METRIS COMPANIES INC.
LONG-TERM INCENTIVE AND STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
This Non-Qualified Stock Option Agreement is made and entered into
effective as of October 25, 1996 by and between Xxxxxx X. Xxxxxx (the
"Optionee") and Metris Companies Inc., a Delaware corporation, with its
principal business office located in St. Louis Park, Minnesota (the
"Company").
WHEREAS, Optionee and Fingerhut Companies, Inc. ("Fingerhut") entered
into that certain Stock Option and Valuation Appreciation Rights Agreement
dated as of March 21, 1994, as amended dated October 25, 1996 (collectively
the "VAR"); and
WHEREAS, by action of the Board of Directors dated October 24, 1996, the
Company assumed Fingerhut's obligations under the VAR with respect to the
grant of options to purchase common stock of the Company and the Compensation
Committee (the "Committee") of the Board of Directors of the Company (the
"Board") desires to provide that such option to purchase shares of common
stock of the Company will be pursuant to the provisions of the Metris
Companies Inc. Long-term Incentive and Stock Option Plan (the "Plan") and
this Non-Qualified Stock Option Agreement (the "Agreement").
NOW, THEREFORE, for and in consideration of the mutual covenants and
promises contained herein, and for other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. GRANT OF OPTION. In accordance with the VAR, attached hereto and
incorporated herein by reference, and in fulfillment of its obligations
thereunder, the Company hereby provides to Optionee the option (the "Option")
to purchase an aggregate of Six Hundred Fifty-Six Thousand Seventy-Five
(656,075) shares (the "Shares") of common stock of the Company (the "Common
Stock"), subject to the terms and conditions set forth herein and in the
Plan. Any conflicts between the terms and interpretation of this Agreement
and the VAR, shall be governed by the VAR.
2. OPTION PRICE. In accordance with the VAR, the purchase price of
the Shares subject to the Option (the "Option Price") shall be $2.76 per
share, subject to adjustment as provided herein.
3. TERM OF OPTION; TIME OF EXERCISE
3.1 In accordance with the VAR, the term of the Option shall be for a
period ending on the earlier of (A) March 21, 2004 or (B) the date optionee
exercises any of the tandem options
to purchase the common stock of Fingerhut granted pursuant to the VAR. In
accordance with the VAR, the Option shall be exercisable according to the
following schedule:
Date Vested Percent
---- --------------
March 21, 1997 73.74%
March 21, 1998 97.49%
March 21, 1999 100.00%
3.2 This Option shall not under any circumstances be exercisable
after, and this Agreement and Option shall terminate as to all unexercised
Shares at, 5:00 p.m. (Minnesota time) on March 21, 2004 (the "Expiration
Date"), unless terminated prior thereto pursuant to the provisions of Section
3.1 or Section 5 hereof.
3.3 Notwithstanding the vesting provisions contained in Section 3.1
hereof, but subject to the other terms and conditions set forth herein, the
Option may be exercised in full immediately following the date of a "Change
in Control" (as hereinafter defined). For purposes of this Agreement, the
following terms shall have the definitions set forth below:
(a) "Change in Control" shall mean:
(i) a change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such reporting
requirement; or
(ii) the public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 13(d)
of the Exchange Act) by the Company or any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) other than Fingerhut Companies,
Inc. ("Fingerhut") or any of Fingerhut's affiliates that such person has
become the "beneficial owner" (as defined in rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of securities of the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities at any time when Fingerhut beneficially owns less than
50% of the combined voting power of the Company's then outstanding
securities; PROVIDED, HOWEVER, that notwithstanding the foregoing, no Change
of Control shall be deemed to have occurred for purposes of this Agreement by
reason of ownership of 30% or more of the total voting capital stock of the
Company then issued and outstanding by any subsidiary of the Company or any
employee benefit plan of the Company or of any subsidiary of the Company or
any entity holding shares of the Common Stock organized, appointed or
established for, or pursuant to the terms of, any such plan (any such person
or entity described in this proviso is referred to herein as a "Company
Entity"); or
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(iii) the announcement of a tender offer by any person or entity (other
than a Company Entity) for 30% or more of the Company's voting capital stock
then issued and outstanding at any time when Fingerhut beneficially owns less
than 50% of the Company's voting capital stock, which tender offer has not
been approved by the Board, a majority of the members of which are Continuing
Directors (as hereinafter defined), and recommended to the shareholders of
the Company; or
(iv) the Continuing Directors (as hereinafter defined) cease to
constitute a majority of the Company's Board of Directors; or
(v) the shareholders of the Company approve (x) any consolidation or
merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Company stock would be converted
into cash, securities or other property, other than a merger of the Company
in which shareholders immediately prior to the merger have the same
proportionate ownership of stock of the surviving corporation immediately
after the merger; (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company; or (z) any plan of liquidation or dissolution
of the Company; or
(vi) a Fingerhut Change of Control at any time Fingerhut beneficially
owns 30% or more of the combined voting power of the Company's then
outstanding securities.
