your proxy in the envelope
provided by May 2, 2000. Harris Trust and Savings Bank will calculate the votes
returned by all holders in the Metris Retirement Plan 401(k) and notify the
Trustee of the Metris Retirement Plan 401(k). First Trust National Association,
the Trustee for the Metris Retirement Plan 401(k) on the record date, will act
in accordance with your instructions for voting your shares of Common Stock
held in your 401(k) account. If your voting instructions for your 401(k)
account are not received by May 2, 2000, the Trustee will vote your shares in
its absolute discretion. Holders of shares in the Metris Retirement Plan 401(k)
will not be permitted to vote in person at the Annual Meeting.
Will My Vote Be Disclosed?
We have a policy that all proxies, ballots and votes tabulated at a meeting
of the shareholders are confidential. Individual votes will not be revealed to
any of our employees or anyone else, other than the non-employee tabulator of
the votes or an independent election inspector, except as necessary to meet
applicable legal requirements, including challenges to the election or in any
lawsuit in which such vote becomes an issue. Representatives of Harris Trust
and Savings Bank will tabulate votes and act as Inspector of Election at the
Annual Meeting.
2
<PAGE>
This policy is not a right of shareholders and we reserve the right to
change this policy as to future elections at any time. However, you will be
entitled to confidentiality, subject to the exceptions stated above, for your
votes in this election.
May I Revoke My Proxy?
If you give a proxy, you may revoke it at any time before it is exercised.
You may revoke your proxy in any one of three ways:
. You may send in another proxy with a later date;
. You may notify our Secretary in writing at 600 South Highway 169, Suite
1800, St. Louis Park, Minnesota 55426; or
. You may vote in person at the Annual Meeting.
If you choose to revoke your proxy by attending the Annual Meeting, you must
vote at such meeting in accordance with the rules for voting at the Annual
Meeting. Attending the Annual Meeting will not, by itself, constitute
revocation of a proxy.
Must a Minimum Number of Shareholders Vote or be Present at the Annual Meeting?
A quorum of shareholders is necessary to hold a valid meeting. Our Amended
and Restated Bylaws (our "Bylaws") state that the presence, in person or by
proxy, of holders of one-third of the shares entitled to vote shall constitute
a quorum. Under Delaware law, if a shareholder abstains from voting as to any
particular matter, then the shares held by such shareholder shall be deemed
present at the Annual Meeting for purposes of determining a quorum and for
purposes of calculating the vote with respect to such matter.
The Inspector of Election will also treat broker non-votes as shares that
are present and entitled to vote for purposes of determining a quorum. Broker
non-votes occur when a broker holding stock in street name votes shares on some
matters but not others. As to matters for which the broker lacks discretionary
authority, the shares will be treated as not present and not entitled to vote
(even if included for purposes of determining a quorum).
If the number of shares present at the Annual Meeting is insufficient to
constitute a quorum, the Annual Meeting may be adjourned by the vote of a
majority of shares present to a later date. No notice, other than as given at
the Annual Meeting itself, is required with respect to the time and place for
the reconvening of the Annual Meeting.
What Vote is Required to Approve Each Proposal?
Our Bylaws provide that, except as provided by the Certificate of
Designation of the Series C Preferred Stock (see "Who is Entitled to Vote?"
above), if a quorum is present, the affirmative vote of a majority of the
shares represented at the meeting may decide any question before the meeting.
What Are the Costs of Soliciting These Proxies?
We will pay all costs of soliciting these proxies. In addition to mailing
proxy soliciting materials, we may also solicit proxies by telephone or other
means. We also ask banks, brokers and other institutions, nominees and
fiduciaries to forward proxy materials to the beneficial owners or principals
and to obtain authority to execute proxies. We will reimburse them for their
expenses. In addition, we have retained D.F. King & Co., Inc. to aid in the
solicitation of proxies. We have agreed to pay them a fee of $7,000 plus
telephone solicitation fees and out-of-pocket expenses.
What Matters May be Raised at the Annual Meeting?
The Board is aware of three items for action at the Annual Meeting: (1) the
election of one director for a three-year term; (2) the approval of an increase
in the number of shares reserved for issuance pursuant to the
3
<PAGE>
Amended and Restated Long-Term Incentive and Stock Option Plan; and (3) the
ratification of KPMG LLP as independent auditors for the Company for the year
ending December 31, 2000.
For the Annual Meeting, our Bylaws required that shareholders submit in
writing any nomination for director or any other item of business not less than
45 days prior to the date we first mailed last year's Proxy Statement or
February 15, 2000. No shareholder has made a nomination or submitted an item of
business.
Under the proxy rules promulgated by the SEC, a proxy may confer
discretionary authority to vote on any matter for which we did not have notice
in accordance with the notice provisions in our Bylaws. Therefore, if any other
matter is presented at the Annual Meeting and you have signed and returned a
proxy card, the holder of your proxy will vote upon such matter in his or her
discretion.
In addition, under the rules of the SEC, the holders of your proxy may also
vote in their discretion with respect to matters incident to the conduct of the
Annual Meeting or, in the case of a nominee for election as director who is
unable to serve, for a substitute nominee.
What if I Want to Obtain Further Information as Reported on the Company's Form
10-K?
If you would like a copy of our Annual Report on Form 10-K for the year
ended December 31, 1999, we will forward one to you without charge. Please
submit your request to:
Investor Relations
Metris Companies Inc.
600 South Highway 169, Suite 1800
St. Louis Park, Minnesota 55426
Or contact Investor Relations by phone at (952) 593-4874 or by fax at (952)
593-4733.
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Corporate Governance
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How Do We Manage Our Company?
Under Delaware law, the ultimate decision making body of our Company is the
Board. The Board decides all of our major questions and selects our management
to manage operations day to day. To meet its obligations, the Board always
meets quarterly. When circumstances arise requiring the decision of the Board
prior to the next regularly scheduled meeting, the Board may hold a special
meeting to discuss such matters. The Board may also render decisions through
written consents.
How Often Did Our Directors Meet?
In 1999, our full Board met at four regularly scheduled quarterly meetings
and one special meeting. In addition to the meetings of the full Board, the
directors attended meetings of individual Board committees. On several
occasions, the Board acted by written consent. In addition, from time to time,
management informally sought counsel of the members of the Board. Overall
attendance at Board and committee meetings was 91.8%.
In 1999, two of our directors had overall Board and committee attendance of
less than 75%: Lee Anderson and David Harkins, whose attendance rates were
72.7% and 60%, respectively. Mr. Anderson's attendance fell below 75% last year
because he was unable to attend three out of eleven meetings: one special
meeting and two regular meetings. Mr. Harkins became a director six months into
1999 and a member of the Compensation Committee in August, 1999. Consequently,
there were only five meetings that he could have attended as a director and
committee member. Mr. Harkins was unable to attend two special meetings,
resulting in overall attendance at three of five meetings.
4
<PAGE>
What Committees has the Board Authorized?
Our Bylaws authorize the full Board to create committees to assist it in the
management of the Company. These committees are comprised of two to four
members of the Board. The Board has created three such committees, each serving
a vital function for us.
The Audit Committee supervises and reviews our financial and accounting
practices. The Audit Committee also reviews our transactions with affiliates
and makes recommendations to the Board as to the selection of independent
auditors. The Audit Committee met four times during 1999. At each meeting in
1999, it received reports from management and our independent auditors
concerning our accounting and reporting practices and our fiscal soundness. The
Audit Committee is comprised entirely of non-employee, independent directors.
The Compensation Committee determines the compensation awarded to our named
directors and officers, subject to ratification by the full Board for
compensation packages granted to our President and Chief Executive Officer. The
Compensation Committee approves, adopts and administers our compensation plans
and administers and grants stock options under the Company's stock option plan
for employees. During 1999, the Compensation Committee met at four regularly
scheduled meetings and at four special meetings.
The Executive Committee is authorized to exercise the full power of the
Board in our management and conduct of business affairs during interim periods
between meetings of the Board. During the past year, members of this committee
sought approval from the full Board for actions and consequently it did not
formally meet during 1999.
The table below shows the committee membership of each director. Only Mr.
Zebeck is an employee of the Company.
<TABLE>
<CAPTION>
Name Audit Compensation Executive
---- ----- ------------ ---------
<S> <C> <C> <C>
Anderson..................................... X
Boll.........................................
Cleary....................................... X*
Deikel....................................... X
Hagerty......................................
Harkins...................................... X
Hoff......................................... X
Lee..........................................
Smith........................................ X
Trestman..................................... X* X
Zebeck....................................... X
</TABLE>
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* Indicates Chair
How Are Directors Compensated?
Only non-employee, independent directors received compensation for serving
as directors. We have the following arrangements for compensation of non-
employee directors.
<TABLE>
<S> <C>
Annual Retainer........................... $20,000
Attendance Fees........................... $2,500 for each Board meeting
and for each Committee meeting
Committee Chair Stipend................... $4,000 annually
</TABLE>
In 1999, non-employee directors received $365,500 as a group.
5
<PAGE>
We also believe that payment of compensation to our non-employee directors
should not be solely in the form of cash but should be tied to our performance.
In October 1996, the Board adopted a Non-Employee Director Stock Option Plan.
The first grants thereunder went to non-employee directors serving at the time
of our initial public offering. Such grants were in the amount of 10,000 shares
with an exercise price of $8.00, which was the price of the Common Stock at the
time of the initial public offering, adjusted for the two-for-one stock split
in June, 1999.
The Board passed a resolution in April, 1997 instituting a policy whereby
non-employee directors would receive options to purchase Common Stock at the
fair market value on certain dates. This policy awards 5,000 shares to each
non-employee director upon commencement of service on the Board. Each non-
employee director also receives options to purchase 5,000 shares annually at
the second regularly scheduled quarterly meeting of the Board. The exercise
price for these options is based upon the closing price of the Common Stock the
day before the grant. The options are immediately exercisable.
The Board may change the amounts and timing of such awards in the future. To
date, the Board has granted options to purchase up to 195,000 shares of Common
Stock to its non-employee directors.
Directors that we employ do not receive compensation from us for service as
a director but may otherwise receive compensation for their service. However,
all directors, including employee directors, are reimbursed for reasonable
travel, lodging and other incidental expenses incurred in attending meetings of
the Board and its Committees.
We also indemnify our directors and officers to the fullest extent permitted
by law. Our Bylaws require such indemnification.
Has the Company Engaged in Any Transactions with Our Management?
In May, 1999, we entered into an agreement with our President and Chief
Executive Officer, Ronald N. Zebeck, designed to provide him incentives to
continue long-term service as a key employee of Metris in consideration of a $5
million loan and other compensation, including: a bonus payment, with a tax
gross-up amount, for interest accrued on the loan; option reloads; and
restricted stock awards. We discuss our agreement with Mr. Zebeck in greater
detail in the "Compensation Committee Report on Executive Compensation--
Compensation of the Chief Executive Officer" section on page 19 of this Proxy
Statement.
Do Any Directors Have Relationships With Entities Doing Business With the
Company?
Directors Representing Our Series C Preferred Stock. All of the holders of
our Series C Preferred Stock, and the four directors representing them--C.
Hunter Boll, David V. Harkins, Thomas M. Hagerty and Thomas H. Lee--are
affiliates of the Thomas H. Lee Company. The outstanding shares of Series C
Preferred Stock are currently convertible into approximately 19.4 million
shares of Common Stock, or 33.4% of our Common Stock on a diluted basis. Our
auditor, KPMG LLP, also provides services to affiliates of the Thomas H. Lee
Company on a periodic basis.
6
<PAGE>
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Company Stock Owned by Officers and Directors
(As of February 25, 2000)
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The following table contains information as to the ownership of the
Company's Common Stock as of February 25, 2000, with respect to (a) each of the
current directors and nominees for directors, (b) the named executive officers,
and (c) all directors and executive officers as a group. Beneficial ownership
has been determined for this purpose in accordance with Rule 13d-3 of Section
13 of the Securities Exchange Act of 1934, as amended. Under that rule, a
person is deemed to be the beneficial owner of securities if he or she has or
shares voting power or investment power in respect of such securities or has
the right to acquire beneficial ownership within 60 days of February 25, 2000.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percent
Name of Beneficial Owner Beneficially Owned of Class
------------------------ ------------------ --------
<S> <C> <C>
Thomas H. Lee............................... 18,999,905 (1) 32.9%
Theodore Deikel............................. 1,924,359 (2) 4.9%
Ronald N. Zebeck............................ 1,585,852 (3) 3.9%
Lee R. Anderson, Sr......................... 220,822 (4) *
Frank D. Trestman........................... 70,000 (5) *
David V. Harkins............................ 69,374 (6) *
C. Hunter Boll.............................. 53,276 (7) *
Thomas M. Hagerty........................... 53,276 (8) *
Derek V. Smith.............................. 34,000 (9) *
John A. Cleary.............................. 22,000(10) *
Walter Hoff................................. 5,000(11) *
Douglas L. Scaliti.......................... 217,480(12) *
David D. Wesselink.......................... 74,456(13) *
Patrick J. Fox.............................. 71,609(14) *
Joseph A. Hoffman........................... 71,239(15) *
All directors and executive officers as a
group (21 persons)......................... 24,010,624(16) 39.3%
</TABLE>
- --------
(*) Less than 1%
(1) Includes 18,994,905 shares of Common Stock that may be acquired through
the conversion of Series C Preferred Stock. Of those 18,994,905 shares:
(a) 18,631,249 shares are beneficially owned in the aggregate by Thomas H.
