METRIS COMPANIES INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I
PURPOSES 1
ARTICLE II
CERTAIN DEFINITIONS 1
2.1 Accrued Obligations 1
2.2 Agreement Term 1
2.3 Article 2
2.4 Beneficial owner 2
2.5 Cause 2
2.6 Change of Control 2
2.7 Code 3
2.8 Disability 3
2.9 Effective Date 3
2.10 Good Reason 4
2.11 Imminent Control Change Date 4
2.12 IRS 4
2.13 1934 Act 4
2.14 Notice of Termination 4
2.15 Plans 4
2.16 Policies 4
2.17 Post-Change Period 4
2.18 SEC 4
2.19 Section 4
2.20 Subsidiary 4
2.21 Termination Date 5
2.22 Voting Securities 5
ARTICLE III
POST-CHANGE PERIOD PROTECTIONS 5
3.1 Position and Duties 5
3.2 Compensation 6
3.3 Stock Options 7
ARTICLE IV
TERMINATION OF EMPLOYMENT 8
4.1 Disability 8
4.2 Death 8
4.3 Cause 8
4.4 Good Reason 9
4.5 Termination Prior to Effective Date 10
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION 10
5.1 If by the Executive for Good Reason or by the
Company Other Than for Cause or Disability 10
5.2 If by the Company for Cause 12
5.3 if by the Executive Other Than for Good Reason 12
5.4 If by the Company for Disability 12
5.5 If upon Death 12
5.6 Certain Additional Payments by the Company 14
5.7 Withholding Taxes 17
5.8 Continued Employment 17
ARTICLE VI
NON-EXCLUSIVITY OF RIGHTS 17
6.1 Waiver of Other Severance Rights 17
6.2 Other Rights 17
ARTICLE VII
EXPENSES AND INTEREST 18
7.1 Legal Fees and Other Expenses 18
7.2 Interest 18
ARTICLE VIII
SET-OFF OR MITIGATION 18
8.1 Set-Off by Company 18
8.2 No Mitigation 19
ARTICLE IX
CONFIDENTIALITY AND NONCOMPETITION 19
9.1 Confidentiality 19
9.2 Intellectual Property 19
9.3 Noncompetition/Nonsolicitation 20
9.4 Remedy 21
9.5 Survival 22
ARTICLE X
MISCELLANEOUS 22
10.1 No Assignability 22
10.2 Successors 22
10.3 Payments to Beneficiary 22
10.4 Non-alienation of Benefits 22
10.5 Severability 22
10.6 Amendments 23
10.7 Notices 23
10.8 Counterparts 23
10.9 Governing Law 23
10.10 Captions 23
10.11 Employment with Subsidiaries 23
10.12 Company's Option to Fix Expiration Date 23
10.13 No Waiver 24
10.14 Entire Agreement 24
METRIS COMPANIES INC.
CHANGE OF CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT dated as of May 15, 1998 is made between
METRIS COMPANIES INC., a Delaware corporation having its
principal place of business in St. Louis Park, Minnesota (the
"Company"), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Executive"), a resident of
the State of Minnesota.
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and
its stockholders to assure that the Company will have the
continued service of the Executive in the event of any threat or
occurrence of, or negotiation or other action that could lead to,
or create the possibility of, a Change of Control (as defined in
Section 2.6). The Board believes it is imperative to reduce the
distraction of the Executive that would result from the personal
uncertainties caused by a pending or threatened change of
control, to encourage the Executive's full attention and
continued dedication to the Company, and to provide the Executive
with compensation and benefits arrangements upon a change of
control which ensure that the expectations of the Executive will
be satisfied and are competitive with those of similarly-situated
corporations. The Board also believes that there is a need to
protect confidential records, data and intellectual property of
the Company and provide certain noncompetition protection. This
Agreement is intended to accomplish these objectives.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall
have the following meanings:
2.1 "Accrued Obligations" has the meaning set forth in
Section 5.3.
2.2 "Agreement Term" means the period commencing on the
date of this Agreement and ending on the date (the "Expiration
Date") which is the first to occur of (a) the date on which the
Executive's employment by the Company terminates prior to the
Effective Date, (b) if the Executive's employment by the Company
terminates by reason of death, the date of death of the Executive
or (c) the expiration date fixed by the Board pursuant to Section
10.12.
2.3 "Article" means an article of this Agreement.
2.4 "Beneficial owner" means such term as defined in Rule
13d-3 of the SEC under the 1934 Act.
2.5 "Cause" has the meaning set forth in Section 4.3(b).
