[EXHIBIT 1] UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

Transcription

1 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 1 of 18 [EXHIBIT 1] IMPORTANT LEGAL NOTICE UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA ) IN RE METRIS COMPANIES INC. ) CIVIL ACTION No. 02-CV-3677 JMR/FLN SECURITIES LITIGATION ) ) NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION, MOTION FOR ATTORNEYS FEES, AND SETTLEMENT FAIRNESS HEARING TO: ALL PERSONS AND ENTITIES WHO PURCHASED OR OTHERWISE ACQUIRED METRIS COMPANIES INC. COMMON STOCK BETWEEN NOVEMBER 5, 2001 AND JULY 17, 2002, INCLUSIVE (THE CLASS, THE CLASS PERIOD ). A Federal Court authorized this Notice. This is not a solicitation from a lawyer. The Settlement will provide a $7,500,000 settlement fund for the benefit of the Class. This notice explains important rights you may have as a member of the Class. If you are a member of the Class, your legal rights are affected whether you act, or do not act. Please read this Notice carefully! The Settlement resolves a lawsuit about whether defendants Metris Companies Inc. ( Metris ), Ronald N. Zebeck and David Wesselink (collectively, Defendants ) misled investors by making material misrepresentations and omissions concerning the financial condition and operations of Metris in violation of the Federal Securities laws (the Action ). YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT SUBMIT A CLAIM FORM BY FRIDAY, MAY 9, 2008 EXCLUDE YOURSELF BY FRIDAY, FEBRUARY 22, 2008 OBJECT BY FRIDAY, FEBRUARY 22, 2008 The only way to receive a payment. See Question 9 below. Get no payment. This is the only option that allows you to ever be part of any other lawsuit against the Defendants or the other Released Parties (defined below) concerning the legal claims being released in this Settlement. See Questions 12 and 13 below. Write or the Court about why you do not like the Settlement. See Question 17 below. Questions? Call toll-free (800) , or visit

2 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 2 of 18 PARTICIPATE IN A HEARING Ask to speak in Court, either in person or via telephone, ON TUESDAY, MARCH 25, about the fairness of the Settlement. See Question 21 below DO NOTHING You will receive no payment, and give up your right to file your own lawsuit or participate in any other lawsuit against the Defendants or the Released Parties concerning the legal claims being released in the Settlement. See Question 22 below. These rights and options - and the deadlines to exercise them - are explained in this Notice. The Court in charge of this case still has to decide whether to approve the settlement. Payments will be made if the Court approves the settlement and after appeals are resolved. Please be patient. SUMMARY OF NOTICE A. Statement of Plaintiff Recovery Pursuant to the settlement described herein, a Settlement Fund consisting of Seven Million and Five Hundred Thousand Dollars ($7,500,000) in cash will be established. Plaintiffs estimate that there were approximately 47 million shares of Metris common stock traded during the Class Period which may have been damaged. Plaintiffs estimate that the average recovery per damaged share of Metris common stock under the settlement is $0.16 before deduction of Court-awarded attorneys fees and expenses. A Class Member s actual recovery will be a proportion of the Net Settlement Fund determined by that claimant s Recognized Claim as compared to the total Recognized Claims of all Class Members who submit acceptable Proofs of Claim. An individual Class Member may receive more or less than the average amount depending on the number of claims submitted, when during the Class Period a Class Member purchased shares of Metris common stock, the purchase price paid, and whether those shares were held at the end of the Class Period or sold during the Class Period, and, if sold, the amount received. See the Plan of Allocation beginning on page 13 for more information on your Recognized Claim. B. Statement of Potential Outcome of Case The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if plaintiffs were to have prevailed on each claim alleged. The issues on which the parties disagree include: (a) the appropriate economic model for determining the amount by which Metris common stock was allegedly artificially inflated (if at all) during the Class Period; (b) the amount by which Metris common stock was allegedly artificially inflated (if at all) during the Class Period; (c) the effect of various market forces influencing the trading price of Metris common stock at various times during the Class Period; (d) the extent to which external factors, such as general market and industry conditions, influenced the trading price of Metris common stock at various times during the Class Period; (e) the extent to which the various matters that Plaintiffs alleged were materially false or misleading influenced (if at all) the trading price of Metris common stock at various times during the Class Period; (f) the extent to which the various allegedly adverse material facts that Plaintiffs alleged were omitted influenced (if at all) the trading price of Metris common stock at various times during the Class Period; and (g) whether the statements made or facts allegedly omitted were material or otherwise actionable under the federal securities laws. The Defendants deny all allegations of wrongdoing, deny that they are liable to the 2 Questions? Call toll-free (800) , or visit