Lee Equity Fund IV, L.P., Thomas H. Lee Foreign Fund IV, L.P. and Thomas
H. Lee Foreign Fund IV-B, L.P., which may also be deemed to be
beneficially owned by THL Equity Advisors IV, LLC, as their general
partner; (b) 251,772 shares are beneficially owned by the 1997 Thomas H.
Lee Nominee Trust; (c) 107,094 shares are beneficially owned by Thomas H.
Lee Charitable Investment L.P.; and (d) 4,790 shares are beneficially
owned by THL-CCI Limited Partnership, which may also be deemed to be
beneficially owned by THL Investment Management Corp. Mr. Lee may be
deemed to beneficially own these shares because he acts as (a) General
Director; (b) settlor and beneficiary; (c) General Partner; and (d) Chief
Executive Officer and sole shareholder, respectively, of these entities.
Mr. Lee disclaims beneficial ownership of all shares except for those
shares owned by the 1997 Thomas H. Lee Nominee Trust and except to the
extent of his pecuniary interest in those shares owned by Thomas H. Lee
Equity Fund IV, L.P., Thomas H. Lee Foreign Fund IV, L.P., Thomas H. Lee
Foreign Fund IV-B, L.P. and THL-CCI Limited Partnership. Also includes
5,000 shares which Mr. Lee has the right to acquire within 60 days of
February 25, 2000, through the exercise of stock options.
(2) Includes 580,000 shares of Common Stock that Mr. Deikel has the right to
acquire within 60 days of February 25, 2000, through the exercise of stock
options. Also includes 170,014 shares of Common Stock held by Mr. Deikel's
trusts and 3,385 shares of Common Stock held by Mr. Deikel's son's trust.
7
<PAGE>
(3) Includes 3,557 shares of Restricted Common Stock and 1,557,022 shares of
Common Stock that Mr. Zebeck has the right to acquire within 60 days of
February 25, 2000, through the exercise of stock options.
(4) Includes 30,000 shares of Common Stock that Mr. Anderson has the right to
acquire within 60 days of February 25, 2000, through the exercise of stock
options.
(5) Includes 40,000 shares of Common Stock that Mr. Trestman has the right to
acquire within 60 days of February 25, 2000, through the exercise of stock
options.
(6) Includes the following shares of Common Stock that may be acquired through
the conversion of Series C Preferred Stock: (a) 57,914 shares beneficially
owned by Mr. Harkins; and (b) 6,460 shares beneficially owned by the 1995
Harkins Gift Trust. Mr. Harkins disclaims beneficial ownership of the
Trust shares. Also includes 5,000 shares which Mr. Harkins has the right
to acquire within 60 days of February 25, 2000, through the exercise of
stock options.
(7) Includes the following shares of Common Stock that Mr. Boll has the right
to acquire within 60 days of February 25, 2000: 5,000 shares through the
exercise of stock options and 48,276 shares through the conversion of
Series C Preferred Stock.
(8) Includes the following shares of Common Stock that Mr. Hagerty has the
right to acquire within 60 days of February 25, 2000: 5,000 shares through
the exercise of stock options and 48,276 shares through the conversion of
Series C Preferred Stock.
(9) Includes 30,000 shares of Common Stock that Mr. Smith has the right to
acquire within 60 days of February 25, 2000, through the exercise of stock
options.
(10) Includes 20,000 shares of Common Stock that Mr. Cleary has the right to
acquire within 60 days of February 25, 2000, through the exercise of
stock options.
(11) Includes 5,000 shares of Common Stock that Mr. Hoff has the right to
acquire within 60 days of February 25, 2000, through the exercise of
stock options.
(12) Includes 2,854 shares of Restricted Common Stock and 206,500 shares of
Common Stock that Mr. Scaliti has the right to acquire within 60 days of
February 25, 2000, through the exercise of stock options.
(13) Includes 6,531 shares of Restricted Common Stock and 59,625 shares of
Common Stock that Mr. Wesselink has the right to acquire within 60 days
of February 25, 2000, through the exercise of stock options. Also
includes 300 shares of Common Stock held by Mr. Wesselink's son.
(14) Includes 4,167 shares of Restricted Common Stock and 63,125 shares of
Common Stock that Mr. Fox has the right to acquire within 60 days of
February 25, 2000, through the exercise of stock options. Also includes
2,000 shares of Common Stock held by Mr. Fox's spouse and 317 shares of
Common Stock held by Mr. Fox's children.
(15) Includes 2,251 shares of Restricted Common Stock and 63,375 shares of
Common Stock that Mr. Hoffman has the right to acquire within 60 days of
February 25, 2000, through the exercise of stock options.
(16) Includes 27,367 shares of Restricted Common Stock, 3,260,772 shares of
Common Stock that the directors and executive officers have the right to
acquire within 60 days of February 25, 2000, through the exercise of
stock options, and 19,155,831 shares through the conversion of Series C
Preferred Stock.
8
<PAGE>
- --------------------------------------------------------------------------------
Persons Owning More than Five Percent of Company's Common Stock
- --------------------------------------------------------------------------------
The following table sets forth information with respect to persons we know
to be the beneficial owner of more than 5% of our outstanding Common Stock on
February 25, 2000. We have based the information with respect to NewSouth
Capital Management, Inc. solely on a Schedule 13G report filed with the SEC on
February 14, 2000. We have based all other information upon Section 16
reporting under the Exchange Act and, with respect to accrued stock dividends
which are not reportable pursuant to Section 16, on our internal records. If
you wish, you may obtain these reports from the SEC or through the Internet via
one of the several sites that provide filings with the SEC on the EDGAR
database.
<TABLE>
<CAPTION>
Number of Shares Percent
Name and Address of Beneficial Owner Beneficially Owned(1) of Class
------------------------------------ --------------------- --------
<S> <C> <C>
Thomas H. Lee(2).......................... 18,999,905 32.9%
Thomas H. Lee Company
75 State Street
Boston, MA 02110
THL Equity Advisors IV, LLC(2)............ 18,631,249 32.5%
Thomas H. Lee Company
75 State Street
Boston, MA 02110
Thomas H. Lee Equity Fund IV, L.P.(2)..... 16,459,767 29.8%
Thomas H. Lee Company
75 State Street
Boston, MA 02110
NewSouth Capital Management, Inc. ........ 3,002,274 7.8%
1000 Ridgeway Loop Rd, Suite 233
Memphis, TN 38120
</TABLE>
- --------
(1) "Beneficial ownership" is a technical term broadly defined under the
Exchange Act to mean more than ownership in the usual sense. So, for
example, you beneficially own our Common Stock not only if you hold it
directly, but also if you indirectly (through a relationship, a position
as a director or trustee, or a contract or understanding) have (or share)
the power to vote the stock, or to sell it, or you have the right to
acquire it within 60 days. NewSouth Capital Management, Inc. has stated in
its 13G Report that it is an investment advisor managing the shares
reported for the benefit of other accounts.
(2) Thomas H. Lee's beneficial ownership includes the shares beneficially
owned by THL Equity Advisors IV, LLC and other affiliates of the Thomas H.
Lee Company. THL Equity Advisors IV, LLC's beneficial ownership includes
all of the shares beneficially owned by Thomas H. Lee Equity Fund IV,
L.P., the 569,215 shares beneficially owned by Thomas H. Lee Foreign Fund
IV, L.P. and the 1,602,267 shares beneficially owned by Thomas H. Lee
Foreign Fund IV-B, L.P.
9
<PAGE>
- --------------------------------------------------------------------------------
Compensation Tables and Compensation Matters
- --------------------------------------------------------------------------------
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
-------------------------------- ---------------------
Restricted Securities
Other Annual Stock Underlying All Other
Name and Principal Salary Bonus Compensation Awards Options Compensation
Position(*) Year ($)(a) ($)(b) ($)(c) ($)(d) (#)(e) ($)(f)
- ------------------ ---- -------- ---------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ronald N. Zebeck........ 1999 $681,827 $1,280,676 $123,286 $4,092,689 359,176 $364,537
President and Chief 1998 $587,212 $1,081,534 $ 81,409 $ 0 400,000 $ 47,626
Executive Officer 1997 $500,264 $ 800,000 $ 40,723 $ 0 400,000 $ 10,210
David D. Wesselink...... 1999 $300,000 $ 470,250 $136,792 $ 78,375 77,000 $348,815
Executive Vice President 1998 $ 11,538 $ 0 $ 1,086 $ 0 100,000 $ 0
Chief Financial Officer
Douglas L. Scaliti...... 1999 $217,987 $ 342,421 $ 56,352 $ 34,242 52,200 $ 98,837
Executive Vice President 1998 $171,355 $ 276,616 $ 35,699 $ 0 120,000 $ 19,982
Fee-Based Products 1997 $159,201 $ 225,000 $ 28,312 $ 0 20,000 $ 16,359
Joseph A. Hoffman....... 1999 $206,538 $ 399,107 $ 50,405 $ 27,009 27,200 $ 91,333
Executive Vice President 1998 $138,846 $ 262,656 $ 47,906 $ 0 60,000 $ 11,214
Consumer Credit Card
Marketing
Patrick J. Fox.......... 1999 $192,404 $ 350,000 $ 47,135 $ 50,000 25,200 $ 91,890
Senior Vice President, 1998 $138,467 $ 222,898 $ 24,259 $ 0 60,000 $ 11,338
Business Development
</TABLE>
- --------
* Mr. Zebeck commenced employment with Metris Direct, Inc. (formerly,
Fingerhut Financial Services Corporation) in March 1994, which later became
a subsidiary of the Company. Mr. Wesselink commenced employment with Metris
Direct, Inc. in December 1998. Mr. Scaliti commenced employment with Metris
Direct, Inc. in September 1995. Mr. Hoffman commenced employment with Metris
Direct, Inc. in April 1998. Mr. Fox commenced employment with Metris Direct,
Inc. in March 1998.
(a) Amounts in this column for the year 1997 include amounts reflecting a one-
time payout of vacation accrued due to a change in vacation policy. These
amounts are as follows: Mr. Zebeck, $29,110; and Mr. Scaliti, $5,987.
(b) Amounts in this column include the following: (1) 1999 signing bonuses of
$75,000 for Mr. Hoffman and $50,000 for Mr. Fox; and (2) 1998 signing
bonuses of $100,000 for Mr. Hoffman and $75,000 for Mr. Fox.
(c) Amounts reported under this column include perquisites such as auto
maintenance, auto allowance, and club dues and also include executive
medical reimbursement, tax preparation and spousal travel, and gross up
payments to pay income taxes on such amounts. In 1998, separate auto
maintenance and allowances and club dues (with respect to those executives
other than the CEO) were eliminated in favor of one perk allowance.
Amounts paid that represent more than 25% of total perquisites for each
named executive officer for each of the fiscal years above are as follows:
(1) 1999: Mr. Zebeck received a perk allowance of $37,200 and a tax gross-
up amount of $31,368; Mr. Wesselink received $57,792 for commuting
expenses and a tax gross-up amount of $50,807; Mr. Scaliti received a perk
allowance of $26,052 and a tax gross-up amount of $11,034; Mr. Hoffman
received a perk allowance of $26,052 and a tax gross-up amount of $8,866;
and Mr. Fox received a perk allowance of $26,052 and a tax gross-up amount
of $7,674; (2) 1998: Mr. Zebeck received a perk allowance of $37,100, club
dues of $20,869 and a tax gross up amount of $11,970 for those expenses;
Mr. Wesselink received a perk allowance of $1,086; Mr. Scaliti received a
perk allowance in the amount of $26,052; Mr. Hoffman received a perk
allowance of $14,561, moving
10
<PAGE>
expenses of $14,673 plus a gross up amount for taxes on such expenses in
the amount of $12,800; and Mr. Fox received a perk allowance in the amount
of $15,417, a spousal travel gross-up amount of $5,279 and a payment for
spousal travel gross-up amount tax of $3,028; and (3) 1997: Mr. Zebeck
received $34,800 as an auto allowance; and Mr. Scaliti received $25,594 as
an auto allowance.
(d) Amounts reported in this column represent the dollar value of a restricted
stock award granted to Mr. Zebeck on April 1, 1999 and also the dollar
value of the Company match of Restricted Stock Units made under the
Management Stock Purchase Plan.