2.6 "Change of Control" means, except as otherwise provided
below, the occurrence of any of the following:
a. any person (as such term is used in Rule 13d-5 of
the SEC under the ▇▇▇▇ ▇▇▇) or group (as such term is defined in
Section 13(d) of the 1934 Act), other than a Subsidiary or any
employee benefit plan (or any related trust) of the Company or a
Subsidiary, becomes, directly or indirectly, the beneficial owner
of 25% or more of the common stock of the Company or of Voting
Securities representing 25% or more of the combined voting power
of all Voting Securities of the Company, except that no Change of
Control shall be deemed to have occurred solely by reason of any
Merger (as defined below) if, immediately after such Merger, each
of the conditions described in clauses (i), (ii) and (iii) of
Section 2.6.c(1) are satisfied.
b. individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Directors") cease for any
reason to constitute at least a majority of the Board; provided
that any individual who becomes a director after the Effective
Date whose election, or nomination for election by the Company's
stockholders, was approved by a vote or written consent of at
least two-thirds of the directors then comprising the Incumbent
Directors shall be considered an Incumbent Director, but
excluding, for this purpose, any such individual whose initial
assumption of office is in connection with an actual or
threatened election contest relating to the election of the
directors of the Company (as such terms are used in Rule 14a-11
of the SEC under the 1934 Act); or
c. approval by the stockholders of the Company of any
of the following:
(1) a merger, reorganization or consolidation
("Merger") unless immediately after such Merger (i) more
than 50% of the then outstanding shares of common stock of
the corporation resulting from such merger and more than 50%
of the combined voting power of the then outstanding Voting
Securities of such corporation is then beneficially owned,
directly or indirectly, by all or substantially all of the
individuals or entities in substantially the same proportion
as their ownership immediately prior to the Merger; (ii) no
person (as such term is used in Rule 13d-5 of the SEC under
the ▇▇▇▇ ▇▇▇) or group (as such term is defined in Section
13(d) of the 1934 Act), other than a Subsidiary or any
employee benefit plan (or any related trust) of the Company
or a Subsidiary becomes the beneficial owner of 25% or more
of the combined voting power of all Voting Securities of the
Company and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Merger were Incumbent Directors at the time of execution of
the original agreement or action of the Board providing for
such Merger.
(2) the sale or other disposition of all or
substantially all of the assets of the Company; or
(3) a plan of complete liquidation or dissolution of
the Company.
Despite clauses (a), (b) and (c) of this definition, a Change of
Control shall not occur with respect to the Executive if (A) the
Executive is, by written agreement executed before such Change of
Control, a participant on such Executive's own behalf in a
transaction in which the persons or entities (or their
affiliates) with whom the Executive has the written agreement
Acquire the Company (as defined below) and, pursuant to the
written agreement, the Executive has an equity interest in the
resulting entity or a right to acquire such an equity interest,
(B) the transaction that would otherwise give rise to a Change in
Control is the contemplated transaction in which the shares of
common stock of the Company which are owned by Fingerhut
Companies, Inc. ("Fingerhut") are distributed by Fingerhut to all
of its stockholders or (c) Fingerhut merges with the Company or a
subsidiary of the Company if at the time of such merger, or
immediately prior thereto, Fingerhut owned at least 80% or more
of the common stock of the Company and no person (as defined in
clause 2.6a) owned 25% or more of the common stock of Fingerhut.
"Acquire the Company" means the acquisition of beneficial
ownership by purchase, merger, or otherwise, of either more than
50% of the stock (such percentage to be computed in accordance
with Rule 13d-3(d)(1)(i) of the SEC under the ▇▇▇▇ ▇▇▇) or
substantially all of the assets of the Company or its successors.
2.7 "Code" means the Internal Revenue Code of 1986, as
amended.
2.8 "Disability" has the meaning set forth in Section
4.1.b.
2.9 "Effective Date" means the first date on which a Change
of Control occurs during the Agreement Term. Despite anything in
this Agreement to the contrary, if the Company terminates the
Executive's employment before the date of a Change of Control,
and if the Executive reasonably demonstrates that such
termination of employment (a) was at the request of a third party
who had taken steps reasonably calculated to effect the Change of
Control or (b) otherwise arose in connection with or in
anticipation of the Change of Control, then "Effective Date"
shall mean the date immediately before the date of such
termination of employment.
2.10 "Good Reason" has the meaning set forth in Section
4.4.b.
2.11 "Imminent Control Change Date" means any date on which
occurs (a) a presentation to the Company's stockholders generally
or any of the Company's directors or executive officers of a
proposal or offer for a Change of Control, (b) the public
announcement (whether by advertisement, press release, press
interview, public statement, SEC filing or otherwise) of a
proposal or offer for a Change of Control, or (c) such proposal
or offer remains effective and unrevoked.
2.12 "IRS" means the Internal Revenue Service.
2.13 "1934 Act" means the Securities Exchange Act of 1934.
2.14 "Notice of Termination" means a written notice given
in accordance with Section 10.7 which sets forth (a) the specific
termination provision in this Agreement relied upon by the party
giving such notice, (b) in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under such termination provision and (c)
if the Termination Date is other than the date of receipt of such
Notice of Termination, the Termination Date.
2.15 "Plans" means plans, programs, policies or practices
of the Company.
2.16 "Policies" means policies, practices or procedures of
the Company.
2.17 "Post-Change Period" means the period commencing on
the Effective Date and ending on the second anniversary of such
date.
2.18 "SEC" means the Securities and Exchange Commission.
2.19 "Section" means, unless the context otherwise
requires, a section of this Agreement.
