SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
FINGERHUT 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:
(2) Aggregate number of securities to which transactions applies:
(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.)
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
[LOGO] FINGERHUT COMPANIES, INC.
4400 BAKER ROAD
MINNETONKA, MINNESOTA 55343
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998
TO THE SHAREHOLDERS OF FINGERHUT COMPANIES, INC.:
Notice is hereby given that the Annual Meeting of the Shareholders of
Fingerhut Companies, Inc. (the "Company") will be held at 11:00 a.m.
(Minneapolis time) on Wednesday, May 6, 1998, at the Minneapolis Hilton, 1001
Marquette Avenue South, Minneapolis, Minnesota, for the following purposes:
1. To elect three Class II directors, each to serve for a three-year term
and until his or her successor is elected and qualified.
2. To ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the 1998 fiscal year.
Only holders of record of the Company's Common Stock at the close of business
on March 19, 1998, will be entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. WHETHER OR NOT YOU PLAN TO
BE PRESENT AT THE MEETING, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael P. Sherman
Michael P. Sherman
Secretary
March 31, 1998
<PAGE>
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 6, 1998
This proxy statement is provided in connection with the 1998 Annual Meeting
of Shareholders of Fingerhut Companies, Inc. (the "Company"), which will be
held at 11:00 a.m. on Wednesday, May 6, 1998 at the Minneapolis Hilton, 1001
Marquette Avenue South, Minneapolis, Minnesota, and any adjournment thereof.
The accompanying proxy is solicited by the Board of Directors of the Company.
The Company's principal executive offices are located at 4400 Baker Road,
Minnetonka, Minnesota 55343.
The Board of Directors has proposed two items of business to be considered at
the Annual Meeting: (1) the election of three Class II directors; and (2)
ratification of appointment of independent auditors for the fiscal year
ending December 25, 1998. The Board of Directors knows of no other matters to
be presented for action at the Annual Meeting. If any other matters properly
come before the Annual Meeting, however, the persons named in the proxy will
vote on such other matters and/or for other nominees in accordance with their
best judgment.
The Board of Directors recommends that an affirmative vote be cast in favor
of all nominees and the proposals listed in the proxy (or voting
instructions) card. By completing and returning the accompanying proxy, the
shareholder authorizes the individuals designated on the face of the proxy,
to vote all shares for the shareholder. All returned proxies that are
properly signed and dated will be voted as the shareholder directs. If no
direction is given, executed proxies will be voted FOR each of the nominees
and the listed proposals. Regardless of the size of your holdings, you are
encouraged to complete and return the proxy or voting instructions card so
that your shares may be voted at the Annual Meeting. Except for shareholders
who hold shares in the Plans (as defined below), a proxy may be revoked by a
shareholder at any time before it is voted at the Annual Meeting by giving
notice of revocation to the Company in writing, by execution of a later dated
proxy, or by attending and voting at the Annual Meeting.
If you participate in the Fingerhut Corporation Profit Sharing and 401(k)
Savings Plan, the Fingerhut Corporation Fixed Contribution Retirement Plan,
the Fingerhut Retirement Plan, the Figi's Inc. Profit Sharing and 401(k)
Savings Plan or the TDI Bargaining Unit Retirement Plan, each an employee
benefit plan of the Company (collectively, the "Plans"), please return your
proxy in the envelope provided by April 29, 1998. Norwest Bank Minnesota,
N.A., the vote tabulator, will calculate the votes returned by all holders in
the Plans. Putnam Fiduciary Trust Company, the Trustee for the Plans, will
act as your proxy for shares of common stock held in your Plan account. If
your voting instructions are not received by April 29, 1998, those shares
will be voted by the Employee Benefits Advisory Committee in its absolute
discretion. Holders of shares in the Plans will not be permitted to vote at
the Meeting.
Shares voted as abstentions on any matter (or a "withhold vote for" as to
directors) will be counted for purposes of determining the presence of a
quorum at the Annual Meeting and treated as unvoted, although present and
entitled to vote, for purposes of determining the approval of each matter as
to which the shareholder has abstained. If a broker submits a proxy that
indicates the broker does not have discretionary authority as to certain
shares to vote on one or more matters, those shares will be counted for
purposes of determining the presence of a quorum at the meeting, but will not
be considered as present and entitled to vote with respect to such matters.
This proxy statement and the accompanying form of proxy are being sent or
given to shareholders beginning on or about March 31, 1998, along with the
Company's 1997 Annual Report to Shareholders.
<PAGE>
Holders of record of the Company's common stock, $.01 par value (the "Common
Stock"), at the close of business on March 19, 1998, will be entitled to vote
on all matters at the Annual Meeting. Each share will be entitled to one
vote. On March 19, 1998, a total of 46,482,741 shares of Common Stock were
outstanding.
All expenses in connection with the solicitation of this proxy will be paid
by the Company. Officers, directors and regular employees of the Company, who
will receive no extra compensation for their services, may solicit proxies by
telephone or electronic transmission.
PROPOSAL 1:
ELECTION OF DIRECTORS
In accordance with the terms of the Company's Amended and Restated Articles of
Incorporation, the Board of Directors is divided into three classes, designated
as Class I, Class II and Class III, respectively, with staggered three-year
terms of office. At each annual meeting, directors who are elected to succeed
the class of directors whose terms expire at that meeting will be elected for
three-year terms. At the Annual Meeting, three Class II directors will be
elected to hold office for three-year terms that will expire at the annual
meeting of shareholders to be held in 2001 and until their successors are
elected and qualified. The Board of Directors has designated Stanley S. Hubbard,
Kenneth A. Macke and Christina L. Shea as nominees for reelection to the Board
of Directors of the Company. Each of the nominees has consented to serve as
director, if elected. If any of the nominees becomes unable to accept nomination
or election, the enclosed proxy will be voted for the election of a nominee
designated by the Board of Directors, unless the Board reduces the number of
directors on the Board of Directors or unless the shareholder indicates to the
contrary on the proxy. The affirmative vote of a majority of the shares of
Common Stock entitled to vote and present in person or by proxy at the Annual
Meeting is required for election of each nominee. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
Certain biographical information furnished by the Company's directors and
nominees, and the directors' respective terms of office, is presented below.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING:
STANLEY S. HUBBARD (age 64) has been a director of the Company since 1990.
Mr. Hubbard is a Class II director whose term expires at the Annual Meeting.
For more than the past five years he has been Chairman of the Board,
President and Chief Executive Officer of Hubbard Broadcasting, Inc. (a
privately-held communications company); he is also an executive with several
other entities affiliated with Hubbard Broadcasting, including Conus
Communications, a satellite news gathering company. He is the founder and
Chairman of the Board of United States Satellite Broadcasting Company, Inc.