(b) "Continuing Director" shall mean any person who is a member of the
Board of Directors of the Company, while such person is a member of the Board
of Directors, who is not an Acquiring Person (as defined below) or an
Affiliate or Associate (as defined below) of an Acquiring Person, or a
representative of an Acquiring Person or of any such Affiliate or Associate,
and who (x) was a member of the Board of Directors on the date of this
Agreement as first written above or (y) subsequently becomes a member of the
Board of Directors, if such person's initial nomination for election or
initial election to the Board of Directors is recommended or approved by a
majority of the Continuing Directors. For purposes of this subparagraph (ii),
"Acquiring Person" shall mean any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) who or which, together with all
Affiliates and Associates of such person, is the "beneficial owner" (as
defined in rule 13d-3 promulgated under the Exchange Act), directly or
indirectly of securities of the Company representing 30% or more of the
combined voting power of the Company's then outstanding securities, but shall
not include any Company Entity; and "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 promulgated
under the Exchange Act.
(c) "Fingerhut Change in Control" shall mean:
(i) a change in control of Fingerhut of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), whether or not Fingerhut is then subject to
such reporting requirement; or
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(ii) the public announcement (which, for purposes of this definition,
shall include, without limitation, a report filed pursuant to Section 13(d)
of the Exchange Act) by Fingerhut or any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) that such person has become the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of Fingerhut representing 30% or
more of the combined voting power of Fingerhut's then outstanding securities;
PROVIDED, HOWEVER, that notwithstanding the foregoing, no Fingerhut Change of
Control shall be deemed to have occurred for purposes of this Agreement by
reason of ownership 30% or more of the total voting capital stock of
Fingerhut then issued and outstanding by any subsidiary of Fingerhut or any
employee benefit plan of Fingerhut or of any subsidiary of Fingerhut or any
entity holding shares of the Common Stock organized, appointed or established
for, or pursuant to the terms of, any such plan (any such person or entity
described in this proviso is referred to herein as a "Fingerhut Entity"); or
(iii) the announcement of a tender offer by any person or entity (other
than a Fingerhut Entity) for 30% or more of Fingerhut's voting capital stock
then issued and outstanding, which tender offer has not been approved by the
Fingerhut Board of Directors, a majority of the members of which are
Fingerhut Continuing Directors (as hereinafter defined), and recommended to
the shareholders of Fingerhut; or
(iv) the Fingerhut Continuing Directors (as hereinafter defined) cease
to constitute a majority of Fingerhut's Board of Directors; or
(v) the shareholders of Fingerhut approve (x) any consolidation or
merger of Fingerhut in which Fingerhut is not the continuing or surviving
corporation or pursuant to which shares of Fingerhut stock would be converted
into cash, securities or other property, other than a merger of Fingerhut in
which shareholders immediately prior to the merger have the same
proportionate ownership of stock of the surviving corporation immediately
after the merger; (y) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of Fingerhut; or (z) any plan of liquidation or dissolution of
Fingerhut.
(vi) "Fingerhut Continuing Director" shall mean any person who is a
member of the Board of Directors of Fingerhut, while such person is a member
of the Fingerhut board of Directors who is not a Fingerhut Acquiring Person
(as defined below) or an Affiliate or Associate (as defined below) of a
Fingerhut Acquiring Person, or a representative of a Fingerhut Acquiring
Person or of any such Affiliate or Associate, and who (x) was a member of the
Fingerhut Board of Directors on the date of this Agreement as first written
above or (y) subsequently becomes a member of the Fingerhut Board of
Directors, if such person's initial nomination for election or initial
election to the Fingerhut Board of Directors is recommended or
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approved by a majority of the Fingerhut Continuing Directors. For purposes of
this subparagraph (ii), "Fingerhut Acquiring Person" shall mean any "person"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or
which, together with all Affiliates and Associates of such person, is the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly of securities of Fingerhut representing 30% or
more of the combined voting power of Fingerhut's then outstanding securities,
but shall not include any Fingerhut Entity; and "Affiliate" and "Associate"
shall have the respective meanings ascribed to such terms in Rule 12b-2
promulgated under the Exchange Act.