3 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 3 of 18 Plaintiffs or the Class, and deny that the Plaintiffs or the Class have suffered any damages. On April 21, 2006, Defendants obtained a ruling from the Court granting them summary judgment which, unless overturned on appeal, would have resulted in no payment being made to plaintiffs. C. Statement of Attorneys Fees and Costs Sought As compensation for their services in creating the Settlement Fund, Class Counsel are moving the Court to award them attorneys fees in an amount not to exceed twenty-eight percent (28%) of the Gross Settlement Fund, and for reimbursement of expenses incurred in connection with the prosecution of this Action in an amount not to exceed $1,155,000. The requested fees and expenses would amount to an average of $0.069 per damaged share in total for fees and expenses. Application will also be made for reimbursement to the Class Representative for an amount not to exceed $20,000 for reimbursement of his reasonable costs and expenses (including lost wages) directly relating to his representation of the Class. D. Further Information Further information regarding the Action and this Notice may be obtained by contacting Class Counsel: Patrice L. Bishop, Esq., Stull, Stull & Brody, Wilshire Boulevard, Suite 2300, Los Angeles, CA 90024, telephone: (888) (toll-free), Metris@SSBLA.com; and Joseph H. Weiss, Esq., or Joseph D. Cohen, Esq., Weiss & Lurie, 551 Fifth Avenue, Suite 1600, New York, NY 10176, telephone: (888) (toll-free), Info@WeissLurie.com. E. Reasons for the Settlement For the Plaintiffs, the principal reason for the Settlement is to provide a benefit to the Class now. This benefit must be compared to the risk that no recovery might be achieved given that the Court had granted Defendants motion for summary judgment. Although plaintiffs contend that they have valid claims and have appealed the Court s decision, the amount offered in settlement appears better than the likely alternatives. Indeed, even if plaintiffs were successful on appeal, there remain substantial risks that a smaller recovery or no recovery might be obtained after a contested trial and likely appeals, possibly years into the future. For the Defendants, the principal reason for the settlement is to eliminate the expense, risks, and uncertain outcome of the litigation. Defendants have expressly denied and continue to deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or omissions alleged, or that could have been alleged, in the Action. [END OF COVER PAGE] Questions? Call toll-free (800) , or visit 3

4 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 4 of 18 WHAT THIS NOTICE CONTAINS PAGE BASIC INFORMATION Why did I receive this notice package? What is this lawsuit about? Why is this Action a class action? Why is there a settlement? How do I know if I am part of the Settlement? Are there exceptions to being included in the Class? What if I am still not sure I am included? What does the Settlement provide? How can I receive a payment? When will I receive my payment? What am I giving up to receive a payment? How do I exclude myself from the Settlement? If I do not exclude myself, can I sue the Defendants or the other Released Parties later for the claims that I am releasing in this Settlement? If I exclude myself, can I obtain a payment from this Settlement? Do I have a lawyer in this case? How will the lawyers be paid? How do I notify the Court that I do not like the Settlement? What is the difference between objecting and requesting exclusion from the Settlement? When and where will the Court decide whether to approve the Settlement? Do I have to come to the hearing? May I speak at the hearing? IF YOU DO NOTHING What will happen if I do nothing at all? GETTING MORE INFORMATION How can I get more information? PLAN OF ALLOCATION OF NET SETTLEMENT FUND AMONG CLASS MEMBERS SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES BASIC INFORMATION 4 Questions? Call toll-free (800) , or visit