KENNETH A. MACKE (age 59) became a director of the Company in February 1997.
Mr. Macke is a Class II director whose term expires at the Annual Meeting. He
is the retired Chairman of the Board, Chief Executive Officer and Chairman of
the Executive Committee of Dayton Hudson Corporation ("DHC"), a general
merchandise retailer. He joined Dayton's as a merchandise trainee and
advanced through various management positions at Dayton's and Target. He
served as President of DHC from 1981 to 1984. He was elected Chief Operating
Officer of DHC in 1982, Chief Executive Officer of DHC in 1983, Chairman of
the Board of DHC in 1984 and Chairman of the DHC Executive Committee in 1985.
He is a director of U.S. Bancorp (formerly, First Bank System, Inc.), General
Mills, Inc., Unisys Corporation and Carlson Companies, Inc. He is also the
general partner of Macke Partners, a private venture capital firm.
CHRISTINA L. SHEA (age 44) became a director of the Company in April 1997.
Ms. Shea is a Class II director whose term expires at the Annual Meeting.
Since December 1994, she has been president of Betty Crocker Products, a
division of General Mills, Inc. From February 1992 to December 1994, she was
vice president, general manager of BC Main Meals, a business unit of General
Mills, Inc.
CONTINUING DIRECTORS:
THEODORE DEIKEL (age 62) has been Chairman of the Board, Chief Executive
Officer and President of the Company since 1989. Mr. Deikel is a Class III
director whose term expires at the 1999 Annual
<PAGE>
Meeting. From 1985 until rejoining the Company, Mr. Deikel served as Chairman
and Chief Executive Officer of CVN Companies, Inc., a direct marketing company
using television and direct mail. From 1979 to 1983, Mr. Deikel was Executive
Vice President of American Can Company (a predecessor of The Travelers Inc.) and
Chairman of American Can Company's specialty retailing division, which included
the Company. In addition, Mr. Deikel was Chief Executive Officer of Fingerhut
Corporation from 1975 to 1983.
WENDELL R. ANDERSON (age 65) has been of counsel to the law firm of Larkin,
Hoffman, Daly and Lindgren, Ltd. since 1991, and was a partner in the firm
for at least five years prior to that time. The law firm provides legal
services to the Company from time to time. Mr. Anderson has been a director
of the Company since 1990. He is a Class III director whose term expires at
the 1999 Annual Meeting. He is a former United States Senator and former
Governor of the State of Minnesota, serves on the board of the University of
Minnesota Foundation and is also a director of National City Bancorporation,
Evans Environmental Corporation and Turbodyne Technologies, Inc.
EDWIN C. GAGE (age 57) has been a director of the Company since 1992. Mr.
Gage is Chairman and Chief Executive Officer of Gage Marketing Group LLC
(integrated marketing services), which he formed in January 1992. He was
Chief Executive Officer of Carlson Companies, Inc. from 1989 to 1991 and
Chief Operating Officer from 1985 to 1989. Mr. Gage is a Class III director
whose term expires at the 1999 Annual Meeting. Mr. Gage is also a director of
SuperValu Inc., Carlson Holdings, Inc., Minnegasco Advisory Board; and an
advisory board member for the Kellogg Graduate School of Management at
Northwestern University.
DUDLEY C. MECUM (age 63) has been a director of the Company since 1990. Mr.
Mecum is a Class I director whose term expires at the 2000 Annual Meeting.
Since July 1997, he has been a managing director of Capricorn Investors, LLC
(leveraged buy-outs). For more than five years prior thereto, he was a
partner in the firm of G.L. Ohrstrom & Co. (merchant banking). Mr. Mecum is
also a director of Metris Companies Inc., an 83% owned subsidiary of the
Company ("Metris"), Travelers Group Inc., Travelers Property Casualty Corp.,
Lyondell Petrochemical Corporation, Vicorp Restaurants, Inc., DynCorp, and
Suburban Propane Partners, L.P.
JOHN M. MORRISON (age 61) became a director of the Company in November 1996.
Mr. Morrison is a Class I director whose term expires at the 2000 Annual
Meeting. For more than the past five years, he has been Chairman of the Board
of the Central Bank Group. Mr. Morrison is also a trustee of the University
of St. Thomas and a director of Fairview Corporation.
The Board of Directors has established Executive, Compensation and Audit
Committees. The Company does not have a nominating committee.
The Executive Committee is authorized to exercise the full power of the Board
of Directors in the management and conduct of the business affairs of the
Company during the interim between meetings of the Board. The Executive
Committee may also review and make recommendations to the Board of Directors
with respect to various corporate matters. The current members of the
Executive Committee are Messrs. Anderson and Deikel. During the fiscal year
ended December 26, 1997, the Executive Committee met four times.
The Compensation Committee sets the compensation of all the Company's
officers whose base annual salary exceeds $200,000, approves, adopts and
administers compensation plans, administers and grants stock options under
the Company's stock option plans, reviews administration of the Company's
benefit plans and reviews and makes recommendations to the Board of Directors
on matters relating to compensation of all officers. During the fiscal year
ended December 26, 1997, the Compensation Committee met six times. The
current members of the Compensation Committee are Messrs. Morrison
(chairman), Gage, Macke and Ms. Shea.
The Audit Committee supervises and reviews the Company's accounting and
financial services, makes recommendations to the Board of Directors as to
nomination of independent auditors, confers with the independent auditors and
internal auditors regarding the scope of their proposed audits and their
audit findings, reports and recommendations, reviews the Company's financial
controls, procedures and practices, approves all nonaudit services by the
independent auditors and reviews transactions
<PAGE>
between the Company and its affiliates. The current members of the Audit
Committee are Messrs. Mecum (chairman), Gage, Macke and Morrison. The Audit
Committee met four times during the fiscal year ended December 26, 1997.
During the fiscal year ended December 26, 1997, the Board of Directors met
six times. All incumbent directors attended at least 75% of all the meetings
of the Board of Directors and committees that were held while they were
serving on the Board of Directors or on such committee. The Company's Board
of Directors and committees also act from time to time by written consent in
lieu of meetings.
COMPENSATION OF DIRECTORS. Members of the Board of Directors who are not
employees of the Company receive an annual retainer of $20,000 for membership
on the Board of Directors, including service on committees of the Board. The
directors designated and serving as the chairperson of the Audit Committee
and of the Compensation Committee also receive an annual retainer of $4,000
for service as chairperson of such committee. In addition, non-employee
directors receive an attendance fee of $2,500 for each regular or special
meeting attended of the Board of Directors. Directors employed by the Company
receive no directors' fees. The Company also reimburses reasonable travel,
lodging and other incidental expenses incurred by directors in attending
meetings of the Board of Directors and committees. Wendell Anderson, a member
of the Company's Board of Directors, provides certain governmental and
regulatory affairs consulting services to the Company, for which he was paid
$144,000 plus reimbursement of expenses in 1997.
