EXHIBIT 10.2
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and among Providian Bancorp Services (the "Corporation"),
a California corporation, Providian Financial Corporation ("Parent"), a Delaware
corporation, and _____________________ (the "Executive"), dated as of the ____
day of August, 1997.
The Board of Directors of Parent (the "Board") has determined that it
is in the best interests of Parent and its shareholders to assure that the
Corporation, a wholly owned subsidiary of Parent, will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined below) of Parent. The Board
believes it is imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks created by a pending
or threatened Change in Control and to encourage the Executive's full attention
and dedication to the Corporation currently and in the event of any threatened
or pending Change in Control, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which ensure that the
compensation and benefits expectations of the Executive will be satisfied and
which are competitive with those of other corporations. Therefore, in order to
accomplish these objectives, the Board has authorized Parent to enter into, and
to cause the Corporation to enter into, this Agreement.
IT IS, THEREFORE, AGREED:
1. Certain Definitions. (a) The "Effective Date" shall be the
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first date during the "Change in Control Period" (as defined in Section 1(b)) on
which a Change in Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a
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Change in Control occurs and if the Executive's employment with the Corporation
and Parent is terminated or the Executive ceases to be an officer of the
Corporation or Parent prior to the date on which a Change in Control occurs, and
if it is reasonably demonstrated by the Executive that such termination of
employment or cessation of status as an officer (i) was at the request of a
third party who has taken steps reasonably calculated to effect the Change in
Control or (ii) otherwise arose in connection with the Change in Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment or cessation of
status as an officer.
(b) The "Change in Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on each
annual anniversary of such date (the date one year after the date hereof and
each annual anniversary of such date, is hereinafter referred to as the "Renewal
Date"), the Change in Control Period shall be automatically extended so as to
terminate two years from such Renewal Date, unless at least 60 days prior to the
Renewal Date the Corporation or Parent shall give notice to the Executive that
the Change in Control Period shall not be so extended.
2. Change in Control. For the purpose of this Agreement, a "Change
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in Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under
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the Exchange Act) of 20% or more of either (i) the then outstanding shares of
common stock of Parent (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of Parent
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (i) any acquisition directly from Parent, (ii) any acquisition by
Parent, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by Parent or any corporation controlled by Parent or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by Parent's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of Parent or the
acquisition of assets of another corporation (a "Business Combination"), in each
case, unless, following such Business
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Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns Parent or all or
substantially all of Parent's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any employee benefit plan (or related trust) of Parent or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of Parent of a complete liquidation
or dissolution of Parent.
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3. Employment Period. The Corporation hereby agrees to continue the
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Executive in its employ for the period commencing on the Effective Date and
ending on the earlier to occur of (i) the third anniversary of such date or (ii)
unless the Executive elects to continue employment beyond the Executive's Normal
Retirement Age (as defined in Parent's 401 (k) Plan, as amended from time to
time), the first day of the month coinciding with or next following the
Executive's Normal Retirement Age (the "Employment Period").
4. Terms of Employment. (a) Position of Duties. (i) During the
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Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities 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 preceding the Effective Date and (B) unless Executive otherwise
agrees, the Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or at any office
or location less than forty-five (45) miles from such location.
(ii) During the Employment Period, and excluding periods of paid time off
(as defined in Parent's benefit plans) to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Corporation and Parent and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use reasonable efforts to perform faithfully and efficiently such
responsibilities. The Executive may (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions
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and (C) manage personal investments, so long as such activities do not
significantly interfere with the performance of the Executive's
responsibilities. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, such prior conduct of activities, and any subsequent conduct of activities
similar in nature and scope shall not thereafter be deemed to interfere with the
performance of the Executive's responsibilities to the Corporation and Parent.
(b) Compensation. (i) Base Salary. During the Employment Period, the
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Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid semi-monthly, at least equal to twenty-four times the highest
semi-monthly base salary paid or payable to the Executive by the Corporation,
together with any of its affiliated companies, during the twelve-month period
immediately preceding the month in which the Effective Date occurs. During the
Employment Period, the Annual 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 in the ordinary
course of business to other peer executives of the Corporation and its
affiliates. Any increase in base salary awarded in the ordinary course of
business to other peer executives of the Corporation and its affiliates. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used in
this Agreement, the term "affiliated companies" includes any company
controlling, controlled by or under common control with the Corporation.