2.20 "Subsidiary" means (a) a corporation of which more
than 50% of the combined voting power of the Voting Securities is
owned, directly or indirectly, by the Company or by one or more
other Subsidiaries of the Company or by the Company and one or
more Subsidiaries or (b) any partnership, limited liability
company, joint venture, business trust or other entity (other
than a corporation) in which the Company or one or more other
Subsidiaries of the Company or the Company and one or more other
Subsidiaries, directly or indirectly, has at least majority
ownership thereof and power to direct the policies, management
and affairs thereof.
2.21 "Termination Date" means the date of receipt of the
Notice of Termination or any later date specified in such notice
(which date shall be not more than 15 days after the giving of
such notice), as the case may be; provided, however, that (a) if
the Company terminates the Executive's employment other than for
Cause or Disability, then the Termination Date shall be the date
of receipt of such Notice of Termination and (b) if the
Executive's employment is terminated by reason of death or
Disability, then the Termination Date shall be the date of death
of the Executive or the Disability Effective Date (as defined in
Section 4.1.a), as the case may be.
2.22 "Voting Securities" of a corporation means securities
of such corporation that are entitled to vote generally in the
election of directors of such corporation.
ARTICLE III
POST-CHANGE PERIOD PROTECTIONS
3.1 Position and Duties.
a. During the Post-Change Period, (1) the Executive's
position (including offices, titles, reporting requirements and
responsibilities), authority and duties shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 90-
day period immediately before the Effective Date and (2) the
Executive's services shall be performed at the location where the
Executive was employed immediately before the Effective Date or
any other location less than 40 miles from such former location.
b. During the Post-Change Period (other than any
periods of vacation, sick leave or disability to which the
Executive is entitled), the Executive agrees to devote the
Executive's full attention and time to the business and affairs
of the Company and, to the extent necessary to discharge the
duties assigned to the Executive in accordance with this
Agreement, to use the Executive's best efforts to perform
faithfully and efficiently such duties. During the Post-Change
Period, the Executive may (1) serve on corporate, civic or
charitable boards or committees, (2) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (3)
manage personal investments, so long as such activities are
consistent with the Policies of the Company at the Effective Date
and do not significantly interfere with the performance of the
Executive's duties under this Agreement. To the extent that any
such activities have been conducted by the Executive before the
Effective Date and were consistent with the Policies of the
Company at the Effective Date, the continued conduct of such
activities (or activities similar in nature and scope) after the
Effective Date shall not be deemed to interfere with the
performance of the Executive's duties under this Agreement.
3.2 Compensation.
a. Base Salary. During the Post-Change Period, the
Company shall pay or cause to be paid to the Executive an annual
base salary in cash ("Guaranteed Base Salary"), which shall be
paid in a manner consistent with the Company's payroll practices
in effect immediately before the Effective Date at a rate at
least equal to 12 times the highest monthly base salary paid or
payable to the Executive by the Company in respect of the 12-
month period immediately before the Effective Date. During the
Post-Change Period, the Guaranteed Base Salary shall be reviewed
at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases
in base salary awarded to other peer executives of the Company.
Any increase in Guaranteed Base Salary shall not limit or reduce
any other obligation of the Company to the Executive under this
Agreement. After any such increase, the Guaranteed Base Salary
shall not be reduced and the term "Guaranteed Base Salary" shall
thereafter refer to the increased amount.
b. Incentive, Compensation, Savings and Retirement
Plans. In addition to Guaranteed Base Salary payable as provided
in this Section, the Executive shall be entitled to participate
during the Post-Change Period in all incentive (including long-
term incentives), compensation, savings and retirement Plans
applicable to other peer executives of the Company, but in no
event shall such Plans provide the Executive with incentive
(including long-term incentives), compensation, savings and
retirement benefits which, in any case, are less favorable, in
the aggregate, than the most favorable of those provided by the
Company for the Executive under such Plans as in effect at any
time during the 90-day period immediately before the Effective
Date.
c. Welfare Benefit Plans. During the Post-Change
Period, the Executive and the Executive's family shall be
eligible to participate in, and receive all benefits under,
welfare benefit Plans provided by the Company (including, without
limitation, medical, prescription, dental, disability, salary
continuance, individual life, group life, dependent life,
accidental death and travel accident insurance Plans) and
applicable to other peer executives of the Company and their
families, but in no event shall such Plans provide benefits which
in any case are less favorable, in the aggregate, than the most
favorable of those provided to the Executive under such Plans as
in effect at any time during the 90-day period immediately before
the Effective Date.
d. Fringe Benefits. During the Post-Change Period,
the Executive shall be entitled to fringe benefits in accordance
with the most favorable Plans applicable to peer executives of
the Company, but in no event shall such Plans provide fringe
benefits which in any case are less favorable, in the aggregate,
than the most favorable of those provided by the Company to peer
executives under such Plans in effect at any time during the 90-
day period immediately before the Effective Date.
e. Expenses. During the Post-Change Period, the
Executive shall be entitled to prompt reimbursement of all
reasonable employment-related expenses incurred by the Executive
upon the Company's receipt of accounting in accordance with the
most favorable Policies applicable to peer executives of the
Company, but in no event shall such Policies be less favorable,
in the aggregate, than the most favorable of those provided by
the Company for the Executive under such Policies in effect at
any time during the 90-day period immediately before the
Effective Date.