Pursuant to the Fingerhut Companies, Inc. Nonemployee Director Stock Option
Plan, nonemployee directors were each granted the option to purchase 5,000
shares of Common Stock on the earlier of March 1, 1996 or the commencement of
their service on the Board of Directors. In addition, each nonemployee director
shall receive annual grants of options to purchase 5,000 shares of Common Stock.
On April 24, 1997, Messrs. Macke and Morrison and Ms. Shea were each granted the
option to purchase 5,000 shares of Common Stock at the exercise price of $14.75.
On July 28, 1997, Messrs. Anderson Gage, Hubbard and Mecum were each granted the
option to purchase 5,000 shares of Common Stock at the exercise price of
$20.4375. These options are fully vested upon grant and terminate five years
from the date of grant.
Under the Fingerhut Companies, Inc. Directors' Retainer Stock Deferral Plan,
non-employee directors may elect to have all or a portion of the annual retainer
for service on the Board of Directors paid in the form of shares of Common
Stock. The payment may be deferred, in which case directors who elect to defer
their retainer will have their deferred stock accounts credited with the number
of shares equal to the deferred retainer amount divided by the market price of
the Common Stock on the date the retainer was otherwise payable. Ms. Shea has
elected to have all of her annual retainer paid in the form of deferred Common
Stock.
<PAGE>
TOTAL SHAREHOLDER RETURN INDEX
The following graph compares the cumulative total shareholder return on the
Company's Common Stock ("FHT") since December 31, 1992, with the cumulative
total return for the Standard & Poor's 500 Stock Index ("SP500") and the Dow
Jones Retailers Broadline Index ("DJRTB") over the same period, assuming the
investment of $100 on December 31, 1992 and reinvestment of all dividends.
[GRAPH]
<TABLE>
<CAPTION>
12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
<S> <C> <C> <C> <C> <C> <C>
FHT $100 $187 $104 $ 94 $ 84 $148
SP500 $100 $110 $112 $153 $189 $252
DJRTB $100 $ 96 $ 81 $ 92 $104 $153
</TABLE>
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Compensation
Committee") consists of John M. Morrison, Edwin C. Gage, Kenneth A. Macke and
Christina L. Shea, each of whom is not an employee of the Company. A
subcommittee (the "Subcommittee") of the Compensation Committee currently
composed of Messrs. Morrison, Macke and Ms. Shea (each a "Non-Employee
Director" as defined in Rule 16b-3 of the Securities Exchange Act of 1934)
approved the grant of all stock options and other stock-based long-term
incentive compensation pursuant to the Company's existing stock option and
incentive plans during 1997. The Subcommittee also administers the Annual
Incentive Plan, as described below. All references to "Compensation
Committee" set forth herein shall be deemed to include the Subcommittee
described above.
COMPENSATION POLICIES. The Company's current executive compensation policies are
intended to achieve three basic goals: (i) allow the Company to attract and
retain the highest caliber executives; (ii) provide compensation programs that
reward individual and corporate performance and motivate executives to achieve
strategic corporate goals for both short-term and long-term financial results;
and (iii) align the interests of executives with the interests of the Company's
long-term shareholders through stock options and other stock-based awards.
The Compensation Committee believes that the most effective executive
compensation program is one that provides incentives to achieve both current
and longer-term strategic goals, with the ultimate objective of enhancing
shareholder value. Accordingly, the Compensation Committee believes executive
compensation should be comprised of both short-term cash-based programs that
reward achievement of individual and Company-specific goals and long-term
equity-based incentives that reward executives when the Company's Common
Stock price increases for all shareholders.
The annual compensation mix provides for base salaries, as well as the
opportunity to receive annual bonuses that are linked directly to financial
performance of the Company and, to varying extents, to individual
performance. This permits the Company to attract and retain talented
executives, but makes a substantial portion of an executive officer's annual
compensation dependent on the Company's performance.
The Company provides long-term equity-based compensation generally through
participation in the Fingerhut Companies, Inc. Stock Option Plan (the "Stock
Option Plan) and the Fingerhut Companies, Inc. 1995 Long-Term Incentive and
Stock Option Plan (the "1995 Stock Option Plan"). This assures that key
employees have a meaningful stake in the Company, the ultimate value of which
is dependent on the Company's long-term stock price appreciation, and that
the interests of employees are aligned with those of the shareholders.
The Company's compensation strategy is to: (i) target salaries at competitive
median levels, (ii) target bonus opportunities to provide total annual cash
compensation (salary plus bonus) that is aligned with relative performance --
top quartile pay for top quartile financial performance, median pay for
median financial performance and below median pay for below median financial
performance, and (iii) set annualized long-term incentive award opportunities
at market levels and tie them to shareholder value creation. The principles
established for the executive compensation program have guided the
Compensation Committee's decisions beginning in 1997.
POLICY ON DEDUCTIBILITY OF COMPENSATION. Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"), limits the tax deduction to $1 million
per year for compensation paid to the executive officers named in the "Summary
Compensation Table" unless certain requirements are met. The Compensation
Committee has carefully considered these requirements and the regulations and
has structured its programs so that bonus compensation and gains from exercises
of Company stock options will be exempt from the deduction limitations. The
Compensation Committee's present intention is to structure compensation to be
tax deductible; however, it retains the right to authorize compensation that
does not qualify for income tax deductibility.
<PAGE>
SALARIES. Salaries generally are intended to be competitive with the median
salaries paid by corporations similar in size to the Company, as indicated in
independent salary surveys. The Company competes for talented executives with a
wide variety of corporations, which are not necessarily the same as those
referenced in the performance graph. Recently recruited executive officers' base
salaries reflect their positions and experience, as well as the compensation
package required to attract them to the Company in light of market factors.
Executive officer salaries are not based on the Company's performance. Annual
merit increases are based on a subjective evaluation of an officer's
performance. As part of the annual budget process, the Company sets company-wide
guidelines for merit salary increases. These guidelines provided for 4% average
department-wide merit increases for exempt employees' salary reviews effective
during 1997. A majority of the executive officers received salary increases in
excess of the guidelines, including some increases related to the assumption of
additional responsibilities. The Compensation Committee increased the Chief
Executive Officer's 1997 salary to $700,000, effective April 28, 1997, from
$660,000 in 1996.