5 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 5 of Why did I receive this notice package? I You or someone in your family may have purchased or otherwise acquired Metris common stock between November 5, 2001 and July 17, 2002, inclusive. If the description above applies to you or someone in your family, you have a right to know about the proposed Settlement of this Action, and about all of your options. 2. What is this lawsuit about? I Throughout the Class Period, Metris was a financial services company that issued credit cards through its wholly owned subsidiary, Direct Merchants Credit Bank, N.A. The lawsuit alleges that defendants Metris, its then Chief Executive Officer and Chairman of the Board Ronald N. Zebeck, and its then Vice Chairman David Wesselink, intentionally or recklessly misled investors through a series of material misrepresentations and/or omissions concerning the business, operations and financial condition of Metris in violation of the Federal Securities laws. These misstatements and omissions concerned, among other things: (a) expectations for growth and profitability at Metris in 2002, and earnings guidance related thereto; (b) the negative impact an examination by the Office of the Controller of the Currency would have, and was having, on Metris operations, financial condition and earnings; and (c) undisclosed material changes in Metris business model and lending practices. The lawsuit further alleges that Defendants misrepresentations and/or omissions caused the price of Metris securities to be artificially inflated, which resulted in monetary damage to Class Members when Metris began to disclose its true financial and operational condition. The Defendants deny the allegations and any wrongdoing whatsoever. The first securities class action complaint was filed in this matter on September 20, On March 5, 2003, the Court issued and filed an Order Consolidating Actions, Appointing Lead Plaintiff, and Approving Lead Plaintiff s Selection of Lead Counsel and Liaison Counsel. On April 9, 2003, Lead Plaintiff filed a Consolidated Amended Complaint ( CAC ). Defendants moved to dismiss the CAC, and on July 14, 2003, after extensive briefing and oral argument, the Court issued an Order denying Defendants motion to dismiss in its entirety. Defendants answered the CAC on August 18, Thereafter, the parties engaged in extensive class and merits discovery, as well as a significant amount of motion practice. This discovery was extremely complicated and contentious, involving many motions to compel and hearings before the Court. Plaintiffs served, and/or responded to, multiple sets of document requests, a myriad of interrogatories, and requests for admissions. Plaintiffs also served numerous third-party subpoenas. As a result of the wide-ranging discovery efforts, Plaintiffs obtained and analyzed hundreds of thousands of pages of documents produced by the Defendants and third parties. The parties also deposed a total of nineteen percipient and expert witnesses in locations throughout the United States. On January 16, 2004, while discovery was continuing, plaintiffs filed a motion for class certification. Following briefing, the Court heard oral argument, and on November 30, 2004, Magistrate Judge Franklin Noel issued his Report and Recommendation (the Report ) recommending that the Class be certified and that Michael Brody Pettit be appointed class representative. On December 10, 2004, Defendants filed their objection to the Report. Following briefing on the issue, Chief Judge Rosenbaum issued an Order denying Defendants request for oral argument and granting Plaintiffs motion for class certification. On January 21, 2005, Defendants Questions? Call toll-free (800) , or visit 5

6 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 6 of 18 filed with the United States Court of Appeals for the Eighth Circuit their petition for permission to take an interlocutory appeal of Chief Judge Rosenbaum s grant of class certification. The Eighth Circuit issued its Judgment denying Defendants Petition on February 4, Following the completion of discovery, on September 21, 2005, Defendants filed two separate motions for summary judgment (the Summary Judgment Motions ). On October 21, 2005, Plaintiffs filed an opposition to the Summary Judgment Motions, and on October 28, 2005, Defendants filed their reply briefs. On April 21, 2006, Chief Judge Rosenbaum granted Defendants Summary Judgment Motions. On May 24, 2006, Plaintiffs filed a Notice of Appeal to the Eighth Circuit (the Notice of Appeal ). Shortly thereafter, the Parties agreed to attend mediation before Eighth Circuit Settlement Director John Martin and, on July 26, 2006, the Parties, including the Court appointed Class Representative, attended a full-day settlement conference in St. Louis, Missouri. While the Parties were unable to settle the action on that date, counsel for the Parties continued to negotiate and on or about August 21, 2006, the Parties reached an agreement in principle for the Settlement of this Action. 3. Why is this Action a class action? I In a class action, one or more people called lead plaintiffs or class representatives (in this case, class representative Michael Brody Pettit), sue on behalf of people who have similar claims. All these people and/or entities are referred to collectively as a Class, or individually as Class Members. One court resolves the issues for all Class Members, except for those who exclude themselves from the Class. 4. Why is there a Settlement? I On April 21, 2006, the Court granted summary judgment in favor of Defendants. Unless the Court s decision was reversed pursuant to the appeal filed by the plaintiffs, the granting of summary judgment to Defendants would have resulted in no recovery at all for the plaintiffs and the Class. During the pendency of the appeal, both sides agreed to a settlement. That way, they avoid the risks and costs of the appeal (and, if plaintiffs were ultimately successful on appeal, a trial), and the people affected will get at least some compensation. The Class Representative and the attorneys think the settlement is best for all Class Members. 5. How do I know if I am part of the Settlement? I The Class includes: all persons and entities who purchased or otherwise acquired Metris common stock from November 5, 2001 to July 17, 2002, inclusive. 6. Are there exceptions to being included in the Class? I Excluded from the Class are Defendants, officers and directors of the Company, members of their immediate families, and their legal representatives, heirs, successors or assigns and any entity in which any Defendant, officer and/or director has or had a controlling interest, or is or was a parent or subsidiary of Metris during the Class Period. 6 Questions? Call toll-free (800) , or visit

