WAIVER AGREEMENT
THIS WAIVER AGREEMENT (this "Waiver Agreement") is made
as of this 8th day of December, 1998, between FINGERHUT
CORPORATION ("Fingerhut"), INFOCHOICE USA, INC. ("Infochoice"), a
wholly owned subsidiary of Fingerhut, METRIS DIRECT, INC.
("Metris"), Metris' wholly owned subsidiary, DIRECT MERCHANTS
CREDIT CARD BANK, NATIONAL ASSOCIATION ("Direct Merchants") and
METRIS DIRECT SERVICES, INC. ("Metris Services"), a wholly owned
subsidiary of Metris.
RECITALS
A. The parties, as described below, have entered into
the following agreements:
Database Access Agreement between Fingerhut and Metris, dated
October 31, 1996 (the "Database Access Agreement");
Data Sharing Agreement between Fingerhut and Direct Merchants,
dated October 31, 1996 (the "Data Sharing Agreement");
Extended Service Plan Agreement between Fingerhut, Infochoice and
Metris, dated October 31, 1996 (the "Extended Service Plan
Agreement");
Co-Brand Credit Card Agreement between Fingerhut, Metris and
Direct Merchants, dated October 31, 1996 (the "Co-Brand Credit
Card Agreement"); and
Agreement between Fingerhut and Metris Services, dated February
5, 1998, relating to credit card registration (the "Credit Card
Registration Agreement").
Collectively, the foregoing agreements are sometimes referred to
herein as the "Agreements" and individually as an "Agreement".
B. Metris desires to enter into the transaction
described in Exhibit A attached hereto (the "Transaction").
C. Certain elements of the Transaction may constitute
a "change of control" as defined in each of the Agreements,
permitting Fingerhut to terminate any or all of the Agreements.
D. Metris, Direct Merchants and Metris Services have
requested that Fingerhut waive its right to terminate the
Agreements, and Fingerhut is willing to do so, but only on the
terms and conditions set forth in this Waiver Agreement.
ACCORDINGLY, the parties hereby agree as follows:
1. Fingerhut hereby agrees not to terminate any of
the Agreements as a result of consummation of Phase 1 of the
Transaction; and Fingerhut agrees not to terminate any of the
Agreements as a result of consummation of Phase 2 of the
Transaction so long as consummation of phase 2 of the Transaction
occurs on or before June 30, 1999, all in accordance with the
description attached hereto as Exhibit A. In executing this
Waiver Agreement, Fingerhut expressly reserves the right to
terminate each of the Agreements upon the occurrence of any
change of control, as defined in that Agreement, other than the
change of control resulting from consummation of the Transaction
on or before the date specified above; provided, however, that
Fingerhut will agree to a subsequent change of control so long as
it is demonstrated to Fingerhut's reasonable satisfaction that
such change of control will not result from a transaction that
involves an entity that is deemed reasonably likely to compete
with Fingerhut or any of its affiliates.
2. The Database Access Agreement is hereby amended as
follows:
(a) Section 1.1 of the Database Access Agreement is hereby
revised by deleting the fourth and fifth sentence thereof and
substituting the following:
"Fingerhut reserves for itself, its affiliates and subsidiaries,
and its licensees, the right to use the Customer Database
(specifically the Fingerhut customer file and the suppress file),
including without limitation the right to license the use of the
Customer Database to unaffiliated third parties, provided,
however, that neither Fingerhut, its subsidiaries or other
affiliates (except to the extent permitted in Exhibit B) shall
have the right to use the Customer Database to offer Financial
Service Products until after October 31, 2001. Fingerhut and
Metris confirm that Fingerhut may continue to license the
Customer Database (specifically the Fingerhut Customer files and
the suppress files) to the parties identified in Exhibit D
attached hereto and incorporated herein by reference; provided,
however, that through October 31, 2001, such parties do not use
the Customer Database to offer Financial Services Products,
except those Financial Services Products now being offered by
such parties through use of the Customer Database, which may
continue to be offered; and provided further that Fingerhut will
remit to Metris monthly 80% of all revenues received by Fingerhut
from such licensing through December 31, 1999 and 25% of all
revenues received by Fingerhut from such licensing thereafter
through October 31, 2001. For purposes of the preceding
sentence, any product offered by any Company listed on Exhibit D
at the end of 1999 which is known to Metris and not regarded by
Metris as a Financial Services Product prior to December 31, 1999
shall not be regarded as a Financial Services Product after
December 31, 1999"
(b) Exhibit B to the Database Access Agreement is hereby
deleted and Exhibit B attached hereto is hereby substituted
therefor.
(c) Exhibit C to the Database Access Agreement is hereby
amended by reducing the amount of the non-refundable Database
License fee due in 2001 and 2002 (on October 31 in each year)
from $2,000,000 each year to $1,000,000 each year.
(d) Exhibit D to the Database Access Agreement is hereby
deleted and Exhibit D attached hereto is hereby substituted
therefor.
