UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X]Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended March 31, 1996
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 1-6707
Number
Providian Corporation
(Exact name of Registrant as specified in its charter)
Delaware 51-0108922
(State or other (I.R.S.
jurisdiction of Employer
incorporation or Identification
organization) No.)
400 West Market Street, 40202
Louisville, Kentucky
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area (502) 560-2000
code
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 April 30, 1996.
Class Shares Outstanding
Common Stock, $1.00 par value 93,459,038
Part I - FINANCIAL
INFORMATION
Item 1. Financial Statements
PROVIDIAN CORPORATION AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF FINANCIAL
CONDITION
March 31, December
1996 31,
(Unaudited 1995
)
(Amounts
in
millions)
Assets
Investments:
Bonds and stocks,
available for sale
(Amortized cost of
$10,328 and $10,566
in 1996 and 1995,
respectively) $10,536 $11,158
Trading account securities 107 105
Commercial mortgage loans 2,771 2,740
Residential mortgage loans 3,025 3,063
Consumer loans, net 2,560 2,968
Consumer loans held for
securitization 790 123
Policy loans 447 454
Other investments 550 605
Total Investments 20,786 21,216
Cash and cash equivalents 713 708
Deferred policy and loan
acquisition costs 1,512 1,481
Value of insurance in
force purchased 253 256
Goodwill 212 214
Separate account assets 2,310 2,070
Other assets 935 894
Total Assets $26,721 $26,839
Liabilities and
Shareholders' Equity
Liabilities:
Benefit reserves and other
policy liabilities $ 9,775 $ 9,894
Policyholder contract
deposits 6,592 6,858
Banking deposits 2,435 2,158
Separate account
liabilities 2,310 2,070
Long-term debt issued by:
Corporate 752 721
Bancorp 50 -
Deferred federal income
tax 375 505
Other liabilities 1,562 1,572
Total Liabilities 23,851 23,778
Commitments and
Contingencies
Company-Obligated
Mandatorily Redeemable
Preferred Securities of
Providian LLC 100 100
Shareholders' Equity:
Common stock, $1 par 115 115
Additional paid-in capital 48 50
Net unrealized investment
gain 129 359
Retained earnings 2,850 2,770
Common stock held in
treasury - at cost:
1996 - 21,779 shares;
1995 - 20,967 shares (366) (330)
Unearned restricted stock (6) (3)
Total Shareholders' Equity 2,770 2,961
Total Liabilities and
Shareholders' Equity 26,721 26,839
See notes to condensed
consolidated financial
statements.
Item 1. (continued)
PROVIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31 1996 1995
(Amounts in millions,
except per common share)
Revenues:
Premiums and other considerations $ 299 $ 295
Investment income, net of expenses 468 454
Consumer loan servicing fees 67 50
Realized investment gain (loss) 5 (34)
Other income, net 42 33
Total Revenues 881 798
Benefits and Expenses:
Benefits and claims 236 229
Increase in benefit and contract reserves 191 206
Commissions, net 22 19
General, administrative and other expenses, net 177 157
Amortization of deferred policy and loan
acquistion costs,
value of insurance in force purchased and
goodwill 77 59
Interest expense 29 26
Total Benefits and Expenses 732 696
Income before Federal Income Tax 14 102
Federal Income Tax 45 31
Net Income before Dividends on Company-Obligated
Mandatorily
Redeemable Preferred Securities of Providian LLC 104 71
Dividends on Preferred Stock of
Consolidated Subsidiary 1 1
Net Income $103 $ 70
Net Income per Common Share $1.09 $ .72
Cash Dividends per Common Share $.25 $.225
Weighted Average Number of Common Shares
Outstanding During the Period 93.9 97.2
See notes to condensed consolidated financial
statements.