7 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 7 of 18 Also excluded from the Class are any prospective Class Members who exclude themselves by filing a request for exclusion in accordance with the requirements set forth in this Notice as described in Question 12 below. If one of your mutual funds purchased or owns Metris common stock, that alone does not make you a Class Member. You are a Class Member only if you directly purchased or otherwise acquired shares of Metris common stock during the Class Period. Contact your broker to see if you purchased Metris common stock during that period. 7. What if I am still not sure whether I am included? I If you are still not sure whether you are included, you can ask for free help. You can call (800) or visit for more information. Or you can fill out and return the claim form described below in Question 9, to see if you qualify (note that if you submit a Proof of Claim form you will be releasing any Settled Claims you have even if you are not eligible for any payment). 8. What does the Settlement provide? I In exchange for the Settlement and dismissal of the appeal and the Action, Defendants and their insurers have agreed to create a Settlement Fund consisting of $7,500,000 in cash. The balance of this fund, after deduction of Court-approved fees and expenses, will be divided among all Class Members who submit valid claim forms, before the deadline for submission. 9. How can I receive a payment? I To qualify for payment, you must submit a Proof of Claim. A Proof of Claim is attached to this Notice. You also may obtain a Proof of Claim on the Internet at Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it and send it to the Claims Administrator no later than Friday, May 9, 2008, via (a) U.S. mail or courier service, (b) fax, or (c) the Claims Administrator s website. 10. When will I receive my payment? I The Court will hold a hearing on Tuesday, March 25, 2008, to decide whether to approve the Settlement. Even if the Court approves the Settlement, it could take more than a year after the hearing before the Net Settlement Fund is distributed to the Class Members. One reason that it may take more than a year for the Net Settlement Fund to be distributed is that delays could be caused by the filing of appeals. The other reason that it may take more than a year for the Net Settlement Fund to be distributed is that once the Settlement has been approved, and any appeals are resolved, the Claims Administrator must process all of the Proofs of Claim. The processing is a complicated process and will take many months. Please be patient. Questions? Call toll-free (800) , or visit 7

8 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 8 of What am I giving up to receive a payment? I Unless you exclude yourself, you are agreeing to remain in the Class and that if the Settlement is approved you will release all Settled Claims (as defined below) against the Released Parties (as defined below). This means that you no longer have the right to pursue these claims in a court of law against the Defendants or any of the Released Parties. Settled Claim(s) means any and all claims, debts, demands, rights or causes of action or liabilities whatsoever (including, but not limited to, any claims for damages, interest, attorneys fees, expert or consulting fees, equitable or injunctive relief and any other costs, expenses or liability whatsoever), whether based on federal, state, local, statutory or common law or any other law, rule or regulation, whether fixed or contingent, accrued or un-accrued, liquidated or unliquidated, at law or in equity, matured or un-matured, whether class or individual in nature, including both known claims and Unknown Claims (as defined below), (a) that have been asserted in this Action by the Class Members or any of them against any of the Released Parties, or (b) that could have been asserted in any forum by the Class Members or any of them against any of the Released Parties which arise out of or are based upon the allegations, transactions, facts, matters or occurrences, representations or omissions involved, set forth, or referred to in the Complaint and relate in any way to the purchase or acquisition of the common stock of Metris during the Class Period. Settled Claim(s) shall also include all claims relating to the defense or settlement of the Action (except for claims to enforce the Settlement). Unknown Claims means any and all Settled Claims which any Class Representative or Class Member does not know or suspect to exist in his, her or its favor at the time of the release of the Released Parties, and any Defendants Claims which any Defendant does not know or suspect to exist in his, her or its favor. Each party assumes the risk of any mistake in executing the Stipulation and furnishing the releases set forth in the Stipulation. With respect to any and all Settled Claims and Settled Defendants Claims, the parties stipulate and agree that upon the Effective Date, the Lead Plaintiffs and the Defendants shall expressly, and each Class Member shall be deemed to have, and by operation of the Judgment shall have, expressly waived any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable, or equivalent to Cal. Civ. Code 1542, which provides: A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor. The Class Representative and Defendants acknowledge, and Class Members by operation of law shall be deemed to have acknowledged, that the inclusion of Unknown Claims in the definition of Settled Claims and Settled Defendants Claims was separately bargained for and was a key element of the Settlement. Released Parties means any and all of Metris and the respective officers, directors, partners, members, subsidiaries, employees, agents, attorneys and representatives, heirs, successors in interest or assigns of Metris, and the Defendants and the agents, attorneys and representatives, heirs, successors in interest or assigns of the Defendants, and Defendants insurers. If you remain a member of the Class, all of the Court s orders will apply to you and legally bind you. 8 Questions? Call toll-free (800) , or visit