ANNUAL INCENTIVE COMPENSATION. A significant portion of the executive officers'
compensation is at risk each year in the form of variable annual incentive
bonuses under the Fingerhut Companies, Inc. and Subsidiaries 1997 Key Management
Incentive Bonus Plan (the "Bonus Plan") or the Fingerhut Companies, Inc. Annual
Incentive Bonus Plan (the "Annual Incentive Plan").
BONUS PLAN. The Bonus Plan is approved annually by the Compensation Committee
and is intended to provide incentives to management to achieve or exceed the
Company's financial goals for that year. All executive officers other than
the Chief Executive Officer, as well as all vice presidents and other
management-level employees, participated in the 1997 Bonus Plan. The 1997
Bonus Plan formula had four components: paid base salary, targeted bonus
percentage (based on job level), Company performance factor and individual
performance objectives. In addition, the Bonus Plan allows the Chief
Executive Officer to make discretionary bonus payments over and above the
defined formula for extraordinary performance or, in other cases, upon the
recommendation of the Compensation Committee where determined to be
warranted. The proportion of the targeted bonus based on the Company's
financial performance ranged from 65% for vice presidents to 70% for senior
executive officers other than the Chief Executive Officer. The 1997 Bonus
Plan established target and maximum bonuses of 75% and 100%, respectively, of
paid base salary for vice presidents, 100% and 134%, respectively, of paid
base salary for senior vice presidents and 125% and 168%, respectively, of
paid base salary for the Chief Operating Officer. The Company performance
factor was based on the Company's 1997 earnings per share and resulted in a
133% of target company performance factor.
An executive officer who is an officer of Metris, participated in a bonus plan
similar to the Bonus Plan. Under the Metris plan, the company performance factor
was based on Metris' 1997 net income and resulted in maximum payouts.
ANNUAL INCENTIVE PLAN. The Company wishes to ensure that bonuses paid to
executive officers satisfy the requirements for deductibility under Section
162(m) of the Code. Accordingly, the Compensation Committee adopted the
Annual Incentive Plan, which was approved by the shareholders in 1994. The
Subcommittee administers the Annual Incentive Plan, determines the annual
participation and performance targets, and approves all bonuses paid to
executive officers of the Company pursuant to such plan. All of the members
of the Subcommittee are "outside directors" as defined in the regulations
promulgated under Section 162(m) of the Code. The Chief Executive Officer was
the only 1997 participant. As with the Bonus Plan, the Annual Incentive Plan
used a Company performance schedule based on the Company's 1997 earnings per
share. It provided for a target bonus of 125% of paid base salary and a
maximum bonus of 168% of paid base salary, calculated solely on the Company's
1997 earnings per share. The Chief Executive Officer received a bonus of
$1,154,031 for 1997.
<PAGE>
LONG-TERM INCENTIVE COMPENSATION. The Company's stock-based incentive plans
are designed to align a significant portion of the executive compensation
program with long-term shareholder interests. The Compensation Committee
grants stock options to executive officers and other key employees when they
commence employment with the Company or when they are promoted. The number of
shares covered by a grant reflects the level of job responsibility and, in
some cases, subjective factors based on recommendations of the Chief
Executive Officer. In addition, the Compensation Committee has a program of
annual grants.
1995 STOCK OPTION PLAN. The 1995 Stock Option Plan permits a variety of
stock-based grants and awards and gives the Committee flexibility in
tailoring its long-term compensation programs. During 1997, the Compensation
Committee granted incentive stock options, nonqualified stock options and
restricted stock under the 1995 Stock Option Plan.
STOCK OPTION PLAN. The Stock Option Plan permits grants of incentive stock
options and non-qualified stock options, although the Compensation Committee
has granted only non-qualified options under this Plan. These options are
granted with an exercise price at the fair market value on the grant date,
vest over a five-year period and expire after ten years.
In July 1997, the Compensation Committee granted a total of 681,472 incentive
stock options and nonqualified stock options under the 1995 Stock Option Plan to
all executive officers other than the chief executive officer, all non-executive
officers and all director and manager-level employees under the annual grant
program. In connection with this grant, executive officers were granted a total
of 217,842 options. These options had exercise prices at fair market value on
the grant date. The options granted under the 1995 Option Plan vest over a
three-year period and expire after ten years. In 1997, the Compensation
Committee granted to the Chief Executive Officer a total of 270,000 options,
substantially all under the 1995 Stock Option Plan.
In 1997, the shareholders approved an amendment to the 1995 Stock Option Plan to
increase the maximum shares available for awards or grants by 2,000,000 shares
(from 2,250,000 to 4,250,000).
METRIS OPTIONS. An executive officer who is the chief executive officer of
Metris was granted options to purchase the common stock of Metris. These
options were granted by the Metris compensation committee.
JOHN M. MORRISON EDWIN C. GAGE KENNETH A. MACKE CHRISTINA L. SHEA
CHAIRMAN MEMBER MEMBER MEMBER
COMPENSATION COMPENSATION COMPENSATION COMPENSATION
COMMITTEE COMMITTEE COMMITTEE COMMITTEE
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Edwin C. Gage, Kenneth A.
Macke, John M. Morrison and Christina L. Shea. Stanley S. Hubbard, a member
of the Board of Directors, was a member of the Compensation Committee until
April 1997 and Richard M. Kovacevich, a former member of the Board of
Directors, was a member of the Compensation Committee until February 1997.