(e) Amounts represent option grants to purchase the Company's Common Stock
under the Metris Companies Inc. Long-Term Incentive and Stock Option Plan.
(f) The amounts disclosed in this column include, for each of the years
listed: 1999: Supplemental Executive Retirement Plan (SERP) payments of
$330,846 for Mr. Zebeck, $339,372 for Mr. Wesselink, $83,207 for Mr.
Scaliti, $77,589 for Mr. Hoffman and $78,783 for Mr. Fox; Nonqualified
Deferred Restorative Retirement Plan payments of $4,200 for each of
Messrs. Zebeck, Wesselink and Scaliti, $2,873 for Mr. Hoffman and $2,026
for Mr. Fox; 401(k) matching contributions in the amount of $3,900 for
Mr. Zebeck, $0 for Mr. Wesselink, $5,000 for Mr. Scaliti, $3,719 for Mr.
Hoffman and $3,830 for Mr. Fox; a key person life insurance premium of
$6,603 for Mr. Zebeck; premiums for disability insurance and life
insurance in the amount of $14,187 for Mr. Zebeck, $4,864 for Mr.
Wesselink, $1,630 for Mr. Scaliti, $2,352 for Mr. Hoffman and $2,452 for
Mr. Fox; and qualified profit sharing matches in the amount of $4,800 for
Messrs. Zebeck, Scaliti, Hoffman and Fox and $379 for Mr. Wesselink. 1998:
Non-Qualified Deferred Compensation match of $10,000 for Messrs. Zebeck,
Scaliti, Hoffman and Fox. A $9,000 restorative match was paid to Messrs.
Zebeck and Scaliti because they were unable to participate in the
Company's 401(k) Plan. Mr. Wesselink, Hoffman and Fox were not eligible to
participate in the restorative match because they had not met the length
of service requirement. Premiums for disability insurance and life
insurance were in the amount of $7,969 for Mr. Zebeck, $0 for Mr.
Wesselink, $982 for Mr. Scaliti, $1,214 for Mr. Hoffman and $1,338 for Mr.
Fox. In addition, Mr. Zebeck received an unvested pension payout gross up
in the amount of $20,658 from the Fingerhut Pension Plan. 1997: These
amounts include a pension payout due to the suspension of the Fingerhut
pension plan, a 401(k) matching contribution, profit sharing payments made
to the 401(k) and premiums paid on term life insurance. For Messrs. Zebeck
and Scaliti, the Company made a payment of $4,800 to their 401(k) account
as part of a discretionary profit sharing contribution, which was made to
all employees in the amount of 3% of their recognized income in the Metris
Retirement Plan 401(k). For Messrs. Zebeck and Scaliti, the Company
matched their employee contributions to the 401(k) in the amount of $4,750
each. Mr. Scaliti received a pension payout due to suspension of the
Fingerhut pension plan in the amount of $6,441. Premiums paid on life
insurance for 1997 by the Company to Messrs. Zebeck and Scaliti were in
the amounts of $660 and $368, respectively.
11
<PAGE>
The following table shows information concerning stock options granted
during the fiscal year ended December 31, 1999, for the named executive
officers:
Option Grants in Last Fiscal Year
Individual Grants
<TABLE>
<CAPTION>
% of Total
Number of Securities Options Granted
Underlying Options to Employees Exercise Price Expiration Grant Date
Name Granted (#)(a) in 1999 ($/Share) Date Present Value (b)
- ---- -------------------- --------------- -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Ronald N. Zebeck........ 200 0.01% $25.16 1/4/09 $ 2,299
358,976 19.70% $20.19 4/1/09 $3,551,493
David D. Wesselink...... 77,000 4.23% $20.19 4/1/09 $ 761,792
Douglas L. Scaliti...... 200 0.01% $25.16 1/4/09 $ 2,299
52,000 2.85% $20.19 4/1/09 $ 514,457
Joseph A. Hoffman....... 200 0.01% $25.16 1/4/09 $ 2,299
27,000 1.48% $20.19 4/1/09 $ 267,122
Patrick J. Fox.......... 200 0.01% $25.16 1/4/09 $ 2,299
25,000 1.37% $20.19 4/1/09 $ 247,335
</TABLE>
- --------
(a) These options were granted under the Metris Companies Inc. Amended and
Restated Long-Term Incentive and Stock Option Plan and expire 10 years
after their grant date. The January 4, 1999 grant of 200 options vests in
full at the earlier of (a) January 4, 2002 or (b) when the price per share
of the Common Stock closes at or above $50 per share. The other options,
granted on April 1, 1999, vest as follows: (a) 50% of the grant in equal
increments over four years, from April 1, 2000 to April 1, 2003; and (b)
50% based on performance criteria.
(b) These dollar amounts are the result of calculations of the present value
of the grant at the date of grant using the Black-Scholes option pricing
model and the following assumptions: 0.1% dividend yield, 55.4% expected
volatility, 5.3% risk-free interest rate and six year expected life. The
actual gains, if any, on stock option exercises will depend on the future
performance of the Common Stock.
12
<PAGE>
The following table indicates for each of the named executive officers
information concerning the number and value of exercisable and unexercisable
in-the-money options as of December 31, 1999. No options on the Company's
Common Stock were exercised by any of the named executive officers.
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options
At 12/31/99 (#) at 12/31/99 ($)(1)
------------------- --------------------
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------------- --------------------
<S> <C> <C> <C> <C>
Ronald N. Zebeck........ 0 0 1,512,150 $48,185,086
959,176 $14,333,837
David D. Wesselink...... 0 0 0 $ 0
177,000 $ 2,774,558
Douglas L. Scaliti...... 0 0 200,000 $ 3,595,000
52,200 $ 807,977
Joseph A. Hoffman....... 0 0 60,000 $ 857,500
27,200 $ 420,539
Patrick J. Fox.......... 0 0 60,000 $ 857,500
25,200 $ 389,544
</TABLE>
- --------
(1) The value of unexercised in-the-money options represents the aggregate
difference between the market value on December 31, 1999, based on the
closing price of our Common Stock, as reported on the New York Stock
Exchange, Inc. and the applicable exercise prices and other amounts paid
to obtain the shares.
Retirement Plans
Metris Retirement Plan. In January, 1997, we adopted a defined contribution
profit sharing plan (the "Metris Retirement Plan"). The Metris Retirement Plan
stipulates that eligible employees may elect to contribute to the 401(k). We
match 50% of pretax contributions of up to 6% of recognized income. In
addition, the Metris Retirement Plan provides for a discretionary profit
sharing contribution, which, if declared, is made to accounts of employees with
at least one year of service. In 1999, we contributed, as a discretionary
profit sharing contribution, 3% of recognized income for eligible employees.
Deferred Compensation Plans. On March 1, 1998, we adopted a Deferred
Compensation Plan which covered those employees not eligible to participate in
the Metris Retirement Plan for fiscal year 1998. The Deferred Compensation
Plan, set up for selected management employees, provided that certain employees
may defer compensation of up to $10,000, with interest accruing on amounts
deferred. We matched such deferral. Deferral and matching did not continue in
1999, although amounts in the plan will remain in the investment plans.
Supplemental Executive Retirement Plan. In October, 1999, the Compensation
Committee adopted a Supplemental Executive Retirement Plan (the "SERP") that
covers our officers or other senior management employees who are selected for
participation by the Compensation Committee and the Chief Executive Officer.
The "SERP" is an account balance plan to which we make annual contributions
targeted to provide a specified benefit at retirement. Under the SERP, we will
pay a benefit to a participant whose employment relationship with us is
completely severed either (a) at age 65 or (b) if the participant has five
years of plan participation, at or after age 55. The annual retirement benefit
payable under the SERP is targeted to equal 60% of the average of the
participant's final five years of salary and bonus years with us. Upon a change
in control of the Company, a termination of the participant's employment will
be deemed to have occurred and, for purposes of determining eligibility for
benefits, a participant will be deemed to have reached the age of retirement
and
13
<PAGE>
completed five years of plan participation. If a participant dies before the
participant's employment terminates, the death will be treated as a termination
of employment and the participant will be deemed to have reached the age of
retirement and completed five years of plan participation. Benefits under the
SERP will be paid in fifteen annual installments, commencing no later than 60
days after the last day of the year in which the participant retires. The
calendar year 1999 Company contribution under the SERP for the Chief Executive
Officer and each of the other named executive officers who are participants are
as follows: Mr. Zebeck, $330,846; Mr. Wesselink, $339,372; Mr. Scaliti,
$83,207; Mr. Fox, $78,783; and Mr. Hoffman, $77,589. These contributions are
calculated based on actuarial assumptions regarding years of participation and
future investment return on participants account balances. We have assumed that
these officers will remain participants in the SERP until age 65.
Deferred Restorative Retirement Plan. On November 2, 1999, the Compensation
Committee adopted a Deferred Restorative Retirement Plan (the "DRRP") that is
limited to a select group of management and highly compensated employees of the
Company as a means of sheltering a portion of income from current taxation
while accumulating resources for future investments or retirement. The DRRP is
designed to make whole an employee whose benefits under the employer's
qualified retirement plan are limited by the application of Section 415 of the
Internal Revenue Code. Section 415 limits the amount of contributions that can
be made to a defined contribution plan on behalf of an employee and also limits
the benefits that can be funded through a defined benefit plan for an employee.
Under the DRRP, participants may defer up to 15% of their salary and bonus with
a maximum compensation level of $300,000. The plan will mirror the Metris
Retirement Plan 401(k), allowing for a 50% match on the first 6% of eligible
compensation deferred by the employee. The DRRP will also restore the
discretionary profit match if allocated under the Metris Retirement Plan for
compensation recognized above the Section 415 limit up to $300,000.
Bonus Plans
We have two bonus plans: an Amended and Restated Annual Incentive Bonus Plan
for Designated Corporate Officers and a Management Incentive Bonus Plan. To
date, only our Chief Executive Officer, Mr. Zebeck, and our Chief Financial
Officer, Mr. Wesselink, have participated in the Amended and Restated Annual
Incentive Bonus Plan for Designated Corporate Officers, although the
Compensation Committee can select other participants from those employees who
are Executive Vice Presidents or Senior Vice Presidents. Our other executives
and employees participate in the Management Incentive Bonus Plan.
The Amended and Restated Annual Incentive Bonus Plan for Designated
Corporate Officers is designed to ensure the tax deductibility of the bonus we
pay to our most highly compensated executives. The maximum bonus payable under
this plan is determined by performance factors set by the Compensation
Committee with respect to performance targets that have been approved by
shareholders. The plan was originally approved by shareholders at the 1997
Annual Meeting, and amendments to such plan were approved by the shareholders
at the 1998 and 1999 Annual Meetings.
Payouts under the Management Incentive Bonus Plan are based upon two
components: Our performance as measured by targets selected by the Compensation
Committee and management objectives personally set for each employee and
approved by the Chief Executive Officer. The weight accorded each component
depends upon the position level of the employee. The more senior the position,
the more likely an employee's actions and decisions directly affect our
performance. Such employees' bonuses will depend heavily upon reaching
objective targets of our performance. Less senior employees' bonuses will
instead depend more heavily upon reaching individually tailored goals.
Amended and Restated Long-Term Incentive and Stock Option Plan
Under our Amended and Restated Long-Term Incentive and Stock Option Plan,
our employees may be granted stock options, stock appreciation rights or other
stock based awards (including restricted stock awards, performance-based stock
awards and cash awards). The Compensation Committee may make individual awards
or a general grant to employees. This stock-based plan was approved by
shareholders in 1997, and amendments to such plan were approved by the
shareholders in 1998 and 1999.
14
<PAGE>
Management Stock Purchase Plan
On May 11, 1999, our shareholders approved a Management Stock Purchase Plan,
which allows a participant to defer up to 50% of a bonus received under the
Management Incentive Bonus Plan. Any employee whose job title is Senior Vice
President or higher and who participates in the Management Incentive Bonus Plan
is eligible to participate.
The amount deferred is credited to a stock purchase account which we will
match at a rate equal to $1 for every $3 contributed by the participant. The
participant's contribution is immediately vested and our match vests on the
third anniversary of the end of the bonus calendar year. Unless a participant's
employment is terminated, amounts contributed to the stock purchase account
must remain in the account for three years (two years in the case of
contributions during the first year of the MSPP).
Change of Control Severance Agreements
We have entered into Change of Control Severance Agreements with key
employees, including each of the named executive officers in this Proxy
Statement. Each agreement continues until the Board sets an expiration date for
such agreement, which action must occur prior to a change of control. An
expiration date may not be earlier than 30 days after the employee receives
notice of such date.
These agreements are intended to provide continuity of management in the
event of a change of control. Each agreement provides that the covered employee
be assured of certain salaries and compensation while employed during the two-
year period after a change of control (the "Post Change Period"), and also
provides severance payments if the Company terminates employment of the covered
employee, other than for death, disability or cause, or if such employee
terminates his or her employment for "good reason," as defined in the
agreement.
