METRIS COMPANIES INC.


                           ANNUAL INCENTIVE BONUS PLAN
                          DESIGNATED CORPORATE OFFICERS


1.       Definitions. When the following terms are used herein with initial
         capital letters, they shall have the following meanings:

1.1      Base Pay - a specific dollar amount identified in Schedule X.

1.2           Compensation  Committee - a committee  comprised  solely of two or
              more "outside  directors" of Metris Companies Inc. which satisfies
              the requirements of Section 162(m) of the Code.

1.2.          Code - The  Internal  Revenue  Code of 1986,  as it may be amended
              from time to time,  and any proposed,  temporary of final Treasury
              Regulations promulgated thereunder.

1.3      Company - Metris Companies Inc., a Delaware corporation, and any of its
         affiliates that adopt this Plan.

1.4           Participant - the President and Chief Executive  Officer,  and any
              of the Executive Vice  Presidents or Senior Vice Presidents of the
              Company who are  designated by the  Compensation  Committee at any
              time ending on or before the 90th day of each  Performance  Period
              as Participants in this Plan.

1.5      Performance Period - the twelve consecutive month period which
         coincides with the Company's fiscal year.

1.6      Targeted Bonus Percentage - the percentage identified in Schedule Y.

1.7           Company Performance Factor - percentage  identified in Schedule Z.
              The Company  Performance Factor shall be directly and specifically
              tied to one or more of the following business criteria, determined
              with respect to the Company:  consolidated  pre-tax earnings,  net
              revenues, net earnings, operating income, earnings before interest
              and  taxes,  cash  flow,  return on  equity,  return on net assets
              employed  or  earnings  per share for the  applicable  Performance
              Period,  all as computed in  accordance  with  generally  accepted
              accounting  principles  as in  effect  from  time to  time  and as
              applied  by the  Company  in  the  preparation  of  its  financial
              statements  and subject to such other special rules and conditions
              as the Compensation  Committee may establish at any time ending on
              or before the 90th day of the applicable  Performance Period. Such
              Performance  Factors shall  constitute the sole business  criteria
              upon which the performance goals under this Plan shall be based.

2.       Administration

2.1 Compensation  Committee.  The Plan shall be administered by the Compensation
Committee.

2.2           Determinations  made prior to each performance Period. At any time
              ending on or before the 90th day of each Performance  Period, they
              shall:

(a)      designate Participants for that Performance Period;
(b) determine each Participant's Base Pay for the Performance Period by amending
(in  writing)  Schedule X; (c)  establish  Targeted  Bonus  Percentages  for the
Performance  Period by amending (in writing)  Schedule Y; (d) establish  Company
Performance Factors for the Performance Period by amending (in writing) Schedule
Z.

2.3           Certification.  Following the close of each Performance Period and
              prior to payment  of any bonus  under the Plan,  the  Compensation
              Committee  must  certify in writing  that the Company  Performance
              Factor and all other  factors  upon  which a bonus is being  based
              have been attained.

2.4           Shareholder  Approval.  The  material  terms of this Plan shall be
              disclosed  to and  approved  by  shareholders  of the  Company  in
              accordance with Section 162(m) of the Code No. Bonus shall be paid
              under  this  plan  unless  such  shareholder   approval  has  been
              obtained.

3.       Bonus Payment.

3.1           Formula.  Each participant  shall receive a bonus payment for each
              Performance Period in an amount not greater than:

(a)    the Participant's Base Pay for the Performance Period, multiplied by.
(b)    the Participant's Target Bonus Percentage for the Performance Period
       multiplied by.
(c)    the Participant's Company Performance Factor for the Performance Period.

3.2      Limitations.

(a)                   No payment if Performance Factor not Achieved. In no event
                      shall any Participant receive a bonus payment hereunder if
                      the Performance  Factor and all other factors on which the
                      bonus  payment  is  based  is  not  achieved   during  the
                      Performance Period.

(b)                   No  payment  in  excess  of  pre-established   amount.  No
                      Participant  shall  receive a payment  under this Plan for
                      any Performance Period in excess of $4 million.

(c)                   Compensation  Committee  may  reduce  bonus  payment.  The
                      Compensation  Committee  retains sole discretion to reduce
                      the amount of or  eliminate  any bonus  otherwise  payable
                      under this Plan.

4.       Benefit Payments.

4.1           Time and Form of Payments.  Subject to any  deferred  compensation
              election pursuant to any such plans of the Company, benefits shall
              be paid to the Participant in one or more cash payments as soon as
              determined by the  Compensation  Committee  after it has certified
              that the Company  Performance  Factor and all other  factors  upon
              which the bonus  payment  for the  Participant  is based have been
              attained.