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(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
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shall be awarded, for each fiscal year during the Employment Period, an annual
bonus under Parent's Management Incentive Plan (or any successor thereto) (the
"Annual Bonus") in cash at least equal to the average annualized (for any fiscal
year consisting of less than twelve full months or with respect to which the
Executive has been employed by the Corporation or its affiliated companies for
less than twelve full months) bonus paid or payable, including by reason of any
deferral, to the Executive by the Corporation and its affiliated companies in
respect of the three fiscal years immediately preceding the fiscal year in which
the Effective Date occurs (the "Recent Average Bonus"). Each such Annual Bonus
shall be payable in March of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall otherwise elect
to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
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Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Corporation and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Corporation and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
90-day period immediately preceding the Effective Date or if more favorable to
the Executive,
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those provided generally at any time after the Effective Date to other peer
executives of the Corporation and its affiliated companies. Without limiting
the foregoing, the annual retirement contribution payable on behalf of the
Executive during the Employment Period, as a percentage of the Executive's total
compensation, shall not in any event be less than the average annual retirement
contribution, as a percentage of total compensation, paid on behalf of the
Executive by the Corporation and its affiliated companies during the three years
immediately preceding the Effective Date.
(iv) Welfare Benefit Plans. During the Employment Period, the
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Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Corporation and its affiliated
companies (including, without limitation, medical, prescription, dental,
vision, disability, employee life, dependent life, and accidental death) to the
extent applicable generally to other peer executives of the Corporation and its
affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Executive with benefits which are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer
executives of the Corporation and its affiliated companies.
(v) Expenses. During the Employment Period, the Executive shall be
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entitled to receive prompt reimbursement for all reasonable expenses incurred by
the
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Executive in accordance with the policies and procedures of the Corporation and
its affiliated companies in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect at any time thereafter with respect to other peer executives of the
Corporation and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
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shall be entitled to fringe benefits in accordance with the most favorable
plans, practices, programs and policies of the Corporation and its affiliated
companies in effect at any time during the 90-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect at any
time thereafter with respect to other peer executives of the Corporation and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
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Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to administrative and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as in effect at any time thereafter with
respect to other peer executives of the Corporation and its affiliated
companies.
(viii) Paid Time Off/Sabbatical. During the Employment Period, the
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Executive shall be entitled to paid time off and sabbatical in accordance with
the most favorable plans, policies, programs and practices of the Corporation
and its affiliated companies as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
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the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Corporation and its affiliated companies.
5. Termination. (a) Death or Disability. This Agreement shall
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terminate automatically upon the Executive's death. If the Corporation
determines in good faith that the Disability of the Executive has occurred
during the Employment Period (pursuant to the definition of "Disability" set
forth below), it may give the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Corporation and
its affiliated companies shall terminate effective on the 30th day after receipt
of such notice (the "Disability Effective Date"), provided that, within 30 days
after such receipt, the Executive shall fail to return to full-time performance
of the Executive's duties. For purposes of this Agreement, "Disability" means
the absence of the Executive from the Executive's duties within the Corporation
and its affiliated companies for 180 consecutive business days as a result of
the incapacity due to physical or mental illness which, after the expiration of
such 180 business days, is determined to be total and permanent by a physician
selected by Parent, the Corporation or its insurers and acceptable to the
Executive or the Executive's legal representative (such agreement to
acceptability not to be withheld unreasonably).
(b) Cause. The Corporation may terminate the Executive's employment
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for "Cause." For purposes of this Agreement, "Cause" means (i) a willful and
continuing failure to perform substantially the Executive's obligations under
Section 4(a) of this Agreement (other than as a result of the Executive's death
or Disability); or (ii) conduct undertaken by the Executive
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which is demonstrably willful and deliberate on the Executive's part and which
is intended to result in (x) substantial personal enrichment of the Executive at
the expense of the Corporation or its affiliated companies and (y) substantial
injury to the Corporation or its affiliated companies; or (iii) commitment by
the Executive of a felony involving the Corporation or its affiliated companies.
A termination for Cause within the meaning of clause (i) or (ii) shall
not take effect unless:
A. the Board shall have delivered a written notice to the Executive
within 30 days of its having knowledge of one of the circumstances constituting
cause within the meaning of clause (i) or (ii), stating which one of those
circumstances has occurred;
B. within 30 days of such notice, the Executive is permitted to
respond and defend himself before the Board;
C. within 15 days of the date on which the Executive is given the
opportunity to respond and defend himself before the Board, the Executive has
not remedied such circumstance; and
D. if the Executive has not remedied such circumstance as provided in
subclause (C) above, the Board notifies the Executive in writing that it is
terminating his employment for Cause.