(e) The first and second sentences of Section 7.1 of the
Database Access Agreement are hereby deleted and the following
substituted therefor:
"This Agreement shall take effect upon the date first written
above and shall remain in effect until October 31, 2003;
provided, however, that after October 31, 2001, (i) Metris' use
of the Customer Database shall be limited to nonexclusive access
to the Customer Database (specifically the Fingerhut Customer
files and the suppress file), and (ii) Fingerhut may use the
Customer Database for any purpose whatsoever. On or before
October 31, 2001, Metris and Fingerhut shall mutually agree on
the parameters and the frequency of Metris' access to the
Fingerhut Customer files."
3. The Data Sharing Agreement is hereby amended by
deleting the first and second sentences of Section 3.1 and
substituting the following:
"This Agreement will terminate on October 31, 2003; provided,
however, that that after October 31, 2001, all rights in this
Agreement characterized as exclusive to Direct Merchants shall
automatically be nonexclusive, and the rights in the fourth
sentence of Section 2.3 of this Agreement, characterized as
exclusive to Fingerhut, shall automatically be nonexclusive."
4. The Extended Service Plan Agreement is hereby
amended as follows:
(a) Section 1.1 of the Extended Service Plan Agreement is
hereby deleted and the following substituted therefor:
"Section 1.1 During the term of this Agreement, Fingerhut
will offer the Extended Service Agreement to all of its Customers
who purchase merchandise eligible for extended service beyond the
Merchandise Warranty and will particularly emphasize the Extended
Service Agreement in respect of all electronics products sold by
Fingerhut."
(b) Section 5.14 of the Extended Service Plan Agreement is
hereby amended by deleting the first and second sentences of
Section 5.14(a) and substituting the following:
"Unless otherwise mutually agreed to by the parties, on or before
January 1 1999 and 2001, Fingerhut and Metris agree to evaluate
the Marketing Management Fee and the Underwriting and Servicing
Fee (collectively, the "Fees") as set forth in this Agreement and
Exhibits A and B attached hereto to ensure that the Fees to be
charged in the year beginning on each such January 1 are
competitive with those charged by others for comparable
services."
(c) The first sentence of Section 5.14(b) is hereby deleted
and the following substituted therefor:
"In the event Fingerhut and Metris are unable to agree on the
then market rate for the Fees to be charged hereunder, they agree
to send out within five (5) days after January 1, requests for
proposals ("RFPs") to three (3) reputable companies that are in
the business of providing extended product service or extended
warranty coverage for retailers to sell to their customers (the
"Independent Providers").
5. In addition to the consideration in the form of
the mutual promises and agreements set forth in the preceding
sections of this Waiver Agreement, including Fingerhut's
agreement herein not to terminate the Agreements as a result of
the "change of control" under the Transaction, as additional
consideration for the respective agreements of the parties
hereto, Fingerhut agrees that neither Fingerhut nor any affiliate
of Fingerhut shall, directly or indirectly, recruit, solicit or
otherwise induce any present or future employee of Metris, Direct
Merchants, Metris Services or any affiliate of any of them to
become an employee of Fingerhut or any affiliate of Fingerhut or
to otherwise discontinue such employment relationship, or
otherwise interfere with any such employment relationship
(provided that nothing herein shall prohibit the solicitation by
Fingerhut or any affiliate of Fingerhut of employees by general
advertisement or searches).
6. In addition to the consideration in the form of
the mutual promises and agreements set forth in the preceding
sections of this Waiver Agreement, as additional consideration
for the respective agreements of the parties hereto, Metris,
Direct Merchants and Metris Services each agree that neither
Metris, Direct Merchants, Metris Services nor any affiliate of
any of them shall, directly or indirectly, recruit, solicit or
otherwise induce any present or future employee of Fingerhut or
any affiliate of Fingerhut to become an employee of Metris,
Direct Merchants, Metris Services or any affiliate of any of them
or to otherwise discontinue such employment relationship, or
otherwise interfere with any such employment relationship
(provided that nothing herein shall prohibit the solicitation by
Metris, Direct Merchants, Metris Services or any affiliate of any
of them of employees by general advertisement or searches).
7. Except as expressly amended by this Waiver
Agreement or as necessary to give effect to the amendments
contained in this Waiver Agreement, all of the Agreements shall
remain in full force and effect.
8. The undersigned acknowledge that not all of the
parties hereto are a party to every Agreement, and the
undersigned executed this Waiver Agreement and are bound hereby
only with respect to the Agreements to which they are a party.
Executed as of the day and year first above written.
FINGERHUT CORPORATION
By/s/ Xxxxxxx Xxxxxxx
Its Executive Vice President
METRIS DIRECT, INC.
By/s/ Xxxxxx X. Xxxxxx
Its President
DIRECT MERCHANTS CREDIT CARD
BANK, NATIONAL ASSOCIATION
By/s/ Xxxxxx X. Xxxxxx
Its Chairman
METRIS DIRECT SERVICES, INC.
By/s/ Xxxxxx X. Xxxxxx
Its President and Chief Executive Officer
INFOCHOICE USA, INC.
