24
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Xxxxx X. Xxxxxxxxx (the
"Executive"), dated as of the 15th day of February, 1995.
The Board of Directors of the Corporation (the "Board"),
has determined that it is in the best interests of the
Corporation and its shareholders to assure that the
Corporation will have the continued dedication of the
Executive, notwithstanding the possibility, threat or
occurrence of a Change in Control (as defined below) of the
Corporation. 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 caused the Corporation to enter into
this Agreement.
IT IS, THEREFORE, AGREED:
1. Certain Definitions. (a) The "Effective Date" shall
be the 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 Change in Control occurs
and if the Executive's employment with the Corporation is
terminated or the Executive ceases to be an officer of the
Corporation 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 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 in Control" shall mean:
(a) 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")) becomes a beneficial
owner (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Corporation (the
"Outstanding Corporation Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of
directors (the "Outstanding Corporation Voting Securities");
provided, however, that beneficial ownership by any of the
following shall not constitute a Change in Control: (x) the
Corporation or any of its subsidiaries, (y) the employee
benefit plan (or related trust) sponsored or maintained by the
Corporation or any of its subsidiaries or (z) any corporation
with respect to which, following such acquisition, more than
60% of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is
then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Corporation Voting Securities
immediately prior to such acquisition in substantially the
same proportions as their ownership, immediately prior to such
acquisition, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be;
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
the Corporation'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 either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act); or
(c) A reorganization, merger or consolidation, with
respect to which, in each case, all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities immediately prior to
such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation, 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
reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such
reorganization, merger or consolidation of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting
Securities, as the case may be; or
(d) (i) Approval by the shareholders of the Corporation
of a complete liquidation or dissolution of the Corporation or
(ii) the sale or other disposition of all or substantially all
of the assets of the Corporation, other than to a corporation,
with respect to which following such sale or other
disposition, more than 60% of, respectively, the then
outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Corporation Common Stock and Outstanding
Corporation Voting Securities immediately prior to such sale
or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other
disposition, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be.
3. Employment Period. The Corporation hereby agrees to
continue the Executive in its employ for the period commencing
on the Effective Date and ending on the earlier to occur of
(i) the fifth anniversary of such date or (ii) unless the
Executive elects to continue employment beyond the Executive's
Normal Retirement Date, the first day of the month coinciding
with or next following the Executive's Normal Retirement Date
(the "Employment Period").
4. Terms of Employment. (a) Position of Duties.
(i) During the Employ-ment 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 thirty-five (35)
miles from such location.
(ii) During the Employment Period, and excluding periods
of vacation and sick leave 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, 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 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.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a bi-
weekly rate, at least equal to twenty-six times the highest bi-
weekly 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 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.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year during
the Employment Period, an annual bonus under the Corporation's
Management Incentive Plan (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 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) Long Term Bonus. The Executive shall
participate in all long-term incentive plans generally
applicable to senior management of the Corporation and in any
other long-term plan in which the Executive is designated by
the Board to participate (the "Long Term Bonus"). In the
event of termination of Executive's employment triggering
compensation under Section 6(a) of this Agreement prior to
expiration of any performance cycle (the "Performance Cycle")
under a longer term incentive plan amounts due Executive under
Section 6(a) of this Agreement shall be determined as follows:
(A) during the balance of the Performance Cycle(s) in
which the Executive is participating at the time of the
termination of his employment, the Company or the relevant
business unit and any similar companies used for comparison
purposes shall be deemed to have achieved the same rate of
growth or change in each of the relevant factors as achieved
in each such factor as of the end of the year in which such
termination occurs:
(B) using the assumptions and methods set forth in
clause (A) above, the amount of long-term incentive that the
Executive would have received at the end of the relevant
Performance Cycle(s) had his employment continued to the end
of such Performance Cycle(s) shall be computed; and
(C) the amount determined pursuant to clause (B) above
shall be multiplied by a fraction, the numerator of which
shall be the number of days in the relevant Performance
Cycle(s) during which the Executive was employed and the
denominator of which shall be the total number of days in such
Performance Cycle(s).
Payment to the Executive or his estate, as the case may
be, of any long-term incentive award shall be made promptly
after the determination of the amount of such award.
(iv) Incentive, Savings and Retirement Plans. During the
Employment 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, those provided generally at any time after
the Effective Date to other peer executives of the Corporation
and its affiliated companies.
(v) Welfare Benefit Plans. During the Employment
Period, the 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, disability, salary continuance, employee
life, group life, accidental death and travel accident
insurance plans and programs) 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.
(vi) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the 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.
(vii) Fringe Benefits. During the Employment Period,
the Executive 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.
(viii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an
office or offices of a size and with furnishings and other
appointments, and to secretarial 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.