While employed during the Post-Change Period, each covered employee will be
paid an annual salary at least equal to 12 times such employee's highest
monthly base salary paid during the 12-month period prior to the change of
control event (the "Guaranteed Base Salary"). In addition, the covered employee
will be entitled to participate in all incentive compensation, retirement and
welfare plans applicable to peer executives at the Company, but in no event
shall such incentive compensation, retirement and welfare plans be on terms
less favorable to the employee than the most favorable provided to the employee
under plans in effect 90 days prior to the change of control. All outstanding
stock options granted to the covered employee will become fully vested upon the
occurrence of a change of control event. To the extent such options are
forfeited, the covered employee will be entitled to receive a cash payment
equal to the aggregate difference between the fair market value of Company
stock underlying such forfeited options and the exercise price to purchase such
stock.
The severance payments to be made if the employee is terminated without
cause or if he or she resigns with "good reason" during the Post-Change Period
include the following:
(a) an amount equal to the Guaranteed Base Salary and accrued vacation
through the applicable termination date;
(b) a lump sum payment in cash equal to a certain number times the covered
employee's Guaranteed Base Salary plus the highest annual bonus paid
to such covered employee during the preceding two years (the
"Guaranteed Bonus");
(c) a pro rata Guaranteed Bonus for the year of termination;
(d) all deferred amounts under any Company non-qualified deferred
compensation or pension plan, together with accrued but unpaid
earnings thereon;
(e) an amount equal to the unvested portion of the executive officer's
accounts, accrued benefits or payable amounts under any qualified
plan, and certain pension, profit sharing and retirement plans we
maintain; and
15
<PAGE>
(f) an amount equal to fees and costs charged by an outplacement firm.
In addition, we have agreed, for a certain year period following the
applicable executive officer's termination date, to continue to provide to such
executive officer certain welfare benefits including, but not limited to,
medical, dental, disability, salary continuance, individual life and travel
accident insurance on terms at least as favorable as provided to other
executives during the 90 day period preceding the Change of Control event.
Each agreement provides that we shall make an additional "gross up payment"
if the covered employee would receive a payment deemed an "excess parachute
payment" under the Internal Revenue Code of 1986, as amended (the "Code") to
pay any excess tax pursuant to Section 4999 of the Code. We will not be able to
deduct any excess parachute payments, if any, made to executive officers under
the agreements nor any payment of any "gross up" for payment of the tax.
Each covered employee signing a Severance Agreement agrees for a period of
years, equal to the number by which his or her Guaranteed Base Salary and
Guaranteed Bonus is multiplied for the determination of severance, not to
compete with us. The number of years and the number by which the Guaranteed
Salary and Guaranteed Bonus are multiplied for each of the named executive
officers are as follows:
<TABLE>
<CAPTION>
Name Number
---- ------
<S> <C>
Zebeck............................................................. 3
Wesselink.......................................................... 2
Scaliti............................................................ 2
Hoffman............................................................ 2
Fox................................................................ 2
</TABLE>
A "change of control" under the agreements occurs if any of the following
events occur:
(a) "any person" as defined in the Exchange Act acquires beneficial
ownership, as defined in the Exchange Act, of more than 30% of the
Common Stock of the Company, except under Mr. Wesselink's agreement, in
which the ownership percentage is 50%;
(b) individuals who constitute the Board prior to a change of control
ceases to constitute a majority of the Board; or
(c) certain corporate reorganizations, including certain mergers, sale of
substantially all of the assets or liquidation or dissolution occurs.
The issuance of the Series C Preferred Stock to the Thomas H. Lee Company
and its affiliates on June 1, 1999, constituted a change of control under these
agreements. Mr. Zebeck waived this "change of control" under his agreement.
Key Person Life Insurance
We provide an insurance death benefit for Mr. Zebeck in the amount of
$25,000,000. We are the beneficiary of $20,000,000 and Mr. Zebeck's spouse is
the beneficiary of $5,000,000.
16
<PAGE>
- --------------------------------------------------------------------------------
Performance Graph
- --------------------------------------------------------------------------------
The following graph compares the cumulative total shareholder return on the
Company's Common Stock since October 24, 1996 (the time of our initial public
offering), with the cumulative return for the S&P 500 Index and the S&P
Consumer Finance Index over the same period, assuming the investment of $100 on
October 24, 1996 and reinvestment of gross dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
TOTAL RETURN 10/24/96 12/31/96 12/31/97 12/31/98 12/31/99
- ------------ -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Metris Common Stock................ $100 $150.00 $214.25 $315.05 $447.32
S&P 500 Index...................... $100 $107.04 $142.81 $184.02 $222.02
S&P Consumer Fin. Index............ $100 $108.89 $146.78 $197.92 $205.05
</TABLE>
17
<PAGE>
- --------------------------------------------------------------------------------
Compensation Committee Report on Executive Compensation
- --------------------------------------------------------------------------------
Compensation Policies
The Board has delegated to the Compensation Committee (the "Committee") the
authority to review, set and administer our compensation plans, subject to
ratification by the full Board as to compensation paid to the President and
Chief Executive Officer. The Committee is comprised entirely of non-employee
directors.
The Committee has established compensation guidelines to achieve four basic
goals:
. promote stock ownership for key executives to align their compensation
with shareholder interests;
. allow us to attract, retain and motivate executives of the highest
caliber;
. align compensation directly with shareholder market value through
earnings per share performance goals and accomplishment of team or
individual objectives; and
. establish annual incentives based on aggressive performance goals.
For 1999, these policies were achieved through a compensation program
consisting of base salary and short-term incentive compensation in the form of
bonuses and long-term stock options.
Base Salaries of Executive Officers other than the Chief Executive Officer
Each year the Committee reviews base salaries of the senior officers,
including the executive officers named in this Proxy Statement in the section
entitled "Compensation Tables and Compensation Matters." In determining base
salaries, the Committee considers the range of salaries paid to similar
officers at comparable companies. In addition, the Committee makes subjective
judgments concerning individual performance of the executive officer.
This year, the Committee commissioned an external human resources consulting
firm to evaluate external market comparisons. This evaluation demonstrated that
we pay below market as to base salaries, but slightly higher than market when
bonuses are considered. This is consistent with our goal to reward employees
based upon our performance.
Bonuses Paid to Executive Officers other than the Chief Executive Officer
In 1999, other than the Chief Executive Officer, the executive officers and
other corporate officers and employees participated in the 1999 Metris
Companies Inc. Management Incentive Plan ("Incentive Plan"). Payouts under the
Incentive Plan for 1999 were based on two components: (1) earnings per share we
achieved; and (2) management objectives personally set for each of the
employees. Senior employee bonuses are largely dependent on achievement of
earnings per share. For the named executive officers, 85% of their bonus was
dependent upon attaining the earnings per share objective.
Stock Options for Executive Officers other than the Chief Executive Officer
In 1999, all executive officers and other key employees were granted non-
qualified stock options under our Amended and Restated Long-Term Incentive and
Stock Option Plan. During the year, options played a significant role in
attracting superior employees. In addition, options were granted to executives
and employees whose individual performances demonstrated continued excellence.
The options granted in the past year generally provided that such options
would expire in ten years. The January 4, 1999 grant of options vests in full
at the earlier of (a) January 4, 2002 or (b) when the price per share of the
Common Stock closes at or above $50 per share. The April 1, 1999 grant of
options vests as follows: (a) 50% of the grant in equal increments over four
years from April 1, 2000 to April 1, 2003; and
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(b) 50% based on performance criteria. All stock options contained an exercise
price based upon the fair market value of the Common Stock on the date of
grant. The Committee uses the closing price of the stock as reflected on the
New York Stock Exchange, Inc. on the day before the grant date to determine the
fair market value.
Compensation of the Chief Executive Officer
Although the full Board must ratify any Committee decision concerning the
compensation paid to Ronald N. Zebeck, the President and Chief Executive
Officer, only the Committee may actually set such compensation. Therefore, the
compensation paid to Mr. Zebeck must have the approval of the majority of the
four non-employee directors.
The Committee considered an analysis of proxy statements prepared by an
independent human resources consulting firm that found that we needed to adjust
our Chief Executive Officer's compensation in order to achieve parity and
competitiveness with other companies. Effective March 1, 1999, the Board
increased Mr. Zebeck's base salary from $700,000 to $800,000, a 14.3% increase.
At the beginning of 1999, Mr. Zebeck met with the Committee to discuss his
goals and objectives for the coming year and to set the performance goals under
our Annual Incentive Plan. Based upon such discussion, the Committee decided
that Mr. Zebeck's bonus would be tied entirely to certain targets for our
earnings per share. For the year 1999, the earnings per share targets were
exceeded by a significant margin. The Committee awarded Mr. Zebeck $1,280,676
as a bonus under the Annual Incentive Plan.
In April of the past year, the Committee also authorized grants of options
to Mr. Zebeck to purchase 358,976 shares of the Company's Common Stock. The
exercise price was set at the fair market value in the same manner as grants
made to other employees. The vesting schedule is the same as set forth above
for other executive officers.
In May, 1999, the Committee authorized us to enter into an agreement with
Mr. Zebeck designed to provide him incentives to continue long-term service as
a key employee of Metris in consideration of a $5 million loan and other
benefits. The following are the significant terms and conditions of the
agreement:
Loan. We have loaned Mr. Zebeck $5 million for a five-year term with annual
interest of 6.25% compounded quarterly.
Bonus Payment. If Mr. Zebeck remains employed by us until May 17, 2004, or
if his employment by us is terminated before that date due to (a) his death or
disability or (b) for any reason other than for cause, we will pay him a bonus
equal to (1) the amount of interest accrued on the loan, plus (2) the gross-up
amount of taxes relating to his receipt of the interest amount.
Option Reload. The agreement also provides that on the date of each exercise
of the options to purchase 1,312,150 shares of our Common Stock that Mr. Zebeck
held at the time of the agreement, he will be granted a new non-qualified stock
option under our Amended and Restated Long-Term Incentive and Stock Option Plan
to purchase the number of whole shares that he instructs us to withhold as
payment for the exercise price and taxes. The exercise price of the new, or
replacement, option will be the fair market value of the withheld shares on the
date that Mr. Zebeck exercises the original option. The new options vest on the
fifth anniversary of the date that they are granted, provided that Mr. Zebeck
retains ownership of at least 25% of the aggregate number of shares received by
him upon the exercise of the original options and any replacement options. If,
prior to the fifth anniversary of the grant of any replacement option, he no
longer owns at least that number of shares, Mr. Zebeck will forfeit any
unexercised remaining replacement options.
Restricted Stock Award. Under this agreement, Mr. Zebeck was awarded 200,000
shares of Restricted Common Stock. Mr. Zebeck may not transfer the stock until
March 31, 2004 and he will forfeit the stock to us
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if his employment is terminated prior to that date (a) by us for cause or (b)
by Mr. Zebeck for any reason other than his death or disability.
Policy on Deductibility of Compensation
Under Section 162(m) of the Internal Revenue Code, we are generally
precluded from deducting compensation in excess of $1 million per year for our
chief executive officer and the next four highest paid executive officers,
unless payments are made under qualifying performance based plans.
The Committee generally intends to pursue a strategy of maximizing the
deductibility of compensation paid to executives. However, the Committee
reserves the right to take actions it considers to be in our best interest,
including the authorization of compensation without regard to deductibility.
<TABLE>
<S> <C> <C> <C>
JOHN A. CLEARY LEE R. ANDERSON, SR. DAVID V. HARKINS FRANK D. TRESTMAN
Chairman Member Member Member
</TABLE>
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Proposal One: Election of Director
- --------------------------------------------------------------------------------
How is Our Board Structured?
Our Amended and Restated Certificate of Incorporation provides that
directors, other than directors who may be elected by any series of Preferred
Stock or any other securities of the Company, shall be divided into three
classes, as nearly equal in number as possible. At our 1999 Annual Meeting of
Shareholders, our shareholders elected two directors to serve as Class One
directors for a three-year term. This year, the holders of our Common Stock
will elect one director to serve as a Class Two director for a three-year term
and next year will elect three directors to serve as Class Three directors for
a three-year term. When each class is up for reelection, the nominees for such
class will be nominated for a three-year term. These provisions create a
staggered board. With a staggered board, the Board will always be comprised of
directors having experience with us. The membership of each of the classes is
set forth below.
Class One Directors : Serving Until 2002
Lee R. Anderson, Sr. (age 60, a director since 1997), is Chairman and Chief
Executive Officer of the API Group, Inc. located in St. Paul, Minnesota, a
group of 21 separate construction, manufacturing, fire protection and material
distribution companies operating out of 86 offices in the United States, Canada
and Great Britain.