4.2           Nontransferability.  Participants and beneficiaries shall not have
              the right to assign, encumber or otherwise anticipate the payments
              to be made under this Plan,  and the benefits  provided  hereunder
              shall  not be  subject  to  seizure  for  payment  of any debts or
              judgments against any Participant or any beneficiary.

4.3           Tax Withholding. In order to comply with all applicable federal or
              state  income tax laws or  regulation,  the  Company may take such
              action  as it deems  appropriate  to  ensure  that all  applicable
              federal  or state  payroll,  withholding,  income or other  taxes,
              which a re the sole and absolute  responsibility of a Participant,
              are withheld or collected from such Participant.

5.   Amendment and Termination.  The Compensation  Committee may amend this Plan
     prospectively  at any  time  and for any  reason  deemed  sufficient  by it
     without  notice  to any  person  affected  by this  Plan  and may  likewise
     terminate  or curtail the benefits of this Plan both with regard to persons
     expecting to receive  benefits  hereunder in the future and persons already
     receiving benefits at the time of such action.

6.       Miscellaneous.

6.1      Effective Date.  January 1, 1998

6.2           Term of the Plan.  Unless the Plan shall have been discontinued or
              terminated,  the Plan shall  terminate on December  31,  2002.  No
              bonus  shall  be  granted  after  the  termination  of  the  Plan;
              provided,  however,  that a payment with respect to a  Performance
              Period  which  begins   before  such   termination   may  be  made
              thereafter.   In  addition,  the  authority  of  the  Compensation
              Committee to amend the Plan,  shall extend beyond the  termination
              of the Plan.

6.3           Headings.  Headings are given to the Sections and  subsections  of
              the Plan solely as a  convenience  to facilitate  reference.  Such
              headings  shall not be deemed in any ways  material or relevant to
              the  construction or  interpretation  of the Plan or any provision
              thereof.

6.4           Applicability  to Successors.  This Plan shall be binding upon and
              inure to the  benefit of the  Company  and each  Participant,  the
              successors  and  assigns of the  Company,  and the  beneficiaries,
              personal  representatives  and heirs of each  Participant.  If the
              Company   becomes  a  party  to  any  merger,   consolidation   or
              reorganization, this Plan shall remain in full force and effect as
              an obligation of the Company or its successors in interest.

6.5           Employment  Rights and Other Benefit  Programs.  The provisions of
              this Plan shall not give any  Participant any right to be retained
              in the  employment of the Company.  In the absence of any specific
              agreement to the contrary, this Plan shall not affect any right of
              the Company,  or of any  affiliate of the Company,  to  terminate,
              with or without cause, the  participant's  employment at any time.
              This Plan shall not replace any  contract of  employment,  whether
              oral or written,  between the  Company  and any  Participant,  but
              shall be considered a supplement thereto. This Plan is in addition
              to, and not in lieu of, any other employee benefit plan or program
              in which any  Participant may be or become eligible to participate
              by reason of  employment  with the  Company.  Receipt of  benefits
              hereunder shall have such effect on  contributions to and benefits
              under such other plans or programs as the  provisions of each such
              other plan or program may specify.

6.6           No Trust Fund Created.  This Plan shall not create or be construed
              to  create a trust  or  separate  fund of any kind or a  fiduciary
              relationship   between  the  Company  or  any   affiliate   and  a
              Participant  or any other  person.  To the extent  that any person
              acquires  a right to  receive  payments  from the  Company  or any
              affiliate  pursuant  to this Plan,  such right shall be no greater
              than the right of an unsecured  general creditor of the Company or
              of any affiliate.

6.7           Governing Law. The validity,  construction  and effect of the Plan
              or any  bonus  payable  under  the  Plan  shall be  determined  in
              accordance with the laws of the State of Minnesota.

6.8           Severability.  If any  provision  of the Plan is or  becomes or is
              deemed to be invalid, illegal or unenforceable in any jurisdiction
              such provision  shall be construed or deemed amended to conform to
              applicable laws, or if it cannot be so construed or deemed amended
              without,  in the Plan, such provision shall be stricken as to such
              jurisdiction,  and the  remainder of the Plan shall remain in full
              force and effect.

6.9           Qualified  Performance-Based  Compensation.  All of the  terms and
              conditions of the Plan shall be  interpreted  in such a fashion as
              to  qualify  all   compensation   paid   hereunder   as  qualified
              performance-based  compensation  within  the  meaning  of  Section
              162(m) if the Code.