For a number of years, the Company has had regular banking relationships with
Norwest Bank Minnesota, N.A. ("Norwest Bank"), a subsidiary of Norwest
Corporation. Mr. Kovacevich is President and Chief Executive Officer of
Norwest Corporation. Norwest Bank is one of the lending banks and is a letter
of credit issuing bank under the Company's revolving credit and letter of
credit facility and is also the registrar and transfer agent with respect to
the Common Stock. In addition, the Company and its subsidiaries maintain a
number of depository and checking accounts with Norwest Bank and its
affiliates. The Company paid Norwest Bank approximately $5,506,000 with
respect to these services and relationships for 1997. The Company believes
the terms of the various banking relationships, and the fees paid, are at
least as favorable to the Company as it could have received from an unrelated
third party. The amount paid is not material to either the Company or Norwest
Corporation.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth cash and noncash compensation for each of the
last three fiscal years to the Chief Executive Officer, each of the four
other most highly compensated executive officers who were serving as
executive officers at December 26, 1997:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
AWARDS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING ALL OTHER
COMPENSATION AWARDS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(A) ($)(B) (#) ($)(C)
<S> <C> <C> <C> <C> <C> <C> <C>
Theodore Deikel 1997 $ 686,923 $1,154,031 $521,538 $ 0 270,000 $ 21,660
Chief Executive Officer 1996 $ 640,385 $ 0 $627,348 $599,995 275,000(d) $ 15,840
1995 $ 576,814 $ 519,132 $530,797 $ 0 250,000 $ 16,980
John D. Buck(e) 1997 $ 241,539 $ 539,625 $ 47,706 $ 0 32,500 $ 20,815
Senior Vice President, 1996 $ 186,923 $ 75,000 $ 61,521 $206,250 100,000(d) $ 19,516
Operations, Information 1995 -- -- -- -- -- --
Services and Human
Resources
Peter G. Michielutti(f) 1997 $ 276,923 $ 500,000 $ 64,951 $ 0 105,000 $ 21,164
Executive Vice President, 1996 $ 235,096 $ 25,000 $ 58,523 $180,001 75,000(d) $ 13,927
Chief Operating Officer 1995 $ 108,173 $ 143,000 $ 44,188 $ 0 30,000 $ 47,582
Fingerhut Corporation
Michael P. Sherman(g) 1997 $ 263,077 $ 365,451 $126,779 $152,344 28,000 $ 20,973
Senior Vice President, 1996 $ 163,462 $ 125,000 $172,824 $ 0 140,000(d) $181,539
Business Development, 1995 -- -- -- -- -- --
General Counsel
Ronald N. Zebeck(h) 1997 $500,264(i) $ 800,000 $ 37,615 $ 0 200,000 $ 10,210
Executive Vice President, 1996 $ 387,773 $ 600,000 $ 79,281 $290,084 656,075(d) $ 15,840
Chief Executive Officer 1995 $ 358,481 $ 478,348 $ 37,668 $ 0 105,000 $ 16,980
Metris Companies Inc.
</TABLE>
(a) Amounts represent perquisites or other personal benefits, cash payments
designated as an auto allowance, tax reimbursement payments and cash
payments under the Fingerhut Corporation Profit Sharing Excess Plan. In
accordance with rules of the Securities and Exchange Commission, perquisites
and other personal benefits totaling less than $50,000 or 10% of a named
executive officer's salary and bonus have been omitted. The perquisites or
other personal benefits that exceed 25% of the amounts listed in this column
for any named executive officer are: $395,779 for 1997, $415,436 for 1996
and $416,019 for 1995 for interest paid by the Company on Mr. Deikel's
personal loan to pay the income tax liability on his 1992 stock option
exercise; and $44,283 for 1997 for principal and interest forgiven on a loan
to Mr. Sherman from the Company.
(b) The Company awarded restricted stock to the named executives (other than Mr.
Sherman) on February 14, 1996 with the following vesting schedule: 25% of
the shares vested on March 31, 1996 (with additional transfer restrictions
until August 1996), 25% vested on March 31, 1997 and, subject to continued
employment, the remaining 50% will vest on August 31, 1998. The number of
shares awarded were: Theodore Deikel, 43,636 shares; Ronald Zebeck, 21,097
shares; Peter G. Michielutti, 13,091 shares; John D. Buck, 15,000 shares;
and Michael P. Sherman, no shares. The Company pays dividends on both the
vested and unvested portion of the restricted stock. The number of shares
and value of aggregate restricted stock holdings of the named executive
officers at December 26, 1997 were: Theodore Deikel, 43,636 shares,
$864,538; Ronald Zebeck, 21,097 shares, $247,890; Peter G. Michielutti,
6,546 shares, $127,910; John D. Buck, 15,000, $297,188 shares; and Michael
P. Sherman, no shares. The Company awarded 7,500 shares of restricted stock
to Mr. Sherman on January 22, 1998, as part of his 1997 incentive
compensation. These shares vest in three equal annual installments.
Dividends are paid on each of these restricted stock awards.
(c) Amounts disclosed in this column for 1997, except as to Mr. Zebeck, include
discretionary profit sharing contributions of $12,320 under the Fingerhut
Corporation Profit Sharing and 401(k) Savings Plan, distributions of $6,400
under the Fingerhut Corporation Fixed Contribution Retirement Plan, a 401(k)
matching distribution and premiums paid on term life insurance of $540. For
each of Messrs. Deikel, Buck, Michielutti and Sherman,
<PAGE>
the Company matched contributions to the 401(k) in the amounts of $2,400,
$1,555, $1,904 and $1,753, respectively. The 1997 amount for Mr. Zebeck
includes a discretionary profit sharing contribution of $4,800 under the
Metris Retirement Plan, a matching 401(k) distribution by Metris of $4,750
and premiums paid on life insurance of $660. In 1998, the Compensation
Committee approved a distribution equivalent to the contribution that each
of Messrs. Buck, Michielutti and Sherman would have received but for the
one-year waiting period under each of the Profit Sharing and 401(k) Savings
Plan and the Fixed Contribution Retirement Plan. In addition, the 1995
amount for Mr. Michielutti and the 1996 amount for Mr. Sherman include
relocation expenses of $35,453 and $164,506, respectively.
(d) Includes options to purchase the common stock of Metris, as follows: 275,000
shares for Mr. Deikel, 50,000 shares for Mr. Michielutti and 5,000 shares
for each of Messrs. Buck and Sherman, 200,000 for Mr. Zebeck in 1997 and
656,075 for Mr. Zebeck in 1996. The 1996 grant to Mr. Zebeck reflects the
conversion of the financial services business equity portion of his 1994
tandem option agreement to options to purchase Metris Common Stock. Each of
these options were granted by the Metris compensation committee
(e) Mr. Buck commenced employment with the Company in March 1996. As part of his
offer of employment, he received a hiring bonus at the time of his
employment with the Company, which is included under the Bonus heading in
the table.
(f) Mr. Michielutti commenced employment with the Company in July 1995. As part
of his offer of employment, he received a hiring bonus at the time of his
employment with the Company, which is included under the Bonus heading in
the table.
(g) Mr. Sherman commenced employment with the Company in May 1996. As part of
his offer of employment, he received a hiring bonus at the time of his
employment with the Company, which is included under the Bonus heading in
the table.
(h) Mr. Zebeck's compensation is paid by Metris and, following the October 1996
initial public offering, determined by the Metris compensation committee.
(i) Amount includes $29,110 representing a one-time payout of accrued vacation
due to a change in vacation policy.