John A. Cleary (age 68, a director since 1998) was the Chief Executive
Officer of Donnelley Marketing, Inc. from 1979 until 1993. Donnelley Marketing,
Inc. was a division of the Dun and Bradstreet Corporation until 1991 when it
was acquired by a group of investors and senior management. Mr. Cleary
continued as Chief Executive Officer until 1993 when he was elected as Vice
Chairman of its Board of Directors until 1996 when First Data Corporation
acquired the company. Mr. Cleary continued as a senior advisor and consultant
to the company. In 1996, Mr. Cleary founded a marketing and consumer privacy
consulting firm, John Cleary Enterprises, of which he is President and which
has no affiliation with the Company. Mr. Cleary is also a director of
SoundWater, Inc., a non-profit Stamford, Connecticut based environmental
education organization dedicated to the preservation and protection of Long
Island Sound. Mr. Cleary was also a director of The Direct Marketing
Association from 1985 to 1996, and served as the Chairman of its Board from
1990 to 1991.
Class Two Director: This Year's Board Nominee
To Be Elected by Holders of Common Stock
The Board has selected the following director to be placed in Class Two, who
is the nominee for election at the Annual Meeting:
Derek V. Smith (age 45, a director since 1997) has been President and Chief
Executive Officer of ChoicePoint Inc., a company formed by the spin-off of the
Insurance Services Group from Equifax, Inc., since August, 1997. Mr. Smith was
formerly an Executive Vice President with Equifax, responsible for its
Insurance Services Group. Mr. Smith had been with Equifax since 1984. Mr. Smith
also currently serves as Chairman of the Board of ChoicePoint Inc. and is a
director of The Chief Executive Leadership Institute.
Class Three Directors: Serving Until 2001
Walter Hoff (age 47, a director since 1999) is the President and Chief
Executive Officer of NDC Health Information Services, the largest operating
division of National Data Corporation. Prior to joining National Data
Corporation, Mr. Hoff was an Executive Vice President of First Data Corporation
from 1991 to 1997, with responsibility for First Data Card Services Group. Mr.
Hoff served as Chief Financial Officer and Executive Vice President of American
Express Information Services Corporation (predecessor to First Data
Corporation) from 1989 to 1991.
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Frank D. Trestman (age 65, a director since 1996) has been President of
Trestman Enterprises, an investment and business development firm, for the past
five years. He has been a consultant to McKesson Corporation and is the former
Chairman of the Board and Chief Executive Officer of Mass Merchandisers, Inc.,
a distributor of non-food products to grocery retailers and a former subsidiary
of McKesson Corporation. Mr. Trestman is also a director of Insignia Systems,
Inc. and Best Buy Co., Inc. and serves on the Board of Governors of Abbott
Northwestern Hospital.
Ronald N. Zebeck (age 45, a director since 1996) is President and Chief
Executive Officer of the Company. He has been President of a subsidiary of the
Company since March 1994, and has served as Chairman of the Board of Direct
Merchants Credit Card Bank, National Association, a subsidiary of the Company,
since July 1995. Mr. Zebeck was Managing Director, GM Card Operations of
General Motors Corporation from 1991 to 1993, Vice President of Marketing and
Strategic Planning of Advanta Corporation (previously known as Colonial
National Bank USA) from 1987 to 1991, Director of Strategic Planning of TSO
Financial (later Advanta Corporation) from 1986 to 1987, and held various
credit card and credit-related positions at Citibank affiliates from 1976 to
1986. He is also a director of MasterCard International, Inc.
The persons named in the enclosed proxy intend to vote the proxy for the
election of the nominee on the proxy card unless you indicate on the proxy card
that your vote should be withheld. The nominee elected as a director will
continue in office until his successor has been elected and qualified or until
his death, resignation or retirement. We expect the nominee for election as a
director to be able to serve. If he is not able to serve, proxies may be voted
for a substitute.
The Board recommends a vote FOR the election of Derek V. Smith to the Board.
In addition to the maximum of seven directors who may be elected by the
holders of our Common Stock, the holders of our Series C Preferred Stock have
the right to elect four directors. The directors elected by the holders of our
Series C Preferred Stock serve for one-year terms. The current term expires at
the Annual Meeting. The following persons are both the current directors
representing the holders of our Series C Preferred Stock and the nominees for
election to terms expiring at the 2001 Annual Meeting:
Thomas H. Lee (age 56) founded the Thomas H. Lee Company in 1974 and since
that time has served as its President. The Thomas H. Lee Company is a Boston-
based private equity firm which focuses on investments in growth companies.
From 1966 through 1974, Mr. Lee was with First National Bank of Boston where he
directed the bank's high technology lending group from 1968 to 1974. Mr. Lee is
also director of Big Flower Holdings, Inc., Finlay Fine Jewelry Corporation,
First Security Services Corporation, Miller Import Corporation, Safelite Glass
Corporation, The Smith & Wollensky Restaurant Group, Inc., Vail Resorts, Inc.
and Wyndham International, Inc. Mr. Lee is an individual general partner of ML-
Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts)
II, L.P. Mr. Lee also serves as Chairman of T.H. Lee Mezzanine II, the
Administrative General Partner of Thomas H. Lee Advisors II, L.P., which is the
sole limited partner of the Managing General Partner of ML-Lee Acquisition Fund
II, L.P. and ML-Lee Acquisition Fund (Retirement Accounts) II, L.P.
David V. Harkins (age 59) has been affiliated with the Thomas H. Lee Company
since its founding in 1974 and currently serves as Senior Managing Director. In
addition, he has over 30 years experience in the investment and venture capital
industry with the John Hancock Mutual Life Insurance Company, where he began
his career, as well as TA Associates and Massachusetts Capital Corporation. Mr.
Harkins also founded National Dentex Corporation and serves as Chairman of the
Board. He is currently a Director of Conseco Inc., Cott Corp., Fisher
Scientific International Inc., Freedom Securities Corporation, Stanley
Furniture Company, Inc. and Syratech Corp. Mr. Harkins also serves as Senior
Vice President and Trustee of T.H. Lee Mezzanine II, the Administrative General
Partner of Thomas H. Lee Advisors II, L.P., which is the sole limited partner
of the Managing General Partner of ML-Lee Acquisition Fund II, L.P. and ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., Principal Managing Director of
TH Lee Putnam Capital Advisors, LLC and Thomas H. Lee
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Advisors, LLC, President of THL Fund IV Bridge Corp. and THL Investment
Management Corp., and Vice President of THL Equity Holdings III, Inc.
C. Hunter Boll (age 44) joined the Thomas H. Lee Company in 1986 and
currently serves as Managing Director. From 1984 through 1986, Mr. Boll was
with The Boston Consulting Group. From 1977 through 1982, he served as an
Assistant Vice President, Energy and Minerals Division of Chemical Bank. Mr.
Boll is a Director of Big V Supermarkets, Inc., Cott Corp., Freedom Securities
Corporation, The Smith & Wollensky Restaurant Group, Inc., TransWestern
Publishing, L.P. and United Industries, Inc. Mr. Boll is also a Vice President
and Trustee of T.H. Lee Mezzanine II, the Administrative General Partner of
Thomas H. Lee Advisors II, L.P., which is the sole limited partner of the
Managing General Partner of ML-Lee Acquisition Fund II, L.P. and ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P.
Thomas M. Hagerty (age 37) joined the Thomas H. Lee Company in 1988 and
currently serves as Managing Director. Prior to joining the Lee Company, Mr.
Hagerty was in the Mergers and Acquisitions Department of Morgan Stanley & Co.
Incorporated. Mr. Hagerty is a director of ARC Holdings, Cott Corp., Freedom
Securities Corporation and Syratech Corp. Mr. Hagerty is also a Vice President
of T.H. Lee Mezzanine II, the Administrative General Partner of Thomas H. Lee
Advisors II, L.P. which is the sole limited partner of the Managing General
Partner of ML-Lee Acquisition Fund II, L.P. and ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P.
- --------------------------------------------------------------------------------
Proposal Two: Approval of an Increase in the Number of Shares
Reserved for Issuance
Pursuant to the Amended and Restated Long-Term Incentive and Stock Option Plan
- --------------------------------------------------------------------------------
We are asking for your approval of an increase in the number of shares of
the Company's Common Stock to be reserved for issuance under our Amended and
Restated Long-Term Incentive and Stock Option Plan (the "Plan") from 8,000,000
to 10,000,000.
The Plan was first approved by our shareholders in 1997, and amendments to
the Plan were approved by our shareholders in 1998 and 1999.
The text of the Plan is set forth in the Appendix delivered with this Proxy
Statement. The following is intended to be a summary of the Plan's principal
terms and does not purport to be a complete statement of its terms. It is
subject to, and qualified in its entirety by, reference to the Plan in the
Appendix.
What is the Purpose of the Plan?
The purposes of the Plan are specifically to stimulate the efforts of our
employees and to align their interest with the interests of shareholders.
Why Do We Need Additional Shares?
We are able to issue up to 8,000,000 shares of Common Stock under the Plan.
The number of shares available at any time is subject to adjustment in the
event of stock splits, stock dividends and other situations. As of February 29,
2000, we have issued or granted options to purchase 7,548,854 shares under the
Plan.
It is important that we maintain our current stock option program to remain
competitive. We have extended our stock option program to employees at all
levels of our organization: in 1999, we introduced a broad-based option
program, offering all employees options to purchase 200 shares. We also want to
continue to effectively use equity-based compensation as a tool to align
employees' interests with those of shareholders.
Furthermore, we believe that the increase that we are requesting is
appropriate, in consideration of our actual equity position, which includes not
only Common Stock but also Series C Preferred Stock, and the
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dilution that would result from the conversion of the Preferred Stock. If the
holders of our Series C Preferred Stock chose to convert their shares at this
time, the number of shares of Common Stock currently outstanding would increase
by approximately 50% to nearly 60 million.
Who is Eligible to Participate Under the Plan?
Our Compensation Committee selects participants in the Plan from all of our,
and our subsidiaries', full and part-time employees, consultants or independent
contractors. Only full or part-time employees, however, are eligible to receive
incentive stock options. Currently, we employ approximately 3,400 full and
part-time employees. A participant may not receive grants of awards under the
Plan if such awards would be based upon shares in excess of 1,350,000 shares in
any calendar year.
Who Administers the Plan?
The Compensation Committee administers the Plan. Currently, the Compensation
Committee consists of four persons appointed by the Board, all of whom are
"Non-Employee Directors" under Rule 16b-3 of the Exchange Act and "outside
directors" under Section 162(m) of the Internal Revenue Code. The Board may
fill vacancies, add members or remove members provided there are at least two
members and that all members are disinterested persons or outside directors.
The Compensation Committee has the authority to: (1) determine the purchase
price of the Common Stock covered by an award; (2) determine the participants;
(3) determine times at which such option or awards may be granted; (4)
determine the form of payment to be made upon exercise of any award; (5)
determine the terms of exercise of any options or award; (6) accelerate the
time at which any option or award may be exercised; (7) modify the terms of any
award prior to the execution of an agreement and to do so after the execution
of an agreement with the grantee's consent; (8) interpret the Plan or any
agreement regarding an award; (9) prescribe rules regarding the Plan; and (10)
make all other determinations necessary or advisable. The Compensation
Committee will determine the terms of awards and may include provisions for
early vesting or other benefits due to any change of control as the Committee
may define such terms in an agreement. Such provisions could have an anti-
takeover effect.
When Does the Plan Terminate?
The Plan continues in effect until all shares of Common Stock available for
issuance have been issued under the Plan, or until March 19, 2009, whichever is
earlier. The Plan may be terminated at such earlier time as the Board may
determine.
What are the Awards That May be Made Under the Plan?
The Plan provides for various types of awards (the "Awards") including the
following: stock options ("Options"); stock appreciation rights ("SARs");
shares that are restricted from disposition until the participant meets certain
conditions ("Restricted Stock"); and performance awards that may be payable in
cash or Common Stock ("Performance Awards").
Options may be either incentive stock options ("ISOs") or nonqualified stock
options ("NQSOs"). For ISOs and for NQSOs that are intended to qualify as
qualified performance based compensation under Section 162(m) of the Internal
Revenue Code, the option price will be no less than the fair market value of
the Common Stock at the time of grant. ISOs will meet all requirements of
Section 422 of the Internal Revenue Code. Except for these restrictions
relating to ISOs, the Compensation Committee will determine all the terms of
Options.
SARs are the right to receive an amount equal to the appreciation in value
of the shares upon which the SARs are based from the time the SAR is awarded
until the grantee elects to receive payment. Participants who
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<PAGE>
elect to receive payment of a SAR will receive an amount in cash, Common Stock
or any combination of cash and Common Stock, as determined by the Committee. No
material changes are being made with respect to SAR Awards.
Restricted Stock is subject to forfeiture until certain conditions have been
fulfilled and a period of time has elapsed. Grants of Restricted Stock shall be
made at such cost as the Compensation Committee shall determine and may be
issued for no monetary consideration, subject to applicable law. Such shares
are non-transferable until all restrictions have been satisfied. The grantee
will be entitled to voting and dividend rights with respect to the Restricted
Stock from the date of grant.