4. EXERCISE OF OPTION.
4.1 Subject to the terms and conditions of the Plan and this Section
4, this Option may be exercised by Optionee in whole or in part by written
notice to the Company and its principal executive office addressed to the
attention of its General Counsel. Such notice shall specify Optionee's
election to exercise this Option and the number of Shares in respect of which
it is being exercised, and shall be signed by Optionee. The Company shall
not, however, be required to sell or issue any Shares pursuant to this Option
if the issuance of such Shares would constitute a violation by Optionee or
the Company of any applicable law or regulation of any governmental authority.
4.2 Notice of exercise of the Option by Optionee shall be accompanied
by payment of the full Option Price of the Shares as to which the Option is
to be exercised, together with payment of the amount determined by the
Company to be necessary to satisfy any applicable federal, state and local
tax withholding requirements arising from the exercise of the Option. The
Company shall issue and deliver a certificate or certificates representing
such Shares as soon as practicable after such notice and payments are
received. Payment of such Option Price shall be made; (i) in cash or by check
or wire transfer, payable to the order of the Company; (ii) by tendering to
the Company shares of the Company's common stock having a fair market value
equal to the Option Price; or (iii) by providing the Company with a copy of
irrevocable instructions to a broker to deliver to the Company on the date of
exercise the amount of sale proceeds to pay the Option Price and any
withholding taxes and the Companies actual receipt of such proceeds. Payment
by the Optionee of any required amount of withholding for tax purposes shall
be made in cash or check payable to the order of the Company. The certificate
or certificates for the Shares as to which the Option shall have been so
exercised shall be registered in the name of Optionee (or Optionee's
Representative (as defined in Section 5)) or at the direction of Optionee or
such Representative and shall be delivered as aforesaid to or upon the
written order of such person or persons. In the event that the Option shall
be exercised by any person or persons other than Optionee, such notice shall
be accompanied by appropriate proof of the authority and right of such person
or persons to exercise the Option. All Shares purchased upon the exercise of
the Option as provided herein shall be fully paid and nonassessable.
5. TERMINATION OF OPTION.
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(a) This Option shall terminate and be subject to the following
special rules in the event the Optionee ceases to be employed by the Company
or one of its subsidiaries (as defined in the Plan):
(i) if Optionee's employment shall be terminated for any reason other
than death, disability or retirement, Optionee may, at any time before (x)
the expiration of ninety (90) days after such termination or (y) the
Expiration Date, whichever shall first occur, exercise this Option (A) to the
extent that the Option was exercisable on the date of the termination of
employment in the case of voluntary termination or (B) to the extent that the
Option was or would become exercisable on or before the expiration of such
ninety (90) day period in the case of involuntary termination; PROVIDED,
HOWEVER, that if, immediately prior to such termination of employment,
Optionee was an "officer" as defined in Rule 16a-1(f) promulgated under the
Exchange Act, the periods of exercisability referred to in clauses (A) and
(B) above (but not the acceleration of vesting referred to in clause (B)
shall be extended from ninety (90) days to seven (7) months after the date of
such termination;
(ii) if Optionee's employment shall be terminated by reason of
Optionee's death, this Option will become fully exercisable and may be
exercised by the Optionee's Representative (as defined below) at any time
before (a) the expiration of three (3) years after the date of death, or (b)
the Expiration Date, whichever shall first occur;
(iii) (A) if Optionee's employment shall be terminated by reason of
Optionee's disability (other than Total Disability), as may be determined by
the Committee in its sole and absolute discretion, this Option may be
exercised, to the extent that the Option was exercisable on the date of
disability, by Optionee or Optionee's guardian or legal representative, at
any time before (x) the expiration of one (1) year after the date Optionee's
employment was terminated by reason for such disability or (y) the Expiration
Date, whichever shall first occur; or (B) if Optionee's employment shall be
terminated by reason of Optionee's Total Disability, this Option will become
fully exercisable and may be exercised by Optionee or Optionee's guardian or
legal representative at any time before (x) the expiration of three (3) years
after the date Optionee's employment was terminated by reason of such
disability or (y) the Expiration Date, whichever shall first occur;
(iv) if the Optionee's employment shall be terminated by the
Optionee's Retirement (as defined below), this Option will become fully
exercisable and may be exercised by Optionee before (x) the expiration of
three years after such date, or (y) the Expiration Date, whichever shall
first occur; or
(v) if Optionee dies or become disabled (as may be determined by the
Committee in its sole and absolute discretion) during the time of
exercisability after termination of employment provided in clause (i) of this
Section 5(a), this Option may be exercised, to the extent that the Option was
exercisable on the date of death or disability; (x) in the case of death, by
the Optionee's Representative or (y) in the case of disability, by Optionee
or Optionee's guardian or
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legal representative, before (A) the expiration of one year after the date of
death or the onset of such disability, or (B) the Expiration Date, whichever
shall fist occur.