PENSION PLAN. Fingerhut Corporation ("Fingerhut") maintains a noncontributory
defined benefit plan (the "Pension Plan") for substantially all of its
non-union employees (and the non-union employees of certain of the Company's
other subsidiaries) who have completed at least one year of service. Under
the Pension Plan, the current service pension credit of a participant for
each year is equal to the sum of .82% of his or her certified earnings not in
excess of Social Security covered compensation for that plan year and 1.40%
of the balance of his or her certified earnings for that year. Retirement
benefits under the Pension Plan are the sum of the pension credits for each
year of service. Participants are 100% vested after completion of at least
five years of service or if they are at least age 65 upon termination of
employment. The Pension Plan also provides reduced early retirement benefits
for participants who have attained age 55 and have at least five years of
service. In addition, the Company adopted a nonqualified supplemental pension
plan to provide certain officers the benefits that would be payable under the
Pension Plan but for the reduction in the limitation on compensation imposed
by Code section 401(a)(17) and based on the limitation in effect under Code
section 415(b)(1)(A). The estimated combined annual benefit payable at age 65
for the named executives under the qualified plan and the nonqualified plan
is: Mr. Deikel, $68,861; Mr. Buck, $54,638; Mr. Michielutti, $85,132; Mr.
Sherman, $69,837; and Mr. Zebeck, $1,755.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The Compensation Committee adopted on
February 14, 1996, a Supplemental Executive Retirement Plan (the "SERP") that
covers officers or other senior management employees of Fingerhut selected
for participation by the Compensation Committee. Under the SERP, Fingerhut
will pay a benefit to a participant whose employment relationship with
Fingerhut is completely severed either (a) at or after age 65 with five years
of service or (b) at or after age 55, if the participant has five years of
service, excluding service prior to January 1, 1996, and the sum of the
participant's age and total years of service equals at least 70. Service
includes service to Fingerhut, and any other service the Compensation
Committee, in its discretion, recognizes. The annual retirement benefit
payable under the SERP equals 60% of the average of the participant's highest
three salary and bonus years with Fingerhut, multiplied by a fraction (not
greater than one) equal to (x) the participant's years of service over (y)
30, and subtracting the offset. The offset is the sum of (i) the
participant's Social Security benefit, (ii) the amount of the participant's
benefit from the Fingerhut Corporation Pension Plan and the Fingerhut
Corporation Pension Excess Plan, (iii) 75% of the participant's balance in
the Fingerhut Corporation Profit Sharing Plan, and (iv) the dollars credited
or paid to the participant under the Fingerhut Corporation Profit Sharing
Excess Plan. Upon a change in control of the Company, a
<PAGE>
termination of the participant's employment would be deemed to have occurred
and, for purposes of determining eligibility for benefits, a participant that is
at least 65 years old would be deemed to have completed five years of service.
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 completed five years of service. Payments under the SERP will be
in the form of a single lump sum that is the actuarial equivalent of annual
benefits payable, to be made as soon as practicable after the end of the year in
which employment ends. The estimated annual benefits payable under the SERP upon
retirement at age 65 for the Chief Executive Officer and each of the other named
executive officers who are participants in the SERP are as follows: Mr. Deikel,
$406,398; Mr. Buck, $0; Mr. Michielutti, $0; and Mr. Sherman, $0. One actuarial
assumption underlying these estimates is that these officers will remain
participants in the SERP. Mr. Zebeck, as Chief Executive Officer of Metris, is
not a participant in the SERP. The estimates are also based on the assumptions
that current salaries remain unchanged. The following table shows information
concerning stock options granted by the Company and Metris during the fiscal
year ended December 26, 1997 for the named executives.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANT DATE
OPTIONS GRANTED TO EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED (#) EMPLOYEES IN 1997 ($/SHARE) DATE VALUE ($)(A)
<S> <C> <C> <C> <C> <C>
Theodore Deikel 250,000(b) 22.3% $20.3125 8/20/07 $2,680,550
20,000(c) 1.8% $20.3125 9/20/07 $ 214,440
John D. Buck 32,500(d) 2.9% $20.4375 7/28/07 $ 339,085
Peter G. Michielutti 25,000(e) 2.2% $14.75 4/24/07 $ 198,915
25,000(f) 2.2% $14.75 5/24/07 $ 198,915
55,000(d) 4.9% $20.4375 7/28/07 $ 573,837
Michael P. Sherman 28,000(d) 2.5% $20.4375 7/28/07 $ 292,135
Ronald N. Zebeck 200,000(g) 62.8% $39.69 8/25/07 $5,650,600
</TABLE>
(a) 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
method. The actual gains, if any, on stock option exercises will depend on
the future performance of the Common Stock and the Metris common stock.
(b) These options were granted on August 20, 1997, under the 1995 Stock Option
Plan and vest in three equal annual installments. The percent is of the
total options granted by the Company in 1997. For the grant date present
value, the following assumptions were used: 1.1% dividend yield, 44.41%
expected volatility, 6.22% risk-free interest rate and 7.32 years expected
lives.
(c) These options were granted on August 20, 1997, under the Stock Option Plan
and vest in 20% annual increments. The percent is of the total options
granted by the Company in 1997. For the grant date present value, the
following assumptions were used: 1.1% dividend yield, 44.41% expected
volatility, 6.22% risk-free interest rate and 7.32 years expected lives.
(d) These options were granted on July 28, 1997, under the 1995 Stock Option
Plan and vest in three equal annual installments. The percent is of the
total options granted by the Company in 1997. For the grant date present
value, the following assumptions were used: 1.1% dividend yield, 44.49%
expected volatility, 6.17% risk-free interest rate and 7.32 years expected
lives.
(e) These options were granted on April 24, 1997, under the 1995 Stock Option
Plan and vest in three equal annual installments. The percent is of the
total options granted by the Company in 1997. For the grant date present
value, the following assumptions were used: 1.1% dividend yield, 44.03%
expected volatility, 6.87% risk-free interest rate and 7.32 years expected
lives.
(f) These options were granted on April 24, 1997, under the Stock Option Plan
and vest in three equal annual installments. The percent is of the total
options granted by the Company in 1997. For the grant date present value,
the following assumptions were used: 1.1% dividend yield, 44.03% expected
volatility, 6.87% risk-free interest rate and 7.32 years expected lives.
(g) These options were granted by Metris under the Metris Companies Inc.
Long-Term Incentive and Stock Option Plan. They vest 50% on the second
anniversary of the grant date and 50% on the fourth anniversary of the grant
date. The percent is of the total options granted by Metris in 1997. For the
grant date present value, the following assumptions were used: .11% dividend
yield, 68.2% expected volatility, 6.34% risk-free interest rate and 7 years
expected lives.