Performance Awards may be payable in cash or Common Stock. Such awards will
be paid if performance goals established by the Committee are met by the
grantee within periods set by the Committee. These periods may be shorter than
the one year used in our other bonus plans. If the Committee chooses to make an
award that will constitute performance based compensation pursuant to Section
162(m) of the Internal Revenue Code, the Committee will select a performance
target based upon one or more of the following performance goals: consolidated
pre-tax earnings; net revenues; net earnings; operating income; earnings before
interest and taxes; cash flow; return on equity; return on net assets employed;
or earnings per share. Performance Awards payable in Common Stock may not
exceed the share limitation for any one person set forth above. Performance
Awards payable solely in cash and not involving the issuance of shares or a
SAR, will not exceed $6,000,000 to any one person in the aggregate for any
three year period. The Plan has provisions concerning Performance Awards by
setting forth specific performance goals as set forth herein and providing a
limitation on Performance Awards payable solely in cash.
The Committee may grant awards in tandem. However, no Award except a SAR may
be granted in tandem with an ISO.
Upon the exercise of an Option or in the case of any other Award requiring a
payment to us, payment may be made either (1) in cash or (2) with the consent
of the Committee (a) by surrender of all or any part of an Award; (b) by the
tender to us of Common Stock having a fair market value equal to the amount due
to us; (c) in other property; (d) any combination of the foregoing; or (e) in
cash, by a broker dealer acceptable to us to whom the participant has delivered
an irrevocable notice of exercise. At the time any Award granted under the Plan
is distributed or exercised, we may withhold, in cash or shares of Common
Stock, any amount necessary to satisfy withholding requirements applicable to
such distribution.
Awards are not transferable other than by will or pursuant to the laws of
descent and distribution. Awards are exercisable during the grantee's lifetime
only by the grantee.
What are the Principal Federal Tax Consequences?
The following discussion summarizes the Federal income tax consequences to
participants who may receive awards under the Plan and to us arising out of the
grant of such awards.
Incentive Stock Options. A participant will not realize taxable income upon
the grant or exercise (except for purposes of the alternative minimum tax) of
an ISO. If the participant holds the shares acquired on the exercise of an ISO
for two years from the date of grant and one year after the transfer of such
shares to the participant, he or she will recognize a long-term capital gain or
loss upon their subsequent sale or exchange. In such case, we will not be
entitled to a tax deduction. If a participant does not hold the shares acquired
on the exercise of an ISO for that holding period, he or she will recognize
ordinary income in the year of disposition of such shares equal to the excess
of (a) the lesser of (1) the amount realized upon such disposition and (2) the
fair market value of such shares on the date of exercise over (b) the exercise
price. To the extent that the amount realized on such sale or exchange exceeds
the market value of the shares on the date of the ISO exercise, the participant
will recognize capital gains. We will be entitled to a tax deduction in the
amount of the ordinary income reportable by the participant. The excess of the
fair market value on the date of exercise of an
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ISO of the shares acquired over the exercise price may in certain circumstances
constitute alternative minimum taxable income.
Nonqualified Stock Options. Upon the grant of an NQSO issued at fair market
value, a participant will not be in receipt of taxable income. Upon exercise of
such stock option, a participant will be in receipt of ordinary income in an
amount equal to the excess of the fair market value of the acquired shares over
their exercise price. We will be entitled to a tax deduction, in the year of
such exercise, equal to the amount of such ordinary income.
Stock Appreciation Rights. Upon the grant of SARs, a participant will not be
in receipt of taxable income. Upon the exercise of SARs, a participant will be
in receipt of ordinary income in an amount equal to any cash payment and the
market value of any shares distributed. We will be entitled to a tax deduction
equal to the income reportable by the participant, provided that the exercise
price was equal to the fair market value of stock at the date of grant.
Restricted Stock and Performance Awards in Shares. Grantees of Restricted
Stock and Performance Awards payable in shares do not recognize income at the
time of grant. However, when shares of Restricted Stock are no longer subject
to a substantial risk of forfeiture or when shares awarded as Performance
Awards are paid, grantees recognize ordinary income in an amount equal to the
fair market value of the stock less, in the case of Restricted Stock, the
amount paid, if any, for the shares. Alternatively, the grantee of Restricted
Stock may elect to recognize income upon the grant and not at the time the
restrictions lapse. We are entitled to deduct an amount equal to the ordinary
income recognized by the grantee unless prohibited by any restrictions of
Section 162(m) of the Code regarding certain highly compensated officers.
Cash Awards and Dividends. Cash awards and dividends are taxable as ordinary
income when paid. We are entitled to deduct the amount of a cash award (unless
restrictions under Section 162(m) of the Code apply) and dividends on
Restricted Stock that has not yet been recognized as income when such amounts
are paid to the recipient.
May the Plan be Amended Without Shareholder Approval?
Yes, the Board may amend or discontinue the Plan, at any time; provided,
however, no amendment of the Plan shall occur without shareholder approval that
would: (a) violate the rules or regulations of the New York Stock Exchange,
Inc., or any other securities exchange applicable to us; or (b) cause us to be
unable to grant ISOs. No amendment or termination shall adversely impair any
Award granted before such amendment or termination without the grantee's
consent.
What Benefits Do Participants Receive?
It is not possible to determine the benefits to be received by participants.
The Plan provides that Awards are at the discretion of the Committee, and
therefore, Awards are not determinable. The value of the Awards is not
determinable. Moreover, the value of the Awards is dependent upon market
volatility and other factors that cannot be predicted at this time. However,
Awards made under the Plan to the named executive officers for the past fiscal
year are set forth in this Proxy Statement in the table designated "Option
Grants in Last Fiscal Year" appearing on page 12 of this Proxy Statement.
The Board recommends a vote FOR the above proposal to approve an increase
in the number of shares reserved for issuance pursuant to the Amended and
Restated Long-Term Incentive and Stock Option Plan.
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- --------------------------------------------------------------------------------
Proposal Three: Ratification of KPMG LLP as Independent Auditors
for the Company for the Year Ending December 31, 2000
- --------------------------------------------------------------------------------
Subject to shareholder approval, the Board has selected KPMG LLP as our
independent auditors for the fiscal year ending December 31, 2000. KPMG LLP has
served as our independent auditors since 1996. Representatives of KPMG LLP are
expected to be present at the Annual Meeting and will be given an opportunity
to make a statement and answer appropriate shareholder questions. Shareholders
may submit questions concerning our financial statements either orally at the
Annual Meeting or in writing before the Annual Meeting.
The Board recommends a vote FOR the Ratification of KPMG LLP as
Independent Auditors for the Company for the Year Ending December 31, 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Based upon a review of our records and responses to questionnaires of all
reporting officers and directors, all reports required to be filed pursuant to
Section 16(a) of the Exchange Act were filed on a timely basis, except the
following Form 3 initial statements of beneficial ownership of securities: (1)
following the acquisition on June 1, 1999 of Series C Preferred Stock, which is
convertible into Common Stock, three affiliates of the Thomas H. Lee Company--
Thomas H. Lee, THL Equity Advisors IV, LLC, and Thomas H. Lee Equity Fund IV,
L.P.--filed Form 3 reports on July 22, 1999, which were in fact due on June 11,
1999; and (2) three members of our Board, appointed on June 25, 1999 to
represent the holders of our Series C Preferred Stock--David V. Harkins, C.
Hunter Boll, and Thomas M. Hagerty--also filed Form 3 reports on July 22, 1999,
which were actually due on July 6, 1999.
- --------------------------------------------------------------------------------
Requirements, Including Deadlines, for Submission of Proxy Proposals,
Nominations of Directors and Other Business of Shareholders
- --------------------------------------------------------------------------------
If you wish to submit proposals to be included in our 2001 proxy statement,
we must receive them on or before December 4, 2000. Please address your
proposals to: Z. Jill Barclift, Secretary, Metris Companies Inc., 600 S.
Highway 169, Suite 1800, St. Louis Park, Minnesota 55426.
Under our Bylaws, if you wish to nominate directors or bring other business
before the shareholders:
. You must notify the Secretary in writing not less than forty-five (45)
days before the first anniversary of the date we first mailed this Proxy
Statement, or February 19, 2001.
. Your notice must contain the specific information required in our
Bylaws.
Please note that these requirements pertain only to matters you wish to bring
before your fellow shareholders at an annual meeting. They are separate from
the deadline to have your proposal included in our proxy statement.
If you would like a copy of our Bylaws, we will send you one without charge.
Please write to the Secretary of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Z. Jill Barclift
Z. Jill Barclift
Secretary
April 3, 2000
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APPENDIX TO PROXY STATEMENT
METRIS COMPANIES INC.
LONG-TERM INCENTIVE AND STOCK OPTION PLAN
As Amended and Restated
Effective as of May 9, 2000
1. Purpose of Plan.
This Plan shall be known as the "METRIS COMPANIES INC. LONG-TERM INCENTIVE
AND STOCK OPTION PLAN." The purpose of the Plan is to aid in maintaining and
developing personnel capable of ensuring the future success of Metris Companies
Inc., a Delaware corporation, to offer such personnel additional incentives to
put forth maximum efforts for the success of the business, and to afford them
an opportunity to acquire a proprietary interest in the Company through stock
options and other long-term incentive awards as provided herein. Options
granted under this Plan may be either Incentive Stock Options or Nonqualified
Stock Options. Awards granted under this Plan may be stock appreciation rights,
restricted stock or performance awards as hereinafter described. Capitalized
terms used herein shall have the meanings assigned such terms in Section 2
hereof.
2. Definitions.
The following words and phrases, when used in the Plan, unless otherwise
specifically defined or unless the context clearly otherwise requires, shall
have the following respective meanings:
(a) Agreement. The document which evidences the grant of any Award under
this Plan and which sets forth the Award and the terms, conditions and
provisions of, and restrictions relating such Award.
(b) Award. Any award granted to a Participant under the Plan.
(c) Board. The Board of Directors of the Company.
(d) Code. The Internal Revenue Code of 1986, as amended. Any reference to
the Code includes the regulations promulgated pursuant to the Code.
(e) Company. Metris Companies Inc.
(f) Committee. The Company's Compensation Committee or its successor.
(g) Common Stock. Company's common stock, par value $.01.
(h) Fair Market Value. The closing price of a share of Common Stock the day
before the date of determination of Fair Market Value on any exchange or
automated quotation system upon which the Common Stock is listed or quoted,
provided that if the Common Stock is listed on more than one exchange, then the
Committee shall determine which exchange's price shall be used. If the Common
Stock did not trade on such a date, the Committee may use the closing price
that is most recent provided the Committee in good faith has determined that
such price reflects the fair market value of the Common Stock. Notwithstanding
the foregoing, if the Code shall specify a different method of determining fair
market value for setting the exercise price of an Incentive Stock Option, than
Fair Market Value for such purpose shall be determined as required by the Code.
If on the date of determination of Fair Market Value, the Common Stock is not
listed on an exchange or otherwise traded in an established securities market
or the Committee has determined that the most recent closing price available
does not reflect Fair Market Value, the Committee shall make a good faith
determination of Fair Market Value from sources and information it deems
relevant to such determination.
(i) Incentive Stock Option. An incentive stock option as defined in Section
422 of the Code and designated by the Committee to be an incentive stock
option.
(j) Nonqualified Stock Option. A stock option which does not qualify as an
Incentive Stock Option.
(k) Option. Any Incentive Stock Option or Nonqualified Stock Option granted
under the Plan.
(l) Performance Award. An Award made pursuant to Section 11 of this Plan.
(m) Plan. The Metris Companies Long-Term Incentive and Stock Option Plan,
as amended and restated effective May 9, 2000.
(n) Restricted Stock. Awards of Common Stock made pursuant to Section 10 of
the Plan.
<PAGE>
(o) SAR. A stock appreciation right granted pursuant to Section 9 of the
Plan.
3. Stock Subject to Plan.
Subject to the provisions of Section 16 hereof, the stock to be subject to
options or other awards under the Plan shall be the Company's Common Stock.
Subject to adjustment as provided in Section 16 hereof, 10,000,000 shares of
Common Stock shall be available for issuance under this Plan, reduced by the
sum of the aggregate number of shares of Common Stock which become subject to
outstanding Options, free standing SARs, and outstanding Restricted Stock
Awards or outstanding Performance Awards of Common Stock. To the extent that
shares of Common Stock subject to an outstanding Option, (except to the extent
that shares of Common Stock are issued or delivered by the Company in
connection with the exercise of a tandem SAR), outstanding free standing SAR,
or outstanding Restricted Stock Award or outstanding Performance Award of
Common Stock are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such Award or by reason of the
delivery or withholding of shares of Common Stock to pay all or a portion of
the exercise price of an Award, if any, or to satisfy all or a portion of the
tax withholding obligations relating to an Award, then such shares of Common
Stock shall again be available under this Plan.