(b) Notwithstanding the provisions contained in Section 5(a) above,
but subject to the other terms and conditions set forth herein, in the event
that, within one year following a Change in Control, Optionee's employment is
terminated for any reason (including Optionee's voluntary termination),
Optionee shall have the right to exercise the Option in whole or in part at
any time before (i) the expiration of one year after the date of such
termination of employment, or (ii) the Expiration Date, whichever shall first
occur.
(c) For purposes of this Agreement, the following terms shall be
defined as follows:
(i) "Retirement" shall mean any termination other than by death after
(A) the Optionee has attained at least age fifty-five (55) and (B) the
Optionee's age plus completed continuous years of service equals sixty (60)
or more; PROVIDED, HOWEVER, that if Optionee is less that age sixty-five (65)
on the date of termination of employment, Optionee must have completed at
least five (5) years of service.
(ii) "Representative" shall mean the person or persons to whom
Optionee's rights under this Agreement shall pass upon death, whether by will
or by the applicable laws of descent and distribution.
(iii) "Total Disability" shall have the meaning given to "permanent
and total disability" in Section 22(c)(3) of the Internal Revenue Code of
1986, as amended (the "Code") and shall be determined by the Committee in its
sole and absolute discretion.
(d) Notwithstanding the foregoing provisions of Section 5(a), the
Committee shall have the authority, on a case by case basis, in its sole and
absolute discretion to extend for up to a period of two (2) years following
the termination of employment of Optionee the period of vesting referred to
in Section 3.1 and the period of exercisability, provided such extension does
not exceed the Expiration Date.
6. LEAVE OF ABSENCE; RELATED TO EMPLOYMENT. A leave of absence
granted in accordance with the Company's usual procedure which does not
operate to interrupt continuous employment for other benefits granted by the
Company shall not be considered a termination of employment under this
Agreement. A period of related employment during which Optionee is not
employed by the Company nor a subsidiary (as defined in the Plan) shall not
be considered a termination of employment under this Agreement if (i) such
employment in undertaken by Optionee at the request of the Company or a
subsidiary, (ii) immediately prior to the undertaking of such employment
Optionee was an officer or employee of the Company of a subsidiary or was
engaged in related employment, and (iii) such employment is recognized by the
Committee, in its sole discretion, as related employment. The death or
disability of Optionee during a period of related employment shall be treated
for purposes of this agreement, as if such death or the onset of such
disability had occurred while Optionee was an officer or employee of the
Company.
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7. ADJUSTMENTS FOR CHANGES IN COMMON STOCK.
7.1 In the event that the outstanding shares of Common Stock (other
than shares held by dissenting shareholders) shall be changed into, or
exchange for, a different number or kind of shares of Common Stock or other
securities of the Company, or, if further changes or exchanges of any Common
Stock or other securities into which the Common Stock shall have been
changed, or for which it shall have been exchanged, shall be made (whether by
reason of merger, consolidation, reorganization, recapitalization, stock
dividend, reclassification, split-up, combination of shares or otherwise),
then for each Share subject to the Option, there shall be substituted and
exchanged therefor the number and kind of shares of Common Stock or other
securities into or for which each outstanding share of Common Stock (other
than shares held by dissenting shareholders) shall be so changed or
exchanged. If in the event of any such changes or exchanges in order to
prevent dilution or enlargement of rights under this Agreement, it is
necessary to make an adjustment in the number, kind, or option exercise price
of the Shares then subject to the Option, such adjustment shall be made by
the Committee and shall be effective and binding for all purposes of this
Agreement.
7.2 All adjustments made pursuant to the provision of this Section 7
shall be made by the Committee, whose determination as to which adjustments
shall be made, and the extent thereof, shall be final, binding and conclusive.