By/s/ Xxxxxxx Xxxxxxx
Its Executive Vice President
EXHIBIT A
THE TRANSACTION
Phase 1
Affiliated entities of Xxxxxx X. Xxx Company (the "Xxx Company")
will purchase $200,000,000 of Series B Perpetual Preferred Stock
with a dividend rate of 12.5% (the "Series B Preferred") and
$100,000,000 of Senior Notes due 2006 (the "Notes") with an
interest rate of 12% and receive 3.75 million ten-year warrants
to purchase Metris common stock at a strike price of $30 per
share (the "Warrants"). Upon the issuance of the Series B
Preferred and the Notes, subject to applicable regulatory
approval, the Xxx Company will be entitled to appoint two
additional directors to the Board, increasing the size of the
Board to nine directors. In the event that shareholder or
regulatory approval is not obtained, both the dividend rate on
the Series B Preferred and the interest rate on the Notes will
increase to 15%, and the Warrants will become immediately
exercisable.
Phase 2
Upon receipt of applicable regulatory and shareholder approval,
Series B Preferred, the Warrants and the Notes will automatically
convert to approximately 805,369 of Series C Perpetual
Convertible Stock (the "Series C Preferred Stock"), subject to
adjustments. Each share of the Series C Preferred Stock will be
convertible into ten (10) common shares at an effective
conversion price of $37.25 per common share, subject to
adjustment, and will have a 9% dividend payable in additional
Series C Preferred Stock, guaranteed for a seven-year period.
When the Series C Preferred Stock is converted into common
shares, the Xxx Company would initially own approximately 28.7%
of Metris, on a fully diluted basis. Upon completion of the
exchange of Series B Preferred and the Notes into the Series C
Preferred Stock, the Warrants would be cancelled and the holders
of the Series C Preferred Stock would be entitled to elect two
additional directors to the Board, thereby increasing the size of
the Board to eleven directors.
EXHIBIT B
FINANCIAL SERVICE PRODUCTS
Accidental Death Insurance
- Metris can offer Credit Life and Accidental Death Insurance
to its customers
- Fingerhut can offer Credit Life and Accidental Death
Insurance to its customers
Medical and Hospitalization Insurance Products
Warranty or Extended Service Plans
Bank Deposit Accounts
Investment Services (Annuities, Mutual Funds, CDs)
Consumer Loans (other than closed end installment or revolving
credit loans to customers of Fingerhut Corporation and its
affiliates)
Student Loans
Auto Lending/Leasing
Equity Loans, Mortgages
Bank Credit Cards
Prepaid Affiliation Cards, including smart cards, but only of
Visa, Mastercard, American Express and Discover
Debit Cards
Co Branded Bank Cards, except private label cards issued by
Fingerhut National Bank to customers of Fingerhut or affiliates
Credit Card Registration
Roadside Assistance Clubs Affinity Bank Credit Cards Membership
fee-based Travel Clubs Mobile Home Financing
Credentials Products (membership based product providing credit
data to consumers)
Financial Services Products may be offered via the Internet to
persons in the Customer Database by any affiliate of Fingerhut
which is not controlled by Fingerhut so long as until October 31,
2001, (i) the business of the affiliate is offering goods and
services via the Internet which are not primarily Financial
Services Products, (ii) the affiliate does not offer Financial
Services Products through other direct marketing channels and
(iii) the business of offering any such Financial Services
Products by the affiliate is subordinate to the business of
offering other goods and services. An affiliate of Fingerhut
that is not controlled by Fingerhut but becomes controlled by
Fingerhut may continue offering Financial Services Products via
the Internet to persons in the Customer Database to the extent
required by any contractual obligations incurred by it prior to
becoming controlled by Fingerhut so long as until October 31,
2001 the conditions in clauses (i), (ii) and (iii) above continue
to be met. As of this date Fingerhut does not control any
affiliates the business of which is offering goods and services
via the Internet.
For purposes of the foregoing paragraph, Fingerhut shall not be
deemed to control an affiliate unless it owns more than 50% of
the affiliates' voting stock or unless more than 50% of the
members of the affiliates' board of directors are employees or
directors of Fingerhut.
M1:430862.11
EXHIBIT D
1. 20th Century Insurance
2. Allstate (except Roadside Assistance)
3. American General Finance
4. Blue Cross Blue Shield
5. Cigna
6. Colonial Exchange
7. Eastern Mortgage
8. Gerber
9. Globe Life
10. Guarantee Reserve
11. Guarantee Trust Life
12. Harvest Life Insurance
13. HealthFirst
14. Kaiser CHP
15. Lincoln Mutual
16. Metropolitan Life
17. Millersfirst
18. Mutual of Omaha
19. Nationwide Insurance
20. Personal Mortgage Corp.
21. PMIC *
22. Providian
23. Response Insurance 24. Response Marketing
25. Signature Group - Security Card
26. Superior Bank
27. Universal Lending Group
* Financial Services Products are now being offered by Metris
without obligation to remit any portion of revenues received
until November 1, 2001, following which date, Metris will remit
to Fingerhut 25% of all revenues received from PMIC.