f. Office and Support Staff. During the Post-Change
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and no
exclusive personal secretarial and other assistance in accordance
with the most favorable Policies applicable to peer executives of
the Company, but in no event shall such Policies be less
favorable, in the aggregate, than the most favorable of those
provided by the Company for the Executive under such Policies in
effect at any time during the 90-day period immediately before
the Effective Date.
g. Vacation. During the Post-Change Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable Policies applicable to peer executives of the
Company, but in no event shall such Policies be less favorable,
in the aggregate, than the most favorable of those provided by
the Company for the Executive under such Policies in effect at
any time during the 90-day period immediately before the
Effective Date.
3.3 Stock Options.
In addition to the other benefits provided in this
Section, on the Effective Date, the Executive shall become fully
vested in any and all outstanding stock options granted to the
Executive for shares of common stock of the Company or to the
extent that such options are not vested, shall receive a lump-sum
cash payment equal to the spread of all non-vested, forfeited
options as of the date such options are forfeited.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability.
a. During the Post-Change Period, the Company may
terminate the Executive's employment upon the Executive's
Disability (as defined in Section 4.1.b) by giving the Executive
or his legal representative, as applicable, (1) written notice in
accordance with Section 10.7 of the Company's intention to
terminate the Executive's employment pursuant to this Section and
(2) a certification of the Executive's Disability by a physician
selected by the Company or its insurers and reasonably acceptable
to the Executive or the Executive's legal representative. The
Executive's employment shall terminate effective on the 30th day
(the "Disability Effective Date") after the Executive's receipt
of such notice unless, before the Disability Effective Date, the
Executive shall have resumed the full-time performance of the
Executive's duties.
b. "Disability" means any medically determinable
physical or mental impairment that has lasted for a continuous
period of not less than six months and can be expected to be
permanent or of indefinite duration, and that renders the
Executive unable to perform the duties required under this
Agreement.
4.2 Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Post-Change
Period.
4.3 Cause.
a. During the Post-Change Period, the Company may
terminate the Executive's employment for Cause.
b. "Cause" means any of the following:
(1) a material breach by the Executive of those duties
and responsibilities of the Executive which do not differ in
any material respect from the duties and responsibilities of
the Executive during the 90-day period immediately before
the Effective Date (other than as a result of incapacity due
to physical or mental illness) which is demonstrably willful
and deliberate on the Executive's part, which is committed
in bad faith or without reasonable belief that such breach
is in the best interests of the Company and which is not
remedied within a reasonable period of time after receipt of
written notice from the Company specifying such breach;
(2) any intentional act of fraud, embezzlement or theft
by the Executive in connection with the Executive's duties
in the course of the Executive's employment hereunder or any
prior employment, or the Executive's admission or conviction
of a felony or of any crime involving moral turpitude,
fraud, embezzlement, theft or misrepresentation;
(3) any gross negligence or willful misconduct of the
Executive in performing the Executive's duties which, if
curable, has not been cured within 10 days of delivery by
the Company to the Executive of written notice of such gross
negligence or willful misconduct; or
(4) any violation in any material respect of any
statutory or common law duty of loyalty to the Company or
any of its affiliates which, if curable, has not been cured
within 10 days of delivery by the Company to the Executive
of written notice of such violation.
c. Any termination of the Executive's employment by
the Company for Cause shall be communicated to the Executive by
Notice of Termination.
4.4 Good Reason.
a. During the Post-Change Period, the Executive may
terminate his or her employment for Good Reason.
b. "Good Reason" means, without the Executive's
express written consent, any of the following:
(1) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's position
(including offices, titles, reporting requirements or
responsibilities), authority or duties as contemplated by
Section 3.1.a(1), or any other action by the Company which
results in a diminution or other material adverse change in
such position, authority or duties;
(2) any failure by the Company to comply with any of
the provisions of Article III;
(3) the Company's requiring the Executive to be based
at any office or location other than the location described
in Section 3.1.a(2);
(4) any other material adverse change to the terms and
conditions of the Executive's employment; or
(5) any purported termination by the Company of the
Executive's employment other than as expressly permitted by
this Agreement (any such purported termination shall not be
effective for any other purpose under this Agreement).
Any reasonable determination of "Good Reason" made in good faith
by the Executive shall be conclusive; provided, however, that an
isolated, insubstantial and inadvertent action taken in good
faith and which is remedied by the Company promptly after receipt
of written notice thereof given by the Executive shall not
constitute "Good Reason."
c. Any termination of employment by the Executive for
Good Reason shall be communicated to the Company by Notice of
Termination within 60 days of the occurrence of the Good Reason.
A failure by the Executive to include in the Notice of
Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive
under this Agreement or preclude the Executive from asserting
such fact or circumstance in enforcing rights under this
Agreement.