9 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 9 of How do I exclude myself from the Settlement? I You can exclude yourself from the Settlement. If you do not want a payment from the Settlement, but you want to keep any right you may have to sue or continue to sue the Defendants or any of the other Released Parties about the Settled Claims, then you must take steps to exclude yourself from the Settlement. This is sometimes referred to as opting out of the Class. To exclude yourself from the Settlement, you must advise the Claims Administrator, by U.S. mail or courier, fax or the Claims Administrator s website, that you want to be excluded from the Metris Companies Inc. Securities Litigation. Be sure to include your name, address, telephone number, your purchase(s), acquisition(s) and sale(s) of Metris common stock during the Class Period, indicating the number of shares, purchased or otherwise acquired and the dates of each purchase, acquisition and sale. You cannot exclude yourself on the telephone. You must send your exclusion request to the Claims Administrator, by U.S. mail or courier, fax or the Claims Administrator s website, no later than Friday, February 22, 2008, to: Metris Companies Inc. Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, N.Y Facsimile: (516) Electronically via website (for further instructions: click on Cases and then click on Metris Companies Inc. Securities Litigation ) If you exclude yourself from the Class, you will not be able to participate in the Settlement, you will not receive a payment from the Net Settlement Fund and you will not be able to object to any aspect of the Settlement. If you exclude yourself, you will not be legally bound by anything that happens in this lawsuit, and you may be able to sue (or continue to sue) the Defendants or the Released Parties in the future. If you wish to be assured that your request for exclusion is actually received by the Claims Administrator, then you should submit it by certified mail, return receipt requested and retain the return receipt. If submitted by fax, please retain the fax confirmation sheet; if submitted electronically via the Claims Administrator s website, please retain the electronic confirmation you receive from the Claims Administrator. 13. If I do not exclude myself, can I sue the Defendants or the other Released Parties later for the claims that I am releasing in this Settlement? No. Unless you exclude yourself, you give up any right to sue the Defendants and the other Released Parties for the Settled Claims that this Settlement releases. You must exclude yourself from the Class to bring your own lawsuit. Remember, the exclusion deadline is Friday, February 22, If I exclude myself, can I obtain a payment from this Settlement? I Questions? Call toll-free (800) , or visit 9

10 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 10 of 18 No. If you exclude yourself, do not send in a Proof of Claim to ask for any money. But, you may yourself seek to sue or be part of a different lawsuit, if any, involving the Settled Claims released by this Settlement against the Released Parties. 15. Do I have a lawyer in this case? I The Court ordered that the law firms of Stull, Stull & Brody in Los Angeles, California, and Weiss & Lurie in New York, New York, will represent all Class Members. These lawyers are called Plaintiffs Co-Lead Counsel or Class Counsel. You may contact Class Counsel at the toll-free telephone numbers, business addresses and/or addresses listed in Question 23 below. You will not be separately charged for these lawyers. The Court will determine the amount of Plaintiffs Co- Lead Counsels fees and expenses, which will be paid out of the Gross Settlement Fund. If you want to be represented by your own lawyer, you may hire one at your own expense. 16. How will the lawyers be paid? I Class Counsel are moving the Court to award attorneys fees from the Gross Settlement Fund in an amount not greater than twenty-eight percent (28%) of the Gross Settlement Fund and for reimbursement of their expenses up to a maximum amount of $1,155, Class Counsel are also moving the Court to award a payment of up to $20,000 to Class Representative Michael Brody Pettit for his reasonable costs and expenses (including lost wages) directly relating to his representation of the Class. Class Counsel, without further notice to the Class, will subsequently apply to the Court for payment of the Claims Administrator s fees and expenses incurred in connection with notice, administering the settlement and distributing the settlement proceeds to the Class Members. 17. How do I notify the Court that I do not like the Settlement? I If you are a Class Member you can object to the Settlement if you do not like any part of it, including the Plan of Allocation, the application for attorneys fees and reimbursement of expenses or the request for an award to the Class Representative. To object, you must send a letter via U.S. mail or to the persons listed below saying that you are a Class Member in the Metris Companies Inc. Securities Litigation, that you object to the Settlement, and the reasons why you object. In your objection, you must include your name, address, and telephone number. You must also include documentation evidencing your purchase(s), acquisition(s) and sale(s) of Metris common stock during the Class Period, indicating the number of shares purchased or otherwise acquired and the dates of each purchase, acquisition and sale showing that you are a member of the Class. The objection must be postmarked or ed no later than Friday, February 22, 2008, to each of the following: 10 Questions? Call toll-free (800) , or visit