(c) Good Reason. The Executive's employment may be terminated during
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the Employment Period by the Executive for Good Reason. For purposes of this
Agreement, "Good
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Reason" means:
(i) (A) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement or (B) any other action by the
Corporation or its affiliated companies which results in a diminution in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not occurring in bad faith which
is remedied by the Corporation or its affiliated companies promptly after
receipt of notice thereof given by the Executive;
(ii) any failure by the Corporation to comply with any of the
provisions of Section 4(b) of this Agreement, excluding for this purpose an
isolated, insubstantial and inadvertent failure not occurring in bad faith
which is remedied by the Corporation promptly after receipt of notice thereof
given by the Executive;
(iii) unless the Executive otherwise agrees, the Corporation's
requiring the Executive to be based at any office or location other than that at
which the Executive is based at the Effective Date or within forty-five (45)
miles of such location, except for travel reasonably required in the performance
of the Executive's responsibilities;
(iv) any purported termination by the Corporation of the Executive's
employment otherwise than as permitted by this Agreement;
(v) any failure by Parent or the Corporation to comply with and
satisfy Section 11(c) of this Agreement provided that such successor has
received at least ten days prior written notice from the Corporation or the
Executive of the requirements of Section 11(c) of this
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Agreement.
(vi) a termination by the Executive for any reason during the 30-day
period immediately following the first anniversary of the date a Change in
Control occurs.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Corporation for
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Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 15
days after the giving of such notice). The failure by the Executive or the
Corporation to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any right
of the Executive or the Corporation hereunder or preclude the Executive or the
Corporation from asserting such fact or circumstance in enforcing the
Executive's or the Corporation's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
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Executive's employment is terminated by the Corporation for Cause, or by the
Executive for Good Reason,
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the date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment is terminated by
the Corporation other than for Cause or Disability, the Date of Termination
shall be the date on which the Corporation notifies the Executive of such
termination and (iii) if the Executive's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.
6. Obligations of the Corporation upon Termination. (a) Good
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Reason; Other Than for Cause, Death or Disability. If, during the Employment
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Period, the Corporation shall terminate the Executive's employment other than
for Cause or Disability or the Executive shall terminate employment for Good
Reason:
(i) the Corporation shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
A. the sum of (1) the Executive's Annual Base Salary through the Date
of Termination to the extent not theretofore paid, (2) the product of (x) the
Annual Bonus and (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365, and (3) any compensation previously deferred by the Executive
under non-qualified plans (together with any accrued interest or earnings
thereon), except for compensation deferred under Parent's Equity Unit Plan
(which shall be paid out or deferred in accordance with elections made under
such Equity Unit Plan and the related rabbi trust documents), and the value of
any unused paid time off and/or accrued sabbatical, in each case to the extent
not theretofore paid (the sum of the amounts described in
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clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and (2) the sum of
(x) the Executive's Annual Base Salary, and (y) the Executive's Base Salary
multiplied by the Bonus Percentage. For purposes of this Section 6(a)(i)(B),
"Bonus Percentage" shall mean the highest percentage obtained by dividing (1)
the annual bonus earned by the Executive in any year beginning with the third
full year before the date on which a Change in Control occurs by (2) the base
salary paid to the Executive for such year. The amount described in the first
sentence of this clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance relating to salary or
bonus continuation to be received by the Executive upon termination of
employment of the Executive under any severance plan, policy or arrangement of
the Corporation or its affiliated companies; and
C. a separate lump-sum payment equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y) the Executive's
Base Salary multiplied by the Bonus Percentage and (3) the Retirement
Contribution Percentage (which, for purposes of this Section 6(a)(i)(C) shall
equal [the highest percentage of retirement contributions as a percentage of
total compensation for all eligible employees of the Corporation and its
affiliated companies for any year beginning with the third full year prior to
the Effective Date); and
D. (i) an amount equal to the unvested portion of the qualified and
non-qualified retirement contribution account in addition to any vested amounts
due under the retirement plans of the Corporation and its affiliated companies;
(ii) for three years after the Date of Termination, or such longer
period as any
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plan, program, practice or policy may provide, the Corporation shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated in accordance with the most
favorable plans, practices, programs or policies of the Corporation and its
affiliated companies applicable generally to other peer executives and their
families during the 90-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Corporation and its
affiliated companies and their families, provided, however, that if the
Executive becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility; and
(iii) to the extent not theretofore paid or provided, the Corporation
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
pursuant to this Agreement under any plan, program, policy or practice or
contract or agreement of the Corporation and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits"), but excluding solely purposes of this Section 6(a)(iii) amounts
waived by the Executive pursuant to the proviso of Section 6(a)(i)(B).