4.5 Termination Prior to Effective Date. Nothing in this
Agreement shall be deemed to entitle the Executive to continued
employment with the Company or any Subsidiary, and if the
Executive's employment with the Company or any Subsidiary shall
terminate prior to the Effective Date, the Executive shall have
no rights under Articles III, IV or V.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Good Reason or by the Company
Other Than for Cause or Disability. If, during the Post-Change
Period, the Company shall terminate the Executive's employment
other than for Cause or Disability, or if the Executive shall
terminate employment for Good Reason, the Company shall
immediately pay the Executive, in addition to all vested rights
arising from the Executive's employment as specified in Article
III, a cash amount equal to the sum of the following amounts:
a. to the extent not previously paid, the Guaranteed
Base Salary and any accrued vacation pay through the Termination
Date;
b. an amount equal to the Executive's highest annual
bonus (or annualized for any fiscal year consisting of less than
12 full months or with respect to which the Executive has been
employed by the Company for less than 12 full months) paid or
payable, including by reason of any deferral, to the Executive by
the Company and its affiliated companies in respect of the two
fiscal years of the Company (or such portion thereof during which
the Executive shall have been employed by the Company for less
than such two-year period) immediately preceding the fiscal year
in which the Effective Date occurs, multiplied by a fraction, the
numerator of which is the number of days in the fiscal year in
which the Effective Date occurs through the Termination Date and
the denominator of which is 365 or 366, as applicable;
c. all amounts previously deferred by or an accrual to
the benefit of the Executive under any nonqualified deferred
compensation or pension plan, together with any accrued earnings
thereon, and not yet paid by the Company;
d. an amount equal to the product of (1) three
multiplied by (2) the sum of (A) Guaranteed Base Salary and (B)
the Executive's highest annual bonus (or annualized bonus for any
fiscal year consisting of less than 12 full months or with
respect to which the Executive has been employed by the Company
for less than 12 full months), paid or payable, including by
reason of any deferral, to the Executive by the Company and its
affiliated companies in respect of the two fiscal years of the
Company if the Executive shall have been employed by the Company
for less than such two fiscal year period) immediately preceding
the fiscal year in which the Effective Date occurs;
e. an amount equal to the sum of the value of the
unvested portion of the Executive's accounts or accrued benefits
under any qualified plan maintained by the Company as of the
Termination Date; and
f. pay on behalf of the Executive all fees and costs
charged by the outplacement firm selected by the Executive to
provide outplacement services or at the election of the
Executive, cash equal to the fees and expenses such outplacement
firm would charge.
Until the first anniversary of the Termination Date or such later
date as any Plan of the Company may specify, the Company shall
continue to provide to the Executive and the Executive's family
welfare benefits (including, without limitation, medical,
prescription, dental, disability, salary continuance, individual
life, group life, accidental death and travel accident insurance
plans and programs) which are at least as favorable as the most
favorable Plans of the Company applicable to other peer
executives and their families as of the Termination Date, but
which are in no event less favorable than the most favorable
Plans of the Company applicable to other peer executives and
their families during the 90-day period immediately before the
Effective Date. The cost of such welfare benefits shall not
exceed the cost of such benefits to the Executive immediately
before the Termination Date or, if less, the Effective Date.
Notwithstanding the foregoing, if the Executive is covered under
any medical, life, or disability insurance plan(s) provided by a
subsequent employer, then the amount of coverage required to be
provided by the Employer hereunder shall be reduced by the amount
of coverage provided by the subsequent employer's medical, life,
or disability insurance plan(s). The Executive's rights under
this Section shall be in addition to, and not in lieu of, any
post-termination continuation coverage or conversion rights the
Executive may have pursuant to applicable law, including, without
limitation, continuation coverage required by Section 4980 of the
Code.
5.2 If by the Company for Cause. If the Company terminates
the Executive's employment for Cause during the Post-Change
Period, this Agreement shall terminate without further obligation
by the Company to the Executive, other than the obligation
immediately to pay the Executive in cash the Executive's
Guaranteed Base Salary through the Termination Date, plus the
amount of any compensation previously deferred by the Executive,
plus any accrued vacation pay, in each case to the extent not
previously paid.
5.3 If by the Executive Other Than for Good Reason. If the
Executive terminates employment during the Post-Change Period
other than for Good Reason, Disability or death, this Agreement
shall terminate without further obligations by the Company, other
than the obligation immediately to pay the Executive in cash all
amounts specified in clauses (a), (b) and (c) of the first
sentence of Section 5.1 (such amounts collectively, the "Accrued
Obligations").
5.4 If by the Company for Disability. If the Company
terminates the Executive's employment by reason of the
Executive's Disability during the Post-Change Period, this
Agreement shall terminate without further obligations to the
Executive, other than
a. the Company's obligation immediately to pay the
Executive in cash all Accrued Obligations, and
b. the Executive's right after the Disability
Effective Date to receive disability and other benefits at least
equal to the greater of (1) those provided under the most
favorable disability Plans applicable to disabled peer executives
of the Company in effect immediately before the Termination Date
or (2) those provided under the most favorable disability Plans
of the Company in effect at any time during the 90-day period
immediately before the Effective Date.