4. Administration of Plan.
(a) The Plan shall be administered by the Committee which shall be a
committee comprised of not less than two directors appointed from time to time
by the Board of Directors. Each member of the Committee shall be a "Non-
Employee Director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934,
as amended, or any successor rule or regulation ("Rule 16b-3") and an "outside
director" within the meaning of Section 162(m) of the Code.
(b) The Committee shall have plenary authority in its discretion, but
subject to the express provisions of the Plan: (i) to determine the purchase
price of the Common Stock covered by each option or award, (ii) to determine
the individuals to whom and the time or times at which such options and awards
shall be granted and the number of shares to be subject to each, (iii) to
determine the form of payment to be made upon the exercise of an SAR or in
connection with performance awards, either cash, Common Stock or a combination
thereof, (iv) to determine the terms of exercise of each option and award, (v)
to accelerate the time at which all or any part of an option or award may be
exercised, (vi) to revoke, amend or modify the terms of any Award prior to
delivery of an Agreement to the grantee and to amend or modify the terms of
any Award with the consent of the grantee after the execution of an Agreement,
(vii) to interpret the Plan, (viii) to prescribe, amend and rescind rules and
regulations relating to the Plan, (ix) to determine the terms and provisions
of each option and award agreement under the Plan (which agreements need not
be identical), including the designation of those options intended to be
Incentive Stock Options, and (x) to make all other determinations necessary or
advisable for the administration of the Plan, subject to the exclusive
authority of the Board of Directors under Section 16 hereof to amend or
terminate the Plan. The Committee's determinations on the foregoing matters,
unless otherwise disapproved by the Board of Directors of the Company, shall
be final and conclusive.
5. Eligibility.
Incentive Stock Options may only be granted under this Plan to any full or
part-time employee (which term as used herein includes, but is not limited to,
officers and directors who are also employees) of the Company and of its
present and future subsidiary corporations within the meaning of Section
424(f) of the Code (herein called "subsidiaries"). Full or part-time
employees, consultants or independent contractors to the Company or one of its
subsidiaries shall be eligible to receive Nonqualified Stock Options and
Awards. In determining the persons to whom Options and Awards shall be granted
and the number of shares subject to each, the Committee may take into account
the nature of services rendered by the respective employees or consultants,
their present and potential contributions to the success of the Company and
such other factors as the Committee in its discretion shall deem relevant. A
person who has been granted an Option or Award under this Plan may be granted
additional Options or Awards under the Plan if the Committee shall so
determine; provided, however, that for Incentive Stock Options granted after
December 31, 1986, to the extent the aggregate Fair Market Value (determined
at the time the Incentive Stock Option is granted) of the
<PAGE>
Common Stock with respect to which all Incentive Stock Options are exercisable
for the first time by an employee during any calendar year (under all plans
described in subsection (d) of Section 422 of the Code of his employer
corporation and its parent and subsidiary corporations) exceeds $100,000, such
Options shall be treated as Nonqualified Stock Options. Nothing in the Plan or
in any Agreement hereunder shall confer on any employee any right to continue
in the employ of the Company or any of its subsidiaries or affect, in any way,
the right of the Company or any of its subsidiaries to terminate his or her
employment at any time.
6. Price.
The exercise price for all Incentive Stock Options and all Nonqualified
Stock Options and SAR's that are intended to constitute "qualified
performance-based compensation" under Section 162(m) of the Code granted under
the Plan shall be determined by the Committee but shall not be less than 100%
of the fair market value per share of Common Stock at the date of grant of
such Option. The exercise price for Nonqualified Stock Options granted under
the Plan that are not intended to constitute "qualified performance-based
compensation" under Section 162(m) of the Code and, if applicable, the price
for all Awards shall also be determined by the Committee.
7. Term.
Each Option and Award and all rights and obligations thereunder shall
expire on the date determined by the Committee and specified in the Option or
Award agreement. The Committee shall be under no duty to provide terms of like
duration for Options or Awards granted under the Plan, but the term of an
Incentive Stock Option may not extend more than ten (10) years from the date
of grant of such Option and the term of Options granted under the Plan which
do not qualify as Incentive Stock Options may not extend more than fifteen
(15) years from the date of granting of such Option.
8. Exercise of Option or Award.
(a) The Committee shall have full and complete authority to determine
whether an Option or Award will be exercisable in full at any time or from
time to time during the term thereof, or to provide for the exercise thereof
in such installments, upon the occurrence of such events (such as termination
of employment for any reason) and at such times during the term of the Option
as the Committee may determine and specify in the Option or Award agreement.
(b) The exercise of any Option or Award granted hereunder shall only be
effective at such time that the sale of Common Stock pursuant to such exercise
will not violate any state or federal securities or other laws and the shares
of Common Stock to be issued are listed as required by any exchange or
automated quotation system upon which the stock is traded or quoted. The
Company shall not be required to make such listing if such listing contains
conditions unacceptable to the Company.
(c) An optionee or grantee electing to exercise an option or award shall
give written notice to the Company of such election and of the number of
shares subject to such exercise. If a payment is required, it shall be made to
the Company in cash (including bank check, certified check, personal check, or
money order), or, at the discretion of the Committee and as specified by the
Committee, (i) by delivering certificates for Common Stock already owned by
the optionee or grantee having a Fair Market Value as of the date of grant
equal to the full purchase price of the shares, (ii) by delivering the
optionee's or grantee's promissory note, which shall provide for interest at a
rate not less than the minimum rate required to avoid the imputation of
income, original issue discount or a below-market-rate loan pursuant to
Sections 483, 1274 or 7872 of the Code or any successor provisions thereto,
(iii) a combination of cash, the optionee's or grantee's promissory note and
such shares, or (iv) in cash by a broker-dealer acceptable to the Company to
whom the optionee or grantee has submitted an irrevocable notice of exercise.
The fair market value of such tendered shares shall be determined as provided
in Section 5 hereof. The optionee's or grantee's promissory note shall be a
full recourse liability of the optionee and may, at the discretion of the
Committee, be secured by a pledge of the shares being purchased. Such payment
shall be made at the time required by the Committee but in no event later than
delivery of any shares of Common Stock hereunder. Such payment shall be made
at the time required by the Committee but in no event later than delivery of
any shares of Common Stock hereunder. Until such person has been issued the
shares subject to such exercise, he or she shall possess no rights as a
shareholder with respect to such shares.
(d) The Committee may grant "restoration" options, separately or together
with another option,
<PAGE>
pursuant to which, subject to the terms and conditions established by the
Committee and any applicable requirements of Rule 16b-3 promulgated under the
Securities and Exchange Act of 1934 or any other applicable law, the optionee
would be granted a new option when the payment of the exercise price of the
option to which such "restoration" option relates is made by the delivery of
shares of Common Stock owned by the optionee, as described in subsection (c)
above, which new option would be an option to purchase the number of shares
not exceeding the sum of (a) the number of shares of Common Stock tendered as
payment upon the exercise of the option to which such "restoration" option
relates and (b) the number of shares of Common Stock, if any, tendered as
payment of the amount to be withheld under applicable income tax laws in
connection with the exercise of the option to which such "restoration" option
relates, as described in Section 12 hereof. "Restoration" options may be
granted with respect to options previously granted under this Plan or any
prior stock option plan of the Company, and may be granted in connection with
any option granted under this Plan at the time of such grant. The purchase
price of the Common Stock under each such new option, and the other terms and
conditions of such option, shall be determined by the Committee consistent
with the provisions of the Plan.
9. Stock Appreciation Rights.
(a) Grant. At the time of grant of an option or award under the Plan (or at
any other time), the Committee, in its discretion, may grant a stock
appreciation right ("SAR") evidenced by an agreement in such form as the
Committee shall from time to time approve. Any such SAR may be subject to
restrictions on the exercise thereof as may be set forth in the agreement
representing such SAR, which agreement shall comply with and be subject to the
following terms and conditions and any additional terms and conditions
established by the Committee that are consistent with the terms of the Plan.
(b) Exercise. An SAR shall be exercised by the delivery to the Company of a
written notice which shall state that the holder thereof elects to exercise
his or her SAR as to the number of shares specified in the notice and which
shall further state what portion, if any, of the "SAR exercise amount"
(hereinafter defined) the holder thereof requests be paid in cash and what
portion, if any, is to be paid in Common Stock of the Company. The Committee
promptly shall cause to be paid to such holder the "SAR exercise amount"
either in cash, in Common Stock of the Company, or any combination of cash and
shares as may be requested by the holder of the SAR and approved by the
Committee in its sole and absolute discretion. The "SAR exercise amount" is
the excess of the Fair Market Value of one share of Common Stock on the date
of exercise over the per share exercise price in respect of which the SAR was
granted, multiplied by the number of shares as to which the SAR is exercised.
(c) Tandem Grants. If SARs are granted in tandem with an Option, the
exercise of the Option shall cause a proportional reduction in SARs standing
to a grantee's credit which were granted in tandem with the Option; and the
payment of SARs shall cause a proportional reduction of the shares of Common
Stock subject to the Option. If SARs are granted in tandem with an Incentive
Stock Option, the SARS shall have such terms and condition as shall be
required for the Incentive Stock Option to qualify as an Incentive Stock
Option.
10.Restricted Stock Awards.
Awards of Common Stock subject to forfeiture and transfer restrictions may
be granted by the Committee. Any restricted stock award shall be evidenced by
an agreement in such form as the Committee shall from time to time approve,
which agreement shall comply with and be subject to the following terms and
conditions and any additional terms and conditions established by the
Committee that are consistent with the terms of the Plan:
(a) Grant of Restricted Stock Awards. Each restricted stock award made
under the Plan shall be for such number of shares of Common Stock as shall be
determined by the Committee and set forth in the agreement containing the
terms of such restricted stock award. Such agreement shall set forth a period
of time during which the grantee must remain in the continuous employment of
the Company in order for the forfeiture and transfer restrictions to lapse. If
the Committee so determines, the restrictions may lapse during such restricted
period in installments with respect to specified portions of the shares
covered by the restricted stock award. The agreement may also, in the
discretion of the Committee, set forth performance or other conditions that
will subject the Common Stock to forfeiture and transfer restrictions. The
Committee
<PAGE>
may, at its discretion, waive all or any part of the restrictions applicable
to any or all outstanding restricted stock awards.
(b) Delivery of Common Stock and Restrictions. At the time of a restricted
stock award, a certificate representing the number of shares of Common Stock
awarded thereunder shall be registered in the name of the grantee. Such
certificate shall be held by the Company or any custodian appointed by the
Company for the account of the grantee subject to the terms and conditions of
the Plan, and shall bear such a legend setting forth the restrictions imposed
thereon as the Committee, in its discretion, may determine. The grantee shall
have all rights of a shareholder with respect to the Common Stock, including
the right to receive dividends and the right to vote such shares, subject to
the following restrictions: (i) the grantee shall not be entitled to delivery
of the stock certificate until the expiration of the restricted period and the
fulfillment of any other restrictive conditions set forth in the restricted
stock agreement with respect to such Common Stock; (ii) none of such shares
may be sold, assigned, transferred, pledged, hypothecated or otherwise
encumbered or disposed of during such restricted period or until after the
fulfillment of any such other restrictive conditions; and (iii) except as
otherwise determined by the Committee, all of the Common Stock shall be
forfeited and all rights of the grantee to such Common Stock shall terminate,
without further obligation on the part of the Company, unless the grantee
remains in the continuous employment of the Company or any subsidiary of the
Company for the entire restricted period in relation to which such Common
Stock was granted and unless any other restrictive conditions relating to the
restricted stock award are met. Any Common Stock, any other securities of the
Company and any other property (except for cash dividends) distributed with
respect to the Common Stock subject to restricted stock awards shall be
subject to the same restrictions, terms and conditions as such restricted
Common Stock.
(c) Termination of Restrictions. At the end of the restricted period and
provided that any other restrictive conditions of the restricted stock award
are met, or at such earlier time as otherwise determined by the Committee, all
restrictions set forth in the agreement relating to the restricted stock award
or in the Plan shall lapse as to the restricted Common Stock subject thereto,
and a stock certificate for the appropriate number of shares of Common Stock,
free of the restrictions and the restricted stock legend, shall be delivered
to the grantee or his beneficiary or estate, as the case may be. If the Common
Stock is traded on a securities exchange, the Company shall not be required to
deliver such certificates until such shares have been admitted for trading on
such securities exchange.