11 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 11 of 18 COURT CLASS COUNSEL DEFENDANTS COUNSEL The Hon. James M. Rosenbaum Patrice L. Bishop, Esq. Peter W. Carter, Esq. United States District Judge Stull, Stull & Brody Seth Leventhal, Esq. United States District Court Wilshire Boulevard Dorsey & Whitney LLP for the District of Minnesota Suite South Sixth Street U.S. Courthouse, Ste. 15E Los Angeles, CA Suite S. 4th Street Toll-free Phone: (888) Minneapolis, MN Minneapolis, MN Facsimile: (310) Telephone: (612) Facsimile: (612) Joseph H. Weiss, Esq. David P. Pearson, Esq. Winthrop & Joseph D. Cohen, Esq. Weinstine, P.A. Weiss & Lurie 225 South Sixth Street 551 Fifth Avenue Suite 3500 Suite 1600 Minneapolis, MN New York, NY Telephone: (612) Toll-free Phone: (888) Facsimile: (612) Facsimile: (212) All s to Defendants Counsel should be sent to: 18. What is the difference between objecting and requesting exclusion from the Settlement? Objecting is simply telling the Court that you do not like something about the Settlement. You can object only if you stay in the Class. Excluding yourself is telling the Court that you do not want to be part of the Class. If you exclude yourself, you have no basis to object because the case no longer affects you. 19. When and where will the Court decide whether to approve the Settlement? I The Court will hold a Settlement Fairness Hearing at 10:00 a.m. on Tuesday, March 25, 2008, at the United States District Court for the District of Minnesota, U.S. Courthouse, 300 S. 4th Street, Minneapolis, MN 55415, in the courtroom of The Honorable James M. Rosenbaum. At this hearing, the Court will consider whether the Settlement and the Plan of Allocation are fair, reasonable and adequate. If there are written objections, the Court will consider them. The Court will also listen to people who have asked in writing by Friday, February 22, 2008, to speak at the hearing. The Court may also decide whether and how much to award Class Counsel for attorneys fees and expenses and whether to make an award to the Class Representative. 20. Do I have to come to the hearing? I No. Class Counsel will answer any questions the Court may have. Questions? Call toll-free (800) , or visit 11

12 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 12 of May I speak at the hearing? I You may ask the Court for permission to speak at the Settlement Fairness Hearing. To do so, you must include with your objection, described in Question 17 above, the statement, I hereby give notice that I intend to appear at the Settlement Fairness Hearing in Metris Companies Inc. Securities Litigation. Be sure to include your name, address and telephone number, identify the date(s), price(s) and number(s) of shares of all purchase(s), acquisition(s) and sale(s) of Metris common stock you made during the Class Period, and sign the letter. You may attend the hearing in person, or in the alternative, in your letter, request the Court s permission to appear via telephone. If you intend to have any witnesses testify or to introduce any evidence at the Settlement Fairness Hearing, you must list the witnesses and evidence in your objection. Your Notice of Intention to Appear must be sent to the Court, Class Counsel and Defendants Counsel, no later than Friday, February 22, 2008, at the addresses shown in the answer to Question 17. If the Court grants your request to speak at the hearing via telephone, Plaintiff s Counsel will provide you with a toll-free telephone number with which you may call the Court and participate in the hearing. You cannot speak at the hearing if you exclude yourself. IF YOU DO NOTHING 22. What happens if I do nothing at all? If you do nothing, you will get no money from this settlement and you will be precluded from starting a lawsuit, continuing with a lawsuit, or being part of any other lawsuit against Defendants and the other Released Parties about the Settled Claims in this case, ever again. To share in the Net Settlement Fund you must submit a Proof of Claim form (see Question 9). To start, continue or be a part of any other lawsuit against any of the Defendants and the other Released Parties about the Settled Claims in this case you must exclude yourself from this Class ( see Question 12). GETTING MORE INFORMATION 23. How can I get more information? I This Notice summarizes the proposed Settlement. More details are contained in the Stipulation and Agreement of Settlement. You can obtain a copy of the Stipulation by visiting If you have questions regarding how to obtain copies of documents related to this Settlement, completing your Proof of Claim, correspondence you have received from the Claims Administrator or the calculation of your Recognized Claim, you may contact the Claims Administrator by mail at Metris Companies Inc. Securities Litigation, c/o Berdon Claims Administration LLC, P.O. Box 9014, Jericho, N.Y ; by phone toll-free at (800) ; by fax at (516) ; or by visiting the website. 12 Questions? Call toll-free (800) , or visit