<PAGE>
The following table indicates for each of the named executives information
concerning stock options exercised during 1997 and the number and value of
exercisable and unexercisable in-the-money options granted by the Company and
Metris as of December 26, 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/26/97 (#) 12/26/97 ($)(A)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Theodore Deikel -- -- 4,585,868 $59,156,779
353,334 $ 401,045
John D. Buck -- -- 25,833 $ 207,759
106,667 $ 514,846
Peter G. Michielutti 5,000 $29,690 20,000 $ 103,750
185,000 $ 1,127,500
Michael P. Sherman -- -- 27,000 $ 254,188
141,000 $ 806,750
Ronald N. Zebeck -- -- 558,372 $13,537,343
402,703 $ 4,839,452
</TABLE>
(a) The value of unexercised in-the-money options represents the aggregate
difference between the market value on December 26, 1997, based on the
closing price of the Common Stock as reported on the New York Stock Exchange
or the closing price of Metris common stock as reported on the Nasdaq
National Market, as the case may be, and the applicable exercise prices.
ARRANGEMENTS WITH MANAGEMENT. In consideration of Mr. Deikel's agreement to
exercise stock options in December 1992, the Company agreed to pay Mr. Deikel
additional compensation in an amount equal to the interest incurred on the
personal loan taken out by him to fund the income tax liability incurred as a
result of his exercise of the stock options, although not to pay a "tax gross
up" on the amount of the additional compensation. The Company will pay such
compensation until December 21, 1999, whether or not Mr. Deikel is an
officer, director or employee of the Company. The proceeds of any sales of
the shares acquired in the option exercise will be deemed to repay the loan
and reduce the Company's obligation.
CHANGE OF CONTROL ARRANGEMENTS. The Company has entered into Change of
Control Severance Agreements (each, a "Severance Agreement") with certain
executive officers of the Company, including the named executive officers,
which provide for a three year and three month term that is extended to a
date that is the one year anniversary of a "Change of Control" or "Imminent
Change of Control" event (as defined in the Severance Agreement); provided,
however, that Mr. Zebeck's Severance Agreement will terminate at such time as
a proposed spin-off of shares of Metris held by the Company occurs. Such
proposed spin-off is subject to the approval of the Board of Directors, the
receipt of a ruling from the Internal Revenue Service and market conditions.
Each Severance Agreement provides to eligible executive officers guaranteed
salaries, bonuses, benefits and severance payments upon the occurrence of
certain terminations of employment during the two-year period following a
Change of Control event. Each Severance Agreement states that, upon the
occurrence of a Change of Control event, each applicable executive officer
will be paid an annual salary at least equal to 12 times such officer's
highest monthly base salary paid during the 12 month period prior to the
Change of Control event (the "Guaranteed Base Salary"). In addition, such
executive officer will be entitled to receive a bonus payment in an amount
calculated as if such officer achieved all performance goals as set forth in
a Company bonus plan or arrangement or, alternatively, a higher amount based
on such officer's actual performance under any existing Company bonus plan or
arrangement (the "Guaranteed Bonus"). Such
<PAGE>
executive officer will also be entitled to participate in all Company welfare
benefit, incentive, savings and retirement plans and to receive other Company
fringe benefits on terms no less favorable than the most favorable terms offered
to other executive officers as in effect during the 90 day period preceding to
the date of the applicable Change of Control event. All outstanding stock
options granted to the executive officer will become fully vested upon the
occurrence of a Change of Control event or, to the extent such options are
forfeited, the executive officer 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.
Each Severance Agreement provides that eligible executive officers
will be entitled to receive severance payments upon (i) termination of
employment by the Company for reasons other than "Cause" (as defined in the
Severance Agreement), (ii) termination of employment by such executive
officer for "Good Reason" (as defined in the Severance Agreement) or (iii)
termination of employment by such executive officer at any time during the
thirteenth month following the date of the applicable Change of Control
event. Eligible executive officers will be entitled to receive (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 three
times the officer's Guaranteed Base Salary plus the highest Guaranteed Bonus
paid to such officer during the preceding two years, (c) a pro rata
Guaranteed Bonus for the year of termination, (d) all deferred amounts under
any Company nonqualified 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 maintained by the Company and (f) an amount equal to fees
and costs charged by an outplacement firm retained by the executive officer
to provide outplacement services unless the Company has paid such fees and
costs directly to the outplacement firm. In addition, the Company has agreed,
for a three 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 Severance Agreement provides that the Company shall make an additional
"gross up payment" to the applicable executive officer who receives payments in
connection with the Severance Agreement to offset fully the effect of any excise
tax imposed under Section 4999 of the Code or any similar tax payable under
federal, state or local law. The Company will not be able to deduct the entire
amount of payments made by the Company to executive officers under the Severance
Agreement that give rise to an excise tax imposed on all or a portion of such
payments under Section 4999 of the Code.
<PAGE>
PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
The Audit Committee has recommended, and the Board of Directors has approved,
the selection of KPMG Peat Marwick LLP, as independent auditors of the
Company and its subsidiaries for the fiscal year ending December 25, 1998.
KPMG Peat Marwick LLP has served as the Company's independent auditors since
1989.
Representatives of KPMG Peat Marwick 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 the financial statements of the Company either orally at the
Annual Meeting or in writing before the Annual Meeting.
A vote of a majority of all shares present in person or by proxy and voting
at the Annual Meeting is necessary for ratification of KPMG Peat Marwick LLP
as the Company's independent auditors for the fiscal year ending December 15,
1998.
THE BOARD OF DIRECTORS RECOMMENDS THE RATIFICATION OF THE APPOINTMENT OF KPMG
PEAT MARWICK LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL YEAR ENDING
DECEMBER 25, 1998.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following information concerning ownership of the Company's Common Stock
is furnished as of February 28, 1998 (except as otherwise indicated) with
respect to all persons known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock. Beneficial ownership has been
determined for this purpose in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934, under which 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.
NUMBER OF SHARES
NAME BENEFICIALLY OWNED PERCENT OF CLASS
Pioneering Management Corporation 2,690,000(1) 5.8%
60 State Street
Boston, MA 02109
ICM Asset Management, Inc. 2,459,133(2) 5.3%
601 W. Main Avenue
Spokane, WA 99201
NewSouth Capital Management, Inc. 4,283,085(3) 9.2%
1000 Ridgeway Loop Road
Suite 233
Memphis, TN 38120
Theodore Deikel 5,741,348(4) 11.3%
4400 Baker Road
Minnetonka, MN 55343
(1) Based on a Schedule 13G dated January 22, 1997 prepared by Pioneering
Management Corporation.
(2) Based on a Schedule 13G dated February 10, 1998 prepared by ICM Asset
Management.
(3) Based on a Schedule 13G dated February 12, 1998 prepared by NewSouth Capital
Management, Inc.
(4) Includes 4,310,868 shares that Mr. Deikel has the right to acquire within 60
days of February 28, 1998 through the exercise of stock options and 6,191
shares held by Mr. Deikel's son, as to which he disclaims beneficial
ownership.
