UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-2
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 1995
or
[ ] Transition Report Pursuant to Section 13 or 15(d)of
the Securities Exchange Act of 1934
For the transition period from _________to_____________
Commission file Number 1-6701
Providian Corporation
(Exact name of Registrant as specified in its charter)
Delaware 51-0108922
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 West Market Street, Louisville, Kentucky 40202
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (502) 560
2000
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months and (2) has been subject to such filing requirements
for the past 90 days. Yes X No ___.
Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of July 31, 1995.
Class Shares Outstanding
Common Stock, $1.00 par value 95,278,533
Item 6. Exhibits and Reports on Form 8-K
Exhibits: Exhibit 10 - Material Contracts
Exhibit 27 - Financial Data Schedule
Reports: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Providian Corporation
(Registrant)
Date: November 13, 1995 Steven T. Downey
Vice President and
Controller
PROVIDIAN CORPORATION AND SUBSIDIARIES
LIST AND INDEX OF EXHIBITS
Reference Number
Per Exhibit Description of Exhibit Exhibit Page
Table Number
(10) Employment Agreement 10.1 _
between Providian
Corporation and Rudy R.
Gernert. (Provided as part
of electronic submission.)
(27) Financial Data Schedule. 27.1 _
(Provided as part of electronic
submission.)
5
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and William R. Gernert (the
"Executive"), dated as of the 5th day of May, 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 sue 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 sue
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: William R. Gernert
Providian Corporation
Post Office Box 32830
Louisville, Kentucky 40232
If to the Corporation: Providian Corporation
400 West Market Street
Post Office Box 32830
Louisville, Kentucky 40232
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
______________________________
Irving W. Bailey, II
Chairman and Chief Executive
Officer
_____________________________
William R. Gernert
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PROVIDIAN CORPORATION AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 11,180,049 <F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 5,661,112 <F2>
<REAL-ESTATE> 88,472 <F3>
<TOTAL-INVEST> 20,166,488
<CASH> 714,425
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,476,040
<TOTAL-ASSETS> 25,742,232 <F4>
<POLICY-LOSSES> 9,890,599 <F5>
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 7,548,944
<NOTES-PAYABLE> 754,296
<COMMON> 115,325
0
100,000 <F6>
<OTHER-SE> 2,537,795 <F7>
<TOTAL-LIABILITY-AND-EQUITY> 25,742,232 <F8>
605,995
<INVESTMENT-INCOME> 931,996
<INVESTMENT-GAINS> (50,288)
<OTHER-INCOME> 166,232 <F9>
<BENEFITS> 891,184 <F10>
<UNDERWRITING-AMORTIZATION> 122,796 <F11>
<UNDERWRITING-OTHER> 360,188 <F12>
<INCOME-PRETAX> 225,051
<INCOME-TAX> 68,323
<INCOME-CONTINUING> 153,843
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 153,843
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes Equity securities of $575,967.
<F2>Includes Commercial and Residential mortgage loans.
<F3>Included in Other investments in the Consolidated Statements of
Financial Condition.
<F4> Includes Consumer Loans of $2,234,797
<F5>Includes Benefit reserves and other policy liabilities.
<F6>Consists of Cumulative Monthly Income Preferred Stock issued
by subsidiary.
<F7>Includes Additional paid-in capital, Net unrealized investment loss,
Retained earnings, Common stock held in treasury and Unearned
restricted stock.
<F8> Includes Banking Deposits of $1,587,247
<F9>Includes Consumer loan servicing fees of $98,323.
<F10>Includes Benefits and claims and Increase in benefit and
contract reserves.
<F11>Includes Amortization of deferred policy and loan acquistion costs,
value of insurance in force purchased and goodwill.
<F12>Includes Commissions, net and General ,administrative and other
expenses, net.
</FN>
</TABLE>