(b) Death. If the Executive's employment is terminated by reason of
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the
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Executive's death, this Agreement shall terminate without further obligations to
the Executive's legal representatives under this Agreement other than for
payment of the Accrued Obligations and the timely payment or provision of Other
Benefits. All Accrued Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding, the
Executive's family shall be entitled to receive benefits at least equal to the
most favorable benefits provided by the Corporation and any of its affiliated
companies to surviving families of peer executives of the Corporation and such
affiliated companies under such plans, programs, practices and policies relating
to family death benefits, if any, as in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive and/or the Executive's family, as in effect at any time on the date of
Executive's death with respect to other peer executives of the Corporation and
its affiliated companies and their families.
(c) Disability. If the Executive's employment is terminated by reason
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of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
All Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Corporation and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
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programs, practices and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the
Corporation and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations other than the obligation to pay to the
Executive Annual Base Salary through the Date of Termination plus the amount of
any compensation previously deferred by the Executive, in each case to the
extent theretofore not paid. If the Executive terminates employment during the
Employment Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for Accrued
Obligations and the timely payment or provision of Other Benefits. In such
case, all Accrued Obligations shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Except as otherwise provided in
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Sections 6(a)(i)(B), 6(a)(ii) and 6(a)(iii) of this Agreement, nothing in this
Agreement shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Corporation or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any stock option or other agreements with
the Corporation or any of its affiliated companies. Amounts which are vested
benefits or which the Executive is otherwise
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entitled to receive under any plan or program of the Corporation or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan or program.
8. Full Settlement. The Corporation's obligation to make the
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payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense or other right which
the Corporation may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement,
and, except as provided in Section 6(a)(ii) of this Agreement, such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Corporation agrees to pay, to the full extent permitted by law, all legal fees
and expenses which the Executive may reasonably incur in good faith as a result
of any contest (regardless of the outcome thereof) by the Corporation, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest, on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Internal Revenue Code of 1986, as amended (the "Code").
9. Certain Additional Payments by the Corporation.
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(a) Anything in this Agreement to the contrary notwithstanding, in
the event
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it shall be determined that any payment or distribution by Parent or the
Corporation 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 9) (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 9(c), all determinations
required to be made under this Section 9, 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 a nationally
recognized accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Corporation 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 Corporation. The
Accounting Firm shall be jointly selected by the Corporation and the Executive
and shall not, during the two years preceding the date of its selection, have
acted in any way on behalf of the Corporation or its
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affiliated companies. If the Corporation and the Executive cannot agree on the
firm to serve as the Accounting Firm, then the Corporation and the Executive
shall each select a nationally recognized accounting firm and those two firms
shall jointly select a nationally recognized accounting firm to serve as the
Accounting Firm. All fees and expenses of the Accounting Firm shall be borne
solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this
Section 9, shall be paid by the Corporation 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 Corporation 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 Corporation
should have been made ("Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Corporation exhausts its
remedies pursuant to Section 9(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 Corporation to or for the benefit of the Executive.
(c) The Executive shall notify the company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Corporation of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten
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business days after the Executive is informed in writing of such claim and shall
apprise the Corporation 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 he or she gives
such notice to the Corporation (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Corporation
notifies the Executive in writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(i) give the Corporation any information reasonably requested by the
Corporation relating to such claim,
(ii) take such action in connection with contesting such claim as
the Corporation 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 Corporation,
(iii) cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) permit the Corporation to participate in any proceedings relating
to such claim; provided, however, that Parent and the Corporation 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
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of this Section 9(c), the Corporation shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 xxx 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 Corporation
shall determine; provided, however, that if the Corporation directs the
Executive to pay such claim and xxx for a refund, the Corporation 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 further provided the Executive shall not be
required by the Corporation to agree to any extension of the statute of
limitations relating to the payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due
unless such extension is limited solely to such contested amount. Furthermore,
the Corporation'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 Corporation pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with
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respect to such claim, the Executive shall (subject to the Corporation's
complying with the requirements of Section 9(c)) promptly pay to the Corporation
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 Corporation pursuant to Section 9(c), a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Corporation 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.