13 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 13 of 18 For further information regarding this Settlement, you may contact Class Counsel: Patrice L. Bishop, Esq. Stull, Stull & Brody Wilshire Blvd. Suite 2300 Los Angeles, CA Toll-free Phone: (888) Joseph H. Weiss, Esq. Joseph D. Cohen, Esq. Weiss & Lurie 551 Fifth Avenue, Suite 1600 New York, NY Toll-free Phone: (888) PLAN OF ALLOCATION OF NET SETTLEMENT FUND AMONG CLASS MEMBERS The $7,500,000 Cash Settlement Amount and any interest earned thereon shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the Net Settlement Fund ) shall be distributed to members of the Class who submit valid Proofs of Claim ( Authorized Claimants ). The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund based upon each Authorized Claimant s Recognized Claim. The Recognized Claim formula is not intended to be an estimate of the amount of what a Class Member might have been able to recover after a trial; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the settlement. The Recognized Claim formula is the basis upon which the Net Settlement Fund will be proportionately allocated to the Authorized Claimants. Damaged Shares Damaged shares are those that were purchased in the open market between November 5, 2001, and July 17, 2002, inclusive, and either: (1) sold between January 16, 2002, and October 16, 2002, or (2) still held as of October 16, Shares purchased and sold between November 5, 2001 and January 15, 2002, inclusive, have not been damaged and will not be entitled to share in the recovery. Inflation Percentage Table 1 below, derived from an event study analysis conducted by an independent expert retained by Class Counsel, shows the inflation percentage per damaged share during the Class Period. The inflation percentage is the percentage of inflation in the stock price of damaged shares attributable to the allegedly wrongful conduct engaged in by defendants and not otherwise attributable to events unrelated to that conduct. The inflation percentage reflects a 50% reduction in recovery for shares purchased between November 5, 2001, and January 15, 2002 based on the Court s summary judgment decision. It is estimated that approximately 47 million shares of Metris were damaged. If all purchasers file claims pursuant to this notice, the expected average recovery per damaged share will be approximately $0.16. Questions? Call toll-free (800) , or visit 13

14 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 14 of 18 Table 1: Inflation as a Percentage of Share Price Inflation Average Period Start Date End Date Percentage Inflation Per Share Recognized Claims 1 11/5/ /12/ % $ /13/ /4/ % $ /5/2001 1/16/ % $ /17/2002 1/24/ % $ /25/2002 3/3/ % $ /4/2002 3/24/ % $ /25/2002 4/16/ % $ /17/2002 4/17/ % $ /18/2002 6/17/ % $ /18/2002 6/19/ % $ /20/2002 7/16/ % $ /16/2002 Current 0.0% $ 0.00 Recognized Claim amounts per share will be calculated as follows: For the shares of Metris common stock purchased during the period from November 5, 2001 through July 17, 2002, and a. sold prior to the close of trading on January 15, 2002, the Recognized Claim is zero; b. sold during the period January 16, 2002 through July 16, 2002, the Recognized Claim is the lesser of: (i) the difference between the purchase price and the sale price; or (ii) the difference between the Average Inflation per share at the time of purchase and the Average Inflation per share at the time of sale, as indicated in Table 1, above; c. sold during the period July 17, 2002 through October 16, 2002, the Recognized Claim is the lesser of: (i) the difference between the purchase price and the sale price; or (ii) the difference between the purchase price and the Average Closing Price on the date of sale, as indicated in Table 2, below; d. retained through October 16, 2002, the Recognized Claim is the difference between the purchase price and $2.88 per share. 14 Questions? Call toll-free (800) , or visit

15 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 15 of 18 Table 2: Average Closing Prices for the 90 Days After the Class Period Average Sale Date Closing Closing Price Price Since July 17, /17/2002 $ 3.17 $ /18/2002 $ 3.20 $ /19/2002 $ 2.90 $ /22/2002 $ 2.62 $ /23/2002 $ 2.35 $ /24/2002 $ 2.11 $ /25/2002 $ 1.55 $ /26/2002 $ 1.86 $ /29/2002 $ 3.02 $ /30/2002 $ 3.51 $ /31/2002 $ 3.50 $ /1/2002 $ 3.02 $ /2/2002 $ 3.10 $ /5/2002 $ 2.90 $ /6/2002 $ 2.97 $ /7/2002 $ 2.70 $ /8/2002 $ 2.25 $ /9/2002 $ 2.11 $ /12/2002 $ 2.15 $ /13/2002 $ 2.60 $ /14/2002 $ 2.75 $ /15/2002 $ 3.07 $ /16/2002 $ 3.06 $ /19/2002 $ 3.03 $ /20/2002 $ 3.38 $ /21/2002 $ 3.43 $ /22/2002 $ 3.80 $ /23/2002 $ 4.33 $ /26/2002 $ 4.45 $ /27/2002 $ 5.15 $ /28/2002 $ 4.25 $ 3.04 Questions? Call toll-free (800) , or visit 15

16 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 16 of 18 8/29/2002 $ 4.50 $ /30/2002 $ 4.00 $ /3/2002 $ 3.65 $ /4/2002 $ 3.76 $ /5/2002 $ 3.90 $ /6/2002 $ 4.08 $ /9/2002 $ 4.30 $ /10/2002 $ 3.95 $ /11/2002 $ 4.04 $ /12/2002 $ 3.87 $ /13/2002 $ 3.49 $ /16/2002 $ 3.00 $ /17/2002 $ 3.00 $ /18/2002 $ 2.71 $ /19/2002 $ 2.52 $ /20/2002 $ 2.65 $ /23/2002 $ 2.35 $ /24/2002 $ 2.39 $ /25/2002 $ 2.39 $ /26/2002 $ 2.44 $ /27/2002 $ 2.20 $ /30/2002 $ 2.13 $ /1/2002 $ 2.20 $ /2/2002 $ 2.30 $ /3/2002 $ 2.25 $ /4/2002 $ 1.90 $ /7/2002 $ 1.77 $ /8/2002 $ 1.70 $ /9/2002 $ 1.45 $ /10/2002 $ 1.44 $ /11/2002 $ 1.70 $ /14/2002 $ 1.65 $ /15/2002 $ 1.57 $ /16/2002 $ 1.80 $ 2.88 General Provisions 16 Questions? Call toll-free (800) , or visit