5.5 If upon Death. If the Executive's employment is
terminated by reason of the Executive's death during the Post-
Change Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement other than the obligation immediately to pay the
Executive's estate or beneficiary in cash all Accrued
Obligations. Despite anything in this Agreement to the contrary,
the Executive's family shall be entitled to receive benefits at
least equal to the most favorable benefits provided by the
Company to the surviving families of peer executives of the
Company under such Plans, but in no event shall such Plans
provide benefits which in each case are less favorable, in the
aggregate, than the most favorable of those provided by the
Company to the Executive under such Plans in effect at any time
during the 90-day period immediately before the Effective Date.
5.6 Certain Additional Payments by the Company.
a. Notwithstanding anything to the contrary in this
Agreement, in the event it shall be determined that any payment
or distribution by the Company or its affiliated companies to or
for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5.6) (a
"Payment") would be subject to the excise tax imposed by Section
4999 of the Code, or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive
of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income
taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
b. Subject to the provisions of Section 5.6.c, all
determinations required to be made under this Section 5.6,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the
Company's public accounting firm (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and the Executive within 15 business days of the receipt
of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change in Control,
the Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-
Up Payment, as determined pursuant to this Section 5.6, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive with a written opinion
that failure to report the Excise Tax on the Executive's
applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 5.6.c and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
c. The Executive shall notify the Company in writing
of any claim by the IRS that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such
notification shall be given as soon as practicable but no later
than 10 business days after the Executive is informed in writing
of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of
the 30-day period following the date on which the Executive gives
such notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such
claim, the Executive shall:
(1) give the Company any information reasonably
requested by the Company relating to such claim,
(2) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this Section 5.6.c, the Company shall control
all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Executive to pay the tax claimed and ▇▇▇ for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided further, that if
the Company directs the Executive to pay such claim and ▇▇▇
for a refund, the Company shall advance the amount of such
payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and provided further, that any
extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect
to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable
hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
d. If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.6.c, the Executive
becomes entitled to receive, and receives, any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 5.6.c)
promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5.6.c, a
determination is made that the Executive shall not be entitled to
any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
5.7 Withholding Taxes. The Company may withhold from all
payments due to the Executive (or his beneficiary or estate)
hereunder all taxes which, by applicable federal, state, local or
other law, the Company is required to withhold therefrom.
5.8 Continued Employment. Nothing expressed or implied
herein shall create any right or duty of continued employment of
the Executive by the Company or any Subsidiary. The Company and
each of its Subsidiaries reserves all rights to terminate the
Executive's employment at any time with or without cause unless
otherwise protected by law or contract.
ARTICLE VI
NON-EXCLUSIVITY OF RIGHTS
6.1 Waiver of Other Severance Rights. To the extent that
payments are made to the Executive pursuant to Section 5.1, the
Executive hereby waives the right to receive severance payments
under any other Plan or agreement of the Company.
6.2 Other Rights. Except as provided in Section 6.1, this
Agreement shall not prevent or limit the Executive's continuing
or future participation in any benefit, bonus, incentive or other
Plans, provided by the Company or any of its Subsidiaries and for
which the Executive may qualify, nor shall this Agreement limit
or otherwise affect such rights as the Executive may have under
any other agreements with the Company or any of its Subsidiaries.
Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any Plan of the Company or
any of its Subsidiaries and any other payment or benefit required
by law at or after the Termination Date shall be payable in
accordance with such Plan or applicable law except as expressly
modified by this Agreement.
ARTICLE VII
EXPENSES AND INTEREST
7.1 Legal Fees and Other Expenses. a. If the Executive
incurs legal fees or other expenses in a good faith effort to
obtain benefits under this Agreement, the Company shall reimburse
the Executive on a current basis for such fees and expenses to
the extent not reimbursed under the Company's officers and
directors liability insurance policy, if any. The existence of
any controlling case or regulatory law which is directly
inconsistent with the position taken by the Executive shall be
evidence that the Executive did not act in good faith.
b. Reimbursement of legal fees and expenses shall be
made monthly upon the written submission of a request for
reimbursement together with evidence that such fees and expenses
are due and payable or were paid by the Executive. If the
Company shall have reimbursed the Executive for legal fees and
expenses and it is later determined that the Executive was not
acting in good faith or the resolution of the dispute includes a
finding denying, in total, the Executive's claims in such
dispute, all amounts paid on behalf of, or reimbursed to, the
Executive shall be promptly refunded to the Company.
7.2 Interest. If the Company does not pay any amount due
to the Executive under this Agreement within three days after
such amount became due and owing, interest shall accrue on such
amount from the date it became due and owing until the date of
payment at a annual rate equal to two percent (2.0%) above the
corporate base rate announced by Norwest Bank Minnesota, National
Association, in effect from time to time during the period of
such nonpayment.
ARTICLE VIII
SET-OFF OR MITIGATION
8.1 Set-Off by Company. Except as provided in the
following sentence, the Executive's right to receive when due the
payments and other benefits provided for under this Agreement is
absolute, unconditional and subject to no set-off, counterclaim
or legal or equitable defense. Notwithstanding anything to the
contrary in this Agreement, in the event that the Executive
breaches in any material respect any covenant or obligation set
forth in Article IX, the Company may withhold any further payment
otherwise due to the Executive pursuant to clauses d. and f. of
Section 5.1. Time is of the essence in the performance by the
Company of its obligations under this Agreement.