<PAGE>
The following information concerning ownership of the Company's Common Stock
(Metris common stock in certain cases) is furnished as of February 28, 1998
with respect to (i) each of the current directors and nominees for director
of the Company; (ii) each of the named executive officers and (iii) all
directors and executive officers as a group. Beneficial ownership has been
determined for this purpose in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934, under which 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.
<TABLE>
<CAPTION>
COMMON STOCK METRIS COMMON STOCK
NUMBER OF SHARES PERCENT OF NUMBER OF SHARES PERCENT OF
NAME BENEFICIALLY OWNED CLASS BENEFICIALLY OWNED CLASS
<S> <C> <C> <C> <C>
Theodore Deikel 5,741,348(1) 11.3% 275,000(2) 1.4%
Wendell R. Anderson 10,000(3) * 5,000 *
Edwin C. Gage 63,800(4) *
Stanley S. Hubbard 10,000(3) *
Kenneth A. Macke 20,000(3) *
Dudley C. Mecum 11,000(3) * 1,000 *
John M. Morrison 105,000(3) *
Christina L. Shea 5,000(3) *
John D. Buck 70,350(5) *
Peter G. Michielutti 40,079(5) * 1,900
Michael P. Sherman 35,191(5) * 2,000 *
Ronald N. Zebeck 67,549(5) * 649,607(7) 3.3%
All directors and executive officers as a
group (19 persons) 6,525,641(6) 12.7% 934,508(7) 4.6%
</TABLE>
* Less than 1% of the outstanding Common Stock.
(1) Includes 4,310,868 shares that Mr. Deikel has the right to acquire within 60
days of February 28, 1998 through the exercise of stock options and 6,191
shares held by Mr. Deikel's son, as to which he disclaims beneficial
ownership.
(2) Includes 275,000 shares that Mr. Deikel has the right to acquire within 60
days of February 28, 1998 through the exercise of stock options.
(3) The numbers of shares beneficially owned by each of Messrs. Anderson,
Hubbard and Mecum include 10,000 shares that such directors have the right
to acquire within 60 days of February 28, 1998 through the exercise of stock
options. The numbers of shares beneficially owned by each of Messrs.
Morrison and Macke and Ms. Shea include 5,000 shares that such directors
have the right to acquire within 60 days of February 28, 1998 through the
exercise of stock options. The number of shares beneficially owned by Ms.
Shea does not include shares held in her deferred stock account pursuant to
her election under the Fingerhut Companies, Inc. Directors' Retainer Stock
Deferral Plan.
(4) Share ownership shown includes 10,000 shares that Mr. Gage has the right to
acquire within 60 days of February 28, 1998 through the exercise of stock
options and 6,900 shares held by Mr. Gage's wife, as to which he disclaims
beneficial ownership.
(5) The numbers of shares beneficially owned by each of Messrs. Buck,
Michielutti, Sherman and Zebeck include 39,166, 33,333, 27,000 and 55,000
shares, respectively, that such officers have the right to acquire within 60
days of February 28, 1998, through the exercise of stock options.
(6) Includes 4,793,418 shares that the directors and executive officers have the
right to acquire within 60 days of February 28, 1998 through the exercise of
stock options.
(7) Includes 639,607 shares that Mr. Zebeck has the right to acquire within 60
days of February 28, 1998 through the exercise of stock options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. The Company has
adopted procedures to assist its directors and executive officers in
complying with Section 16(a) of the Securities Exchange
<PAGE>
Act of 1934, which include assisting the director or officer in preparing forms
for filing. The Company believes that all of its executive officers and
directors complied in 1997 with all applicable stock ownership reporting
requirements, except that James M. Wehmann failed to file a Form 4 on a timely
basis reporting a sale in connection with an option exercise transaction, Peter
G. Michielutti made a gift of shares and was granted stock options neither of
which transactions were reported on a Form 5 and Theodore Deikel made a gift of
shares which was inadvertently not reported on his Form 5 for the fiscal year
ended December 26, 1997. Amended Forms reporting the transactions were filed
promptly after the oversights were discovered.
ARRANGEMENTS AND TRANSACTIONS WITH RELATED PARTIES
Wendell Anderson, a member of the Company's Board of Directors, provides
certain governmental and regulatory affairs consulting services to the
Company, for which he was paid $144,000 in 1997.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals of shareholders intended to be presented at the next annual meeting
of shareholders must be received in the Company's principal executive offices
no later than November 30, 1998 for inclusion in the Company's proxy
materials. Proposals should be mailed to Fingerhut Companies, Inc., 4400
Baker Road, Minnetonka, Minnesota 55343, Attention: Secretary.
PLEASE SIGN AND DATE THE ENCLOSED PROXY (OR VOTING INSTRUCTIONS CARD) AND
RETURN IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED FOR THAT PURPOSE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael P. Sherman
Michael P. Sherman
Secretary
March 31, 1998
<PAGE>
PROXY
FINGERHUT COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints THEODORE DEIKEL and MICHAEL P. SHERMAN as
Proxies each with the power to appoint his substitute, and hereby authorizes
them to vote all of the shares of Common Stock of Fingerhut Companies, Inc.
the undersigned is entitled to vote at the Annual Meeting of Shareholders to
be held on Wednesday, May 6, 1998, or any adjournment thereof, as specified
below on the following matters which are further described in the Proxy
Statement related hereto:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below
(EXCEPT AS MARKED TO THE CONTRARY)
[ ] WITHHOLD AUTHORITY
TO VOTE FOR ALL NOMINEES LISTED BELOW
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH HIS OR HER NAME IN THE LIST BELOW:
STANLEY S. HUBBARD KENNETH A. MACKE CHRISTINA L. SHEA
2. PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 25, 1998:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY BE BROUGHT BEFORE THE MEETING.
(OVER)
<PAGE>
(CONTINUED FROM OTHER SIDE)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MATTER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE NOMINEES NAMED IN ITEM 1 AND FOR PROPOSAL 2. Please
sign exactly as name appears below. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee
or guardian, please give full title as such. If a corporation, please sign in
full corporate name by the president or other authorized officer. If a
partnership, please sign in partnership name by partner or other authorized
person.
___________________________________
Signature
___________________________________
Signature if held jointly
Dated: _______________________ 1998
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD
PROMPTLY IN THE ENCLOSED ENVELOPE.
FINGERHUT COMPANIES, INC.
1998 ANNUAL MEETING
Minneapolis Hilton
1001 Marquette Avenue South
Minneapolis, Minnesota
MAY 6, 1998
11:00 A.M. CENTRAL TIME
[LOGO] FINGERHUT COMPANIES, INC.