8. NON-TRANSFERABILITY OF OPTION.
(a) Except as provided in subsection 8(b) below, the Option granted
under this Agreement shall not be transferable by Optionee, either
voluntarily or involuntarily, except by will or the laws of descent and
distribution. This Option may not be transferred, assigned, pledged or
hypothecated, whether by operation of law or otherwise, or be subject to
attachment, execution or similar process. Any attempt to do so shall void
this Option. During the lifetime of Optionee, this Option may be exercised
only by the Optionee (or by Optionee's guardian or legal representative in
the case of disability) or by a permitted transferee pursuant to a transfer
as described below.
(b) To the extent such transfers are permitted under the Plan and are
not restricted by Rule 16b-3 promulgated under the Exchange Act, the
Committee, in its sole discretion, may establish, as permitted by applicable
law, rules and conditions under which an Optionee may transfer this Option to
any member of Optionee's "immediate family" (as such term is defined in Rule
16a-1(e) promulgated under the Exchange Act).
9. RIGHTS AS A SHAREHOLDER. No rights of a shareholder of the Company
shall attach to Optionee with respect to any of the Shares until this Option
shall be duly exercise as to such Shares and Optionee shall have become the
holder of record of such Shares. No adjustments
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shall be made for cash dividends or other distributions or rights as to which
there is a record date preceding the date that Optionee becomes the holder of
record of such Shares.
10. SECURITIES LAW COMPLIANCE. The exercise of all or any portion of
this Option shall only be effective at such time that the sale of Common
Stock issued pursuant to such exercise will not violate any state or federal
securities or other laws. The Company is under no obligation to effect any
registration of the stock subject to the Option under the Securities Act of
1933 or to effect any state registration or qualification of such Common
Stock. The Company may, in its sole discretion, defer the effectiveness of
any full or partial exercise of the Option in order to ensure that the
issuance of stock upon exercise will be in compliance with federal or state
securities laws and the rules of the NASDAQ National Markets or any other
exchange upon which the Company's Common Stock is traded.
11. LIMITATION OF LIABILITY. Nothing in this Agreement shall be
construed to:
(a) limit in any way the right of the Company or a subsidiary to
terminate the employment of Optionee; or
b) be evidence of any agreement or understanding, express or implied,
that the Company or a subsidiary shall employ Optionee in any particular
position at any particular rate of compensation or for any particular period
of time.
12. SEVERABILITY. It is intended that each provision of this Agreement
shall be viewed as separate and divisible. In the event that any provision
hereof shall be held to be invalid or unenforceable, the remaining provisions
of this Agreement shall continue to be in full force and effect.
13. GOVERNING LAW. This Agreement shall be construed in accordance
with and governed by the laws of the State of Minnesota.
14. FURTHER ASSURANCES. Upon the exercise of the option by Optionee or
at such subsequent date as either the Company or Optionee may reasonably
request, each party hereto agrees to execute and deliver such further
instruments and to take such other action as shall be reasonably required to
carry out the intent and purposes of this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
16. NOTICES. All notices that are required or may be given pursuant to
the terms of this Agreement shall be in writing and delivered personally or
by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows and shall be deemed to have been given upon delivery to
the addressee:
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To the Company:
Metris Companies Inc.
000 Xxxxx Xxxxxxx 000, Xxxxx 0000
Xx. Xxxxx Xxxx, XX 00000
Attention: General Counsel
To Optionee:
At Optionee's residence address listed in the Company's
personnel records.
Notice of a change in address of one of the parties hereto shall be given in
writing to the other party as provided above, but shall be effective only
upon actual receipt.
17. AMENDMENT. This Agreement may not be amended or modified by the
parties hereto in any manner, except by a written instrument signed by both
parties hereto.
18. BINDING EFFECT: ASSIGNMENT. This Agreement shall be binding upon
the heirs, successors and assigns of the parties hereto, subject to
shareholder approval of the Plan. This Agreement shall not be assigned by
either party hereto without the express written consent of the other party.
19. ENTIRE AGREEMENT. The Plan, the rules adopted by the Committee
from time to time and this Agreement constitute, except as to any written
agreement between the parties hereto which specifically references this
Section 19, the entire understanding between the parties hereto with respect
to the matters covered herein and supersede all previous written, oral or
implied understandings between the parties hereto with respect to the subject
matter hereof.
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IN WITNESS WHEREOF, the Company and Optionee have executed this Agreement as
of the day and year first above written.
METRIS COMPANIES INC.
By /s/ Xxxxxxx Xxxxxxx
-------------------------------
OPTIONEE SIGNATURE
/s/ Xxxxxx X. Xxxxxx
-------------------------------
Xxxxxx X. Xxxxxx
Social Security #: ###-##-####
------------------------
Date: 4/7/97
--------------------------------
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