17 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 17 of In processing claims, the first-in, first-out basis ( FIFO ) will be applied to purchases and sales. 2. The date of purchase is the contract or trade date, and not the settlement date. 3. Brokerage commissions, fees and taxes should be excluded from the purchase and sale price. 4. Shares originally sold short will result in a zero Recognized Claim. 5. All profits will be subtracted from all losses, both computed in the manner described above. 6. The receipt or grant by gift, devise or operation of law of Metris common stock during the Class Period shall not be deemed a purchase or sale of Metris common stock for the calculation of an Authorized Claimant s Recognized Claim nor shall it be deemed an assignment of any claim relating to the purchase of such shares unless specifically provided in the instrument of gift or assignment. 7. Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund based on his, her or its Recognized Claim as compared to the total Recognized Claims of all Authorized Claimants. 8. Class Members who do not submit acceptable Proofs of Claim will not share in the settlement proceeds. Class Members who do not either submit a request for exclusion or submit an acceptable Proof of Claim will nevertheless be bound by the settlement and the Order and Final Judgment of the Court dismissing this Action. 9. The Court has reserved jurisdiction to allow, disallow, or adjust the claim of any members of the Class on equitable grounds. 10. No person shall have any claim against Plaintiffs Counsel, the Claims Administrator or other agent designated by Plaintiffs Counsel, or any Defendant or any Defendants counsel based on the distribution made substantially in accordance with the Stipulation and this Plan of Allocation, or further orders of the Court. Distributions will be made to Authorized Claimants after all claims have been processed and after the Court has finally approved the settlement. If any funds remain in the Net Settlement Fund by reason of un-cashed distributions or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distributions, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed to Class Members who have cashed their initial distributions and who would receive at least $10.00 from such re-distribution, after payment of any unpaid costs or fees incurred in administering the Net Settlement Fund for such re-distribution. If after six months after such re-distribution any funds shall remain in the Net Settlement Fund, then such balance shall be contributed to non-sectarian, not-for-profit, 501(c)(3) organization(s) designated by Class Counsel and approved by the Court. Plaintiffs, Defendants, their respective counsel, and all other Released Parties shall have no responsibility for or liability whatsoever for the investment or distribution of the Settlement Fund, the Net Settlement Fund, the Plan of Allocation or the determination, administration, calculation, Questions? Call toll-free (800) , or visit 17

18 CASE 0:02-cv JMR-FLN Document Filed 01/11/08 Page 18 of 18 or payment of any Proof of Claim or non-performance of the Claims Administrator, the payment or withholding of taxes owed by the Settlement Fund or any losses incurred in connection therewith. SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES If you purchased shares of Metris common stock during the period from November 5, 2001 to July 17, 2002, inclusive, for the beneficial interest of a person or organization other than yourself, the Court has directed that, WITHIN SEVEN (7) DAYS OF YOUR RECEIPT OF THIS NOTICE, you either (1) provide to the Claims Administrator the name and last known address of each person or organization for whom or which you purchased Metris common stock during such time period, preferably in an MS Excel data table setting forth: (a) title/registration, (b) street address, (c) city/state/zip; or electronically in MS Word or WordPerfect files (label size Avery # 5162); or on computer-generated mailing labels ; or (2) request additional copies of this Notice and the Proof of Claim, which will be provided to you free of charge, and within seven (7) days mail the Notice and Proof of Claim directly to the beneficial owners of that Metris common stock. If you choose to follow alternative procedure (2), the Court has directed that, upon such mailing, you send a statement to the Claims Administrator confirming that the mailing was made as directed. You are entitled to reimbursement from the Settlement Fund of your reasonable expenses actually incurred in connection with the foregoing, including reimbursement of postage expense and the cost of ascertaining the names and addresses of beneficial owners. Those expenses will be paid after request and submission of appropriate supporting documentation. All communications concerning the foregoing should be addressed to the Claims Administrator at: Metris Companies Inc. Securities Litigation c/o Berdon Claims Administration LLC P.O. Box 9014 Jericho, N.Y Telephone: (800) Facsimile: (516) Website: Dated: Minneapolis, Minnesota January 11, 2008 BY ORDER OF THE UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA 18 Questions? Call toll-free (800) , or visit