8.2 No Mitigation. The Executive shall not have any duty
to mitigate the amounts payable by the Company under this
Agreement by seeking new employment following termination.
Except as specifically otherwise provided in this Agreement, all
amounts payable pursuant to this Agreement shall be paid without
reduction regardless of any amounts of salary, compensation or
other amounts which may be paid or payable to the Executive as
the result of the Executive's employment by another employer.
ARTICLE IX
CONFIDENTIALITY AND NONCOMPETITION
9.1 Confidentiality. Executive acknowledges that it is the
policy of the Company and its subsidiaries to maintain as secret
and confidential all valuable and unique information and
techniques acquired, developed or used by the Company and its
relating to their business, operations, employees and customers,
which gives the Company and its Subsidiaries a competitive
advantage in the businesses in which the Company and its
Subsidiaries are engaged except to the extent that such
information is a matter of public record or is published and made
available to the general public ("Confidential Information").
Executive recognizes that all such Confidential Information is
the sole and exclusive property of the Company and its
Subsidiaries, and that disclosure of Confidential Information
would cause damage to the Company and its Subsidiaries.
Executive agrees that, except as required by the duties of
Executive's employment with the Company and/or its Subsidiaries
and except in connection with enforcing the Executive's rights
under this Agreement or if compelled by a court or governmental
agency, Executive will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information
obtained during Executive's employment with the Company. When
the Executive shall cease to be employed by the Company, the
Executive shall surrender to the Company all records, computer
tapes, software or other documents or data obtained by Executive
or entrusted to Executive (together with all copies thereof)
which pertain to the businesses engaged in by the Company or its
affiliates.
9.2 Intellectual Property. The Executive hereby assigns to
the Company the Executive's entire right, title and interest in
and to all discoveries and improvements, patentable or
otherwise, trade secrets and ideas, writings and copyrightable
material, which may be conceived by the Executive or developed or
acquired by the Executive during the Executive's employment,
which may pertain directly or indirectly to the business of the
Company or any of its affiliates. The Executive agrees to
disclose fully all such developments to the Company upon its
request, which disclosure shall be made in writing promptly
following any such request. The Executive shall, upon the
Company's request, execute, acknowledge and deliver to the
Company all instruments and do all other acts which are necessary
or desirable to enable the Company or any of its affiliates to
file and prosecute applications for, and to acquire, maintain and
enforce, all patents, trademarks and copyrights in all countries.
All copyrightable subject matter developed by the Executive under
this Agreement is work made for hire vesting title in the
Company.
9.3 Noncompetition/Nonsolicitation. a. The Executive
agrees that, during the period of his employment with the Company
and/or its Subsidiaries and, if the Executive's employment is
terminated for any reason, thereafter for a period of three
years, the Executive will not at any time directly or indirectly,
in any capacity, engage or participate in, or become employed by
or render advisory or consulting or other services in connection
with any Prohibited Business (as defined in Section 9.3.d).
b. The Executive agrees that, during the period of the
Executive's employment with the Company and/or its Subsidiaries
and, if the Executive's employment is terminated for any reason,
thereafter for a period of three years, the Executive shall not
make any financial investment, whether in the form of equity or
debt, or own any interest, directly or indirectly, in any
Prohibited Business. Nothing in this Section 9.3.b shall,
however, restrict the Executive from making any investment in a
mutual fund or diversified investment company or any company
whose stock is listed on a national securities exchange or
actively traded in the over-the-counter market; provided that (1)
such investment does not give the Executive the right or ability
to control or influence the policy decisions of any Prohibited
Business, (2) such investment does not create a conflict of
interest between the Executive's duties hereunder and the
Executive's interest in such investment and (3) such investment
does not exceed three percent of the outstanding stock of any
class of stock of a corporation or three percent of the ownership
interest of any other entity.
c. The Executive agrees that, during the period of his
employment with the Company and/or its Subsidiaries and, if the
Executive's employment is terminated for any reason, thereafter
for a period of three years, the Executive shall not (1) employ
any employee of the Company and/or its Subsidiaries or (2)
interfere with the Company's or any of its Subsidiaries'
relationship with, or endeavor to entice away from the Company
and/or its Subsidiaries any person, firm, corporation, or other
business organization who or which at any time (whether before or
after the date of the Executive's termination of employment), was
an employee, customer, vendor or supplier of, or maintained a
business relationship with, any business of the Company and/or
its Subsidiaries which was conducted at any time during the
period commencing one year prior to the termination of
employment.
d. For the purpose of this Section 9.2, "Prohibited
Business" shall be defined as any business or other entity and
any branch, office or operation thereof, which is engaged in
managing, distributing, marketing, administering or otherwise
providing general purpose payment cards or credit cards, extended
service plans and warranties, consumer credit products, fee-based
products and services or any other business being conducted by or
contemplated by the Company or any of its Subsidiaries as of the
Termination Date, in any geographic area in which the Company
does business, in the United States or abroad.