11. Performance Awards.
The Committee is further authorized to grant Performance Awards. Subject to
the terms of this Plan and any applicable award agreement, a Performance Award
granted under the Plan (i) may be denominated or payable in cash, Common Stock
(including, without limitation, restricted stock), other securities, other
awards, or other property and (ii) shall confer on the holder thereof rights
valued as determined by the Committee, in its discretion, and payable to, or
exercisable by, the holder of the Performance Award, in whole or in part, upon
the achievement of such performance goals during such performance periods as
the Committee, in its discretion, shall establish. Subject to the terms of
this Plan, any applicable award agreement, or as required to constitute
"qualified performance-based compensation" under Section 162(m) of the Code,
the performance goals to be achieved during any performance period, the length
of any performance period, the amount of any Performance Award granted, and
the amount of any payment or transfer to be made by the grantee and by the
Company under any Performance Award shall be determined by the Committee. For
Awards that are to be "qualified performance-based compensation" pursuant to
Section 162(m) of the Code, the Committee shall set performance goals based on
for one or more of the following business criteria: consolidated pre tax
earnings, net revenues, net earnings, operating income, earnings before
interest and taxes, cash flow, return on equity, return on net assets employed
or earnings per share for the applicable performance period, all as computed
in accordance with generally accepted accounting principles in effect.
12.Income Tax Withholding.
In order to comply with all applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to
ensure that all applicable federal or state payroll, withholding, income or
other taxes, which are the sole and absolute responsibility of an
<PAGE>
optionee or grantee under the Plan, are withheld or collected from such
optionee or grantee. In order to assist an optionee or grantee in paying all
federal and state taxes to be withheld or collected upon exercise of an option
or award which does not qualify as an Incentive Stock Option hereunder, the
Committee, in its absolute discretion and subject to such additional terms and
conditions as it may adopt, may permit the optionee or grantee to satisfy such
tax obligation by (i) electing to have the Company withhold a portion of the
shares otherwise to be delivered upon exercise of such option or award with a
Fair Market Value equal to such taxes or (ii) delivering to the Company Common
Stock other than the shares issueable upon exercise of such option or award
with a fair market value equal to such taxes.
13. Additional Restrictions.
(a) The Committee shall have full and complete authority to determine
whether all or any part of the Common Stock acquired upon exercise of any of
the Options or Awards granted under the Plan shall be subject to restrictions
on the transferability thereof or any other restrictions affecting in any
manner the optionee's or grantee's rights with respect thereto, but any such
restriction shall be contained in the agreement relating to such Options or
Awards.
(b) No person, who is an employee of the Company at the time of grant, may
be granted any award or awards payable in shares or otherwise, the value of
which is based solely on an increase in the value of the Common Stock after
the date of grant of such awards, for more than 1,350,000 shares, in the
aggregate, in any one calendar year period, or, for cash awards not tied to
shares, for more than $6,000,000, in the aggregate, in any three calendar year
period. The foregoing limitations specifically include the grant of any awards
representing "qualified performance-based compensation" within the meaning of
Section 162(m) of the Code.
14. Ten Percent Shareholder Rule.
Notwithstanding any other provision in the Plan, if at the time an
Incentive Stock Option is otherwise to be granted pursuant to the Plan the
optionee owns directly or indirectly (within the meaning of Section 424(d) of
the Code) Common Stock of the Company possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Company or
its parent or subsidiary corporations, if any (within the meaning of Section
422(b)(6) of the Code), then any Incentive Stock Option to be granted to such
optionee pursuant to the Plan shall satisfy the requirements of Section
422(c)(5) of the Code, and the option price shall be not less than 110% of the
fair market value of the Common Stock determined as described herein, and such
option by its terms shall not be exercisable after the expiration of five (5)
years from the date such option is granted.
15. Non-Transferability.
Except as otherwise determined by the Committee or in an option or award
agreement, no Option or Award granted under the Plan shall be transferable by
an optionee or grantee, otherwise than by will or the laws of descent and
distribution and during the lifetime of an optionee or grantee, the Option or
Award shall be exercisable only by such optionee or grantee. Notwithstanding
the foregoing, no Incentive Stock Option shall be transferable by an optionee
otherwise than by will or the laws of descent or distribution.
16. Dilution or Other Adjustments.
If there shall be any change in the Common Stock through merger,
consolidation, reorganization, recapitalization, dividend in the form of stock
(of whatever amount), stock split or other change in the corporate structure,
appropriate adjustments in the Plan and outstanding Options and Awards shall
be made by the Committee. In the event of any such changes, adjustments shall
include, where appropriate, changes in the aggregate number of shares subject
to the Plan, the number of shares and the price per share subject to
outstanding Options and Awards and the amount payable upon exercise of
outstanding Awards, in order to prevent dilution or enlargement of Option or
Award rights.
17. Amendment or Discontinuance of Plan.
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an option or award agreement or in the Plan:
(a) Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that, notwithstanding any other provisions of the Plan or any option or award
agreement, without the approval of the shareholders of the Company, no such
amendment, alteration,
<PAGE>
suspension, discontinuation or termination shall be made that, absent such
approval:
(i) would violate the rules or regulations of the National Association of
Securities Dealers, Inc. or The Nasdaq stock market or any other securities
exchange that are applicable to the Company; or
(ii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.
(b) Amendments to Awards. The Committee may waive any conditions of or
rights of the Company under any outstanding Option or Award, prospectively or
retroactively. The Committee may not amend, alter, suspend, discontinue or
terminate any outstanding Option or Award, prospectively or retroactively,
without the consent of the Participant or holder or beneficiary thereof,
except as otherwise herein provided.
(c) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any option or award in the manner and to the extent it shall deem
desirable to carry the Plan into effect.
18. Time of Granting.
The effective date of any grant of an Award shall be the date of the
Committee action granting such Award provided that within a reasonable time
thereafter a definitive Agreement is delivered to the grantee and executed by
the grantee.
19. Section 16(b) Compliance.
The Plan is intended to comply in all respects with Rule 16b-3 or any
successor provision, as in effect from time to time, and in all events the
Plan shall be construed in accordance with the requirements of Rule 16b-3. If
any Plan provision does not comply with Rule 16b-3 as hereafter amended or
interpreted, the provision shall be deemed inoperative. The Board of
Directors, in its absolute discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to
participants who are officers or directors subject to Section 16 of the
Securities and Exchange Act of 1934, as amended, without so restricting,
limiting or conditioning the Plan with respect to other participants.
20. Effective Date and Termination of Plan.
(a) The Plan shall be submitted to the shareholders of the Company for
their approval and adoption.
(b) Unless the Plan shall have been discontinued as provided in Section 16
hereof, the Plan shall terminate March 19, 2009. No option or award may be
granted after such termination, but termination of the Plan shall not, without
the consent of the optionee or grantee, alter or impair any rights or
obligations under any Option or Award theretofore granted.
21.Governing Law.
The place of administration of the Plan and each Agreement shall be in the
State of Minnesota. The corporate law of the Company's state of incorporation
shall govern issues related to the validity and issuance of shares of the
Common Stock. Otherwise, this Plan and each Agreement shall be construed and
administered in accordance with the laws of the State of Minnesota.
22. Fractional Shares.
The Company shall not be required to issue or deliver any fractional share
of Common Stock hereunder but may pay, in lieu thereof, an amount in cash
equal to the Fair Market Value of such fractional share.
23. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. Neither the Company nor any subsidiary shall be
required to segregate any assets that may be represented by Awards, and
neither the Company nor any subsidiary shall be deemed to be a trustee of any
amounts to be paid under an Award. Any liability of the Company to pay any
grantee of an Award hereunder with respect to such Award shall be based solely
upon contractual obligations created pursuant to the Agreement with the
grantee and the Plan; no such obligation shall be deemed to be secured by any
pledge or encumbrance on any property of the Company or its subsidiaries.
24. Headings.
Headings contained in the Plan and any Agreement are included for
convenience only, and they shall not be construed as a part of the Plan or
Agreement or in any respect affecting or modifying its provisions.
<PAGE>
[METRIS LOGO] PROXY FOR
COMMON SHARES
METRIS COMPANIES INC.
Hyatt Regency Minneapolis
1300 Nicollet Mall
Minneapolis, Minnesota
ANNUAL MEETING OF STOCKHOLDERS--TUESDAY, MAY 9, 2000, 10:00 A.M.
This proxy is solicited on behalf of the Board of Directors
for use at the Annual Meeting on Tuesday, May 9, 2000.
The undersigned hereby appoints RONALD N. ZEBECK and Z. JILL BARCLIFT as
proxies, each with power to act alone and with the power of substitution and
revocation, and hereby authorizes them to vote all of the shares of the Common
Stock of Metris Companies Inc. that the undersigned is entitled to
vote at the Annual Meeting of Stockholders to be held on May 9, 2000, or any
adjournment thereof, as specified below on the following matters which are
further described in the Proxy Statement related hereto.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL
IN THEIR DISCRETION, PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS
MAY PROPERLY BE BROUGHT BEFORE THE MEETING AND, IF A NOMINEE IS UNABLE TO SERVE,
FOR A SUBSTITUTE.
See reverse for voting instructions.
- --------------------------------------------------------------------------------
5130-Metris Companies Inc. (Common)
<PAGE>
METRIS COMPANIES INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors Recommends a Vote FOR the nominee in Proposal 1, and FOR
Proposals 2 and 3.
1.The election of a director--
01-Derek V. Smith
For Withhold
[_] [_]
2. Proposal to approve an increase in the number of shares reserved for
issuance under the Metris Companies Inc. Amended and Restated
Long-Term Incentive and Stock Option Plan
For Against Abstain
[_] [_] [_]
3. Proposal to ratify KPMG LLP as independent auditors for the year
ending December 31, 2000.
For Against Abstain
[_] [_] [_]
IN THEIR DISCRETION, PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS
MAY PROPERLY BE BROUGHT BEFORE THE MEETING AND, IF A NOMINEE IS UNABLE TO SERVE,
FOR A SUBSTITUTE.
Address Change? Mark Box and indicate
changes below: [_]
Dated: , 2000
----------------------------
Signature(s)
---------------------------------
---------------------------------
(If there are co-owners, both must sign.) Please sign
exactly as your name(s) appear on Proxy. If held in joint
tenancy, all persons must sign. Trustees, administrators,
etc., should include title and authority. Corporations
should provide full name of corporation and title of
authorized officer signing the proxy.
- --------------------------------------------------------------------------------
o PLEASE FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
5130-Metris Companies Inc. (Common)
<PAGE>
[METRIS LOGO] PROXY FOR
SERIES C PREFERRED
METRIS COMPANIES INC.
Hyatt Regency Minneapolis
1300 Nicollet Mall
Minneapolis, Minnesota
ANNUAL MEETING OF STOCKHOLDERS--TUESDAY, MAY 9, 2000, 10:00 A.M.
This proxy is solicited on behalf of the Board of Directors
for use at the Annual Meeting on Tuesday, May 9, 2000.
The undersigned hereby appoints RONALD N. ZEBECK and Z. JILL BARCLIFT as
proxies, each with power to act alone and with the power of substitution and
revocation, and hereby authorizes them to vote all of the shares of the Series C
Preferred Stock of Metris Companies Inc. that the undersigned is entitled to
vote at the Annual Meeting of Stockholders to be held on May 9, 2000, or any
adjournment thereof, as specified below on the following matters which are
further described in the Proxy Statement related hereto.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH PROPOSAL
IN THEIR DISCRETION, PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS
MAY PROPERLY BE BROUGHT BEFORE THE MEETING AND, IF A NOMINEE IS UNABLE TO SERVE,
FOR A SUBSTITUTE.
See reverse for voting instructions.
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5131--Metris Companies Inc. (Class C)
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METRIS COMPANIES INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
The Board of Directors Recommends a Vote FOR Items 1, 2, and 3.
1.The election of directors--
01-Thomas H. Lee, 02-David V. Harkins,
03-C. Hunter Boll, 04-Thomas M. Hagerty
Withhold For All
For All Except
[_] [_] [_]
---------------------------------------------------------
(Instruction: To withhold authority to vote for any indicated nominee,
write that nominee's name above.)
2. Proposal to approve an increase in the number of shares reserved for
issuance under the Metris Companies Inc. Amended and Restated
Long-Term Incentive and Stock Option Plan
For Against Abstain
[_] [_] [_]
3. Proposal to ratify KPMG LLP as independent auditors for the year
ending December 31, 2000.
For Against Abstain
[_] [_] [_]
Address Change? Mark Box and indicate
changes below: [_]
Dated: , 2000
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Signature(s)
---------------------------------
---------------------------------
(If there are co-owners, both must sign.) Please sign
exactly as your name(s) appear on Proxy. If held in joint
tenancy, all persons must sign. Trustees, administrators,
etc., should include title and authority. Corporations
should provide full name of corporation and title of
authorized officer signing the proxy.
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o PLEASE FOLD AND DETACH HERE o
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
5131-Metris Companies Inc. (Class C)
We intend to register the increase in the number of shares reserved for issuance
pusuant to the Amended and Restated Long-Term Incentive and Stock Option Plan
within one week after the Annual Meeting.