(e) If, pursuant to regulations issued under Section 280G or 4999 of
the Code, the Corporation and the Executive were required to make a preliminary
determination of the amount of an excess parachute payment (as contemplated by
Q/A of the proposed regulations under Section 280G of the Code as issued on May
4, 1989) and thereafter a redetermination of the Excise Tax is required under
the applicable regulations, the parties shall request the Accounting Firm to
make such redetermination. If as a result of such redetermination an additional
Gross-Up Payment is required, the amount thereof shall be paid by the
Corporation to the Executive within five days of the receipt of the Accounting
Firm's determination. If the redetermination of the Excise Tax results in a
reduction of the Excise Tax, the Executive shall take such steps as the
Corporation may reasonably direct in order to obtain a refund of the excess
Excise Tax paid. If the Corporation determines that any suit or proceeding is
necessary or advisable in order to obtain such refund, the provisions of Section
9(c) relating to the contesting
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of a claim shall apply to the claim for such refund, including, without
limitation, the provisions concerning legal representation, cooperation by the
Executive, participation by the Corporation in the proceedings and
indemnification by the Corporation. Upon receipt of any such refund, the
Executive shall promptly pay the amount of such refund to the Corporation. If
the amount of the income taxes otherwise payable by the Executive in respect of
the year in which the Executive makes such payment to the Corporation is reduced
as a result of such payment, the Executive shall, no later than the filing of
his income tax return in respect of such year, pay the amount of such tax
benefit to the Corporation. In the event there is a subsequent redetermination
of the Executive's income taxes resulting in a reduction of such tax benefit,
the Corporation shall, promptly after receipt of notice of such reduction, pay
to the Executive the amount of such reduction. If the Corporation objects to
the calculation or recalculation of the tax benefit, as described in the
preceding two sentences, the Accounting Firm shall make the final determination
of the appropriate amount. The Executive shall not be obligated to pay to the
Corporation the amount of any further tax benefits that may be realized by him
or her as a result of paying to the Corporation the amount of the initial tax
benefit.
10. Confidential Information. (a) The Executive shall not, without
------------------------
the prior written consent of the Corporation, divulge, disclose or make
accessible to any other person, firm, partnership or corporation or other entity
any Confidential Information (as defined in Section 10(b) below) pertaining to
the business of the Corporation or its affiliated companies except (i) while
employed by the Corporation or its affiliated companies in the business of and
for the benefit of the Corporation or its affiliated companies or (ii) when
required to do so by a court
-25-
of competent jurisdiction, by any governmental agency having supervisory
authority over the business of the Corporation or its affiliated companies, or
by any administrative body or legislative body (including a committee thereof)
with purported or apparent jurisdiction to order the Executive to divulge,
disclose or make accessible such information.
(b) For the purposes of this Agreement, Confidential Information shall
mean all nonpublic information concerning the business of the Corporation and
its affiliated companies, including products, customer lists, financial
information and marketing plans and strategies. Confidential Information does
not include the information that is, or becomes, available to the public, unless
such availability occurs through a breach by the Executive of the provisions of
this Section.
(c) In no event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any amounts otherwise
payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Corporation 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.
(b) This Agreement shall inure to the benefit of and be binding upon
the Corporation and its successors.
(c) Parent hereby unconditionally and irrevocably guarantees the
timely performance and payment of all obligations of the Corporation under this
Agreement. In the
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event of a Change in Control of Parent, any parent company or successor to
Parent shall, by an agreement in form and substance satisfactory to the
Executive, guarantee and agree to cause the performance of this Agreement, in
each case, in the same manner and to the same extent as the Corporation would be
required to perform if no Change in Control had taken place.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive: __________________________
------------------- Providian Financial Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
If to Parent or the Corporation:
-------------------------------
Providian Financial Corporation
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: V. P. Human Resources
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or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Executive's failure to insist upon strict compliance with any
provision of this Agreement shall not be deemed to be a waiver of such provision
or any other provisions hereof.
(f) All references to sections of the Code shall be deemed to refer to
corresponding sections of any successor federal income tax statute.
(g) This Agreement contains the entire understanding of the
Corporation and the Executive with respect to the subject matter hereof and
supersedes all prior agreements, representations and understandings (i) of the
parties with respect to the subject matter hereof and (ii) between the Executive
and Providian Corporation (the former parent company of Parent) or any of its
affiliated companies. It is further specifically agreed that Executive shall
not otherwise be entitled to any compensation or benefits under the terms of
Parent's Change in Control Policy.
(h) The Executive and the Corporation acknowledge that the employment
of the Executive by the Corporation and its affiliated companies is currently
"at will", and, prior to the Effective Date, may be terminated by either the
Executive or the Corporation or such affiliated companies at any time, with or
without cause. This Agreement shall terminate and there shall be no
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further rights or liabilities hereunder upon a termination of Executive's
employment prior to the Effective Date.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Directors, the Corporation has
caused these presents to be executed in its name on its behalf, all as of the
date and year first above written.
PROVIDIAN FINANCIAL CORPORATION
_____________________________________
Name:
Title:
PROVIDIAN BANCORP SERVICES
_______________________________________
Name:
Title:
EXECUTIVE
_______________________________________
Name:
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