9.4 Remedy. a. The Executive and the Company specifically
agree that, in the event that the Executive shall breach the
Executive's obligations under this Article IX, the Company and
its subsidiaries will suffer irreparable injury and no adequate
remedy for such breach, and shall be entitled to injunctive
relief or other relief in order to enforce or present any such
violation thereof (including the extension of the non-competition
and nonsolicitation periods by a period equal to the length of
the violation and the length of proceedings necessary to stop
such violation). In particular, without limiting the generality
of the foregoing, the Company shall not be precluded from
pursuing any and all remedies it may have at law or in equity for
breach of such obligations.
If, at any time of enforcement of this Article IX, a
court or an arbitrator holds that the restrictions stated herein
are unreasonable under circumstances then existing, the parties
hereto agree that the maximum period, scope or geographical area
reasonable under such circumstances shall be substituted for the
stated period, scope or area and that the court or arbitrator
shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law. This
Agreement shall not authorize a court or arbitrator to increase
or broaden any of the restrictions in this Article IX.
b. In addition to any other remedies provided for
herein, in the event that the Executive shall breach in any
material respect any obligation under this Article IX, the
Executive shall refund to the Company all compensation paid to
the Executive pursuant to paragraphs d. and f. of Section 5.1.
Any such refund shall neither relieve the Executive of his
obligations under this Article IX nor limit the remedies the
Company may have at law or in equity for breach of such
obligation.
9.5 Survival Article IX of this Agreement shall survive
and continue in full force and effect in accordance with its
terms, notwithstanding the expiration of the Agreement Term.
ARTICLE X
MISCELLANEOUS
10.1 No Assignability. This Agreement is personal to the
Executive and without the prior written consent of the Company
shall not be assignable by the Executive otherwise than by will
or the laws of descent and distribution. This Agreement shall
inure to the benefit of and be enforceable by the Executive's
legal representatives.
10.2 Successors. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and
assigns. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company
to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place.
Any successor to the business and/or assets of the Company which
assumes or agrees to perform this Agreement by operation of law,
contract, or otherwise shall be jointly and severally liable with
the Company under this Agreement as if such successor were the
Company.
10.3 Payments to Beneficiary. If the Executive dies before
receiving amounts to which the Executive is entitled under this
Agreement, such amounts shall be paid in a lump sum to the
beneficiary designated in writing by the Executive, or if none is
so designated, to the Executive's estate.
10.4 Non-alienation of Benefits. Benefits payable under
this Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind,
either voluntary or involuntary, before actually being received
by the Executive, and any such attempt to dispose of any right to
benefits payable under this Agreement shall be void.
10.5 Severability. If any one or more articles, sections
or other portions of this Agreement are declared by any court or
governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any
article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to
be unlawful or invalid shall be construed so as to effectuate the
terms of such article, section or other portion to the fullest
extent possible while remaining lawful and valid.
10.6 Amendments. Except as provided in Section 2.2, this
Agreement shall not be altered, amended or modified except by
written instrument executed by the Company and the Executive.
10.7 Notices. All notices and other communications under
this Agreement shall be in writing and delivered by hand or by
first class registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
If to the Company:
Metris Companies Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing. Notice and communications shall be
effective when actually received by the addressee.
10.8 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original,
but all of which together constitute one and the same instrument.
10.9 Governing Law. This Agreement shall be interpreted
and construed in accordance with the laws of the State of
Minnesota, without regard to its choice of law principles.
10.10 Captions. The captions of this Agreement are not a
part of the provisions hereof and shall have no force or effect.
10.11 Employment with Subsidiaries. Employment with the
Company for purposes of this Agreement shall include employment
with any Subsidiary.
10.12 Company's Option to Fix Expiration Date. The Company
shall have the right prior to the Effective Date, in its sole
discretion, pursuant to action by the Board, to determine on
expiration date for the Agreement Term, which expiration date
shall not become effective until the date fixed by the Board for
such expiration date, which date shall be at least 30 days after
notice thereof is given by the Company to the Executive in
accordance with Section 10.7; provided, however, that no such
action shall be taken by the Board following an Imminent Control
Change Date until, in the opinion of the Board, any such proposal
or offer has been abandoned or terminated; and provided further,
that in no event shall the Board fix an expiration date pursuant
to this Section on and after the Effective Date.
10.13 No Waiver. The Executive's failure to insist upon
strict compliance with any provision of this Agreement shall not
be deemed a waiver of such provision or any other provision of
this Agreement. A waiver of any provision of this Agreement
shall not be deemed a waiver of any other provision, and any
waiver of any default in any such provision shall not be deemed a
waiver of any later default thereof or of any other provision.
10.14 Entire Agreement. This Agreement contains the entire
understanding of the Company and the Executive with respect to
its subject matter.
IN WITNESS WHEREOF, the Executive and the Company have executed
this Agreement as of the date first above written.
______________________________
METRIS COMPANIES INC.
By: _________________________
Title: _______________________