(ix) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation 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 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 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 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
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 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 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 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 and (y) substantial injury to the
Corporation; or (iii) commitment by the Executive of a felony
involving the Corporation.
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 the Employment Period by the Executive for
Good Reason. For purposes of this Agreement, "Good 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 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 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 thirty-five (35) 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; or
(v) any failure by 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 Agreement.
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 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 Executive's employment is terminated by the
Corporation for Cause, or by the Executive for Good Reason,
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 Reason; Other Than for Cause, Death or Disability.
If, during the Employment 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 (together with any
accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) two and (2)
the sum of (x) the Executive's Annual Base Salary, (y) the
Annual Bonus and (z) any Long Term Bonus earned or accrued but
not yet paid under Section 4(b)(iii); provided, however, that
such amount 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; and
C. a separate lump-sum supplemental retirement benefit
equal to the difference between (1) the actuarial equivalent
(utilizing for this purpose the actuarial assumptions utilized
with respect to the Corporation's Retirement Plan (or any
successor plan thereto) (the "Retirement Plan") during the 90-
day period immediately preceding the Effective Date) of the
benefit payable under the Retirement Plan and any supplemental
and/or excess retirement plan providing benefits for the
Executive (the "SERP") which the Executive would receive if
the Executive's employment continued at the compensation level
provided for in Sections 4(b)(i) and 4(b)(ii) of this
Agreement for the remainder of the Employment Period, assuming
for this purpose that all accrued benefits are fully vested
and that benefit accrual formulas are no less advantageous to
the Executive than those in effect during the 90-day period
immediately preceding the Effective Date, and (2) the
actuarial equivalent (utilizing for this purpose the actuarial
assumptions utilized with respect to the Retirement Plan
during the 90-day period immediately preceding the Effective
Date) of the Executive's actual benefit (paid or payable), if
any, under the Retirement Plan and the SERP;
(ii) for the remainder of the Employment Period, or such
longer period as any 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. For purposes of
determining eligibility of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until
the end of the Employment Period and to have retired on the
last day of such period; 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 the 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 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, 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 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
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 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 as a result of any
contest (regardless of the outcome thereof) by the Corporation
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 Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company 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 Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company.
The Accounting Firm shall be jointly selected by the Company
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 Company. If the Company and the Executive
cannot agree on the firm to serve as the Accounting Firm, then
the Company 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 Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable
federal income tax return would not result in the imposition
of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to
Section 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 Company 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 Company of a Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day
period following the date on which he or she gives such notice
to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-
tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company 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 Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and xxx for a
refund, the Company shall advance the amount of such payment
to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided the Executive
shall not be required by the Company 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 Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled
to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect
to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay
to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a
determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
(e) If, pursuant to regulations issued under Section
280G or 4999 of the Code, the Company 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 Company 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
Company may reasonably direct in order to obtain a refund of
the excess Excise Tax paid. If the Company 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 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 Company in the proceedings and
indemnification by the Company. Upon receipt of any such
refund, the Executive shall promptly pay the amount of such
refund to the Company. 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 Company 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 Company.
In the event there is a subsequent redetermination of the
Executive's income taxes resulting in a reduction of such tax
benefit, the Company shall, promptly after receipt of notice
of such reduction, pay to the Executive the amount of such
reduction. If the Company 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 Company the amount of any
further tax benefits that may be realized by him or her as a
result of paying to the Company 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 except (i) while
employed by the Corporation in the business of and for the
benefit of the Corporation or (ii) when required to do so by a
court of competent jurisdiction, by any governmental agency
having supervisory authority over the business of the
Corporation, 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 Corporation's business including its 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) In the event of a Change in Control of the
Corporation, (i) any parent company or Successor shall, in the
case of a successor, by an agreement in form and substance
satisfactory to the Executive, expressly assume and agree to
perform this Agreement and, in the case of a parent company,
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
Commonwealth of Kentucky, 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: Xxxxx X. Xxxxxxxxx
Providian Bancorp, Inc.
00 Xxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
If to the Corporation: Providian Corporation
000 Xxxx Xxxxxx Xxxxxx
Post Office Box 32830
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: V. P. Human Resources
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 of the parties with respect
to the subject matter hereof. It is further specifically
agreed that Executive shall not otherwise be entitled to any
compensation or benefits under the terms of the Corporation's
Change in Control Policy.
(h) The Executive and the Corporation acknowledge that
the employment of the Executive by the Corporation is
currently "at will", and, prior to the Effective Date, may be
terminated by either the Executive or the Corporation at any
time. This Agreement shall terminate and there shall be no
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 CORPORATION
/s/ Xxxxxx X. Xxxxxx, XX
Xxxxxx X. Xxxxxx, XX
Chairman and Chief Executive
Officer
/s/ Xxxxx X. Xxxxxxxxx
Xxxxx X. Xxxxxxxxx