Item 1. (continued)
PROVIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
Three Months Ended March 31 1996 1995
(Dollars in
millions)
Net Cash Flows provided by Operations 369 403
Cash Flows from Investment Activities:
Investments sold or matured 2,415 946
Cost of securities and mortgage loans
acquired (2,057) (1,215)
Additions to operating property (11) (6)
Net increase in consumer loans (662) (479)
Securitization of consumer loans 375 -
Purchase of securitized consumer loans - (41)
All other investment activities (15) 2
Net Cash Flows provided by (used in)
Investment Activities 45 (793)
Cash Flows from Financing Activities:
Net increase (decrease) in short-term
borrowings (119) 92
Policyholder contract deposits 298 695
Withdrawals of policyholder contract
deposits (893) (709)
Policyholder contract deposits 277 262
Issuance of long-term debt by:
Corporate 56 25
Bancorp 50 -
Repayment of long-term debt (25) -
Net borrowings from revolving line of
credit 15 75
Purchase of common stock for treasury (50) (37)
Dividends (23) (22)
Proceeds from exercise of stock options 5 3
Net Cash Flows provided by (used in)
Financing Activities (409) 384
Net Increase (Decrease) in Cash and Cash
Equivalents 5 (6)
Cash and Cash Equivalents at Beginning of
Period 708 573
Cash and Cash Equivalents at End of Period $713 $567
See notes to condensed consolidated
financial statements.
PROVIDIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the
instructions to Form 10-Q and in conformity with generally
accepted accounting principles and reflect all adjustments
which are, in the opinion of management, necessary for a
fair presentation of the results for the interim periods
presented. All such adjustments are of a normal recurring
nature. Certain 1995 amounts have been reclassified to
conform to the current year presentation. These
reclassifications did not have a significant effect on the
Company's financial position, results of operations or cash
flows. The results of operations for the three-month period
ended March 31, 1996 are not necessarily indicative of the
results to be expected for the full year ending December 31,
1996. These unaudited condensed consolidated financial
statements should be read in conjunction with
the consolidated financial statements and footnotes included
in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
B. Per common share amounts have been calculated using net
income divided by the weighted average number of common
shares outstanding during the three-month period. Fully
diluted net income per common share is not presented as it
approximates net income per common share.
C. Consumer loans have been reduced by the sale, without
recourse, of unsecured receivables under asset
securitization plans during 1996 of $375.0 million At March
31, 1996, there were $790.0 million of consumer loans in
process of securitization. Total unsecured consumer
receivables outstanding under securitization plans were $3.7
billion at March 31, 1996.
D. An analysis of the allowance for loan losses on consumer and
mortgage loans for the three-month period ended March 31,
1996 and 1995 is as follows:
Consumer Mortgage
Three Months Ended March 31 1996 1995 1996 1995
(Dollars in millions)
Balance at beginning of $93 $76 $50 $52
period
Current period provision 28 8 2 3
Current period chargeoffs,
net of recoveries (23) (15) - (2) -
Balance at end of period $98 $69 $52 $53
E. During the three months ended March 31, 1996, the Company
issued $56.0 million of Series D medium-term notes with
maturities of 10 to 30 years and interest rates ranging from
6.31% to 7.44%. In addition, long-term debt totaling $25.0
million matured through March 31, 1996.
During the three months ended March 31, 1996, Providian
Bancorp issued $50.0 million of notes with a maturity of
three years and an interest rate of 5.74%.
F. During the three months ended March 31, 1996, the Company
repurchased 1,151,500 shares of its common stock at an
average price of $43.38 per share. Subsequent to March 31,
1996 and through May 6, 1996, the Company repurchased
104,480 additional shares at an average price of $45.45 per
share.
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This item presents specific comments on material changes to the
Company's results of operations, financial condition, liquidity
and capital resources for the periods reflected in the condensed
consolidated financial statements filed with this report. This
analysis should be read in conjunction with the financial
statements, footnotes and management's discussion and analysis
included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
Results of Operations
The following discussion compares the results of operations for
the three months ended
March 31, 1996 to the three months ended March 31, 1995.
Consolidated Results
Providian's net income for the quarter ended March 31, 1996 was
$1.09 per common share, up 51.4% from the $.72 per common share
reported last year. Net income included pretax realized gains of
$4.5 million, comprised of realized gains on investment and
securities of $6.1 million and $1.6 million in provisions for
mortgage loan losses. Pretax realized losses for the three
months ended March 31, 1995 were $34.2 million.
Earnings, as discussed herein, exclude realized investment gains
and losses, net of related deferred acquisition cost amortization
and tax. Earnings for the three months ended March 31, 1996 were
$1.07 per common share, up 11.5% from the same period last year.
The discussion included under "Business Segment Results"
highlights the key items which contributed to the overall growth
in earnings.
Revenues, as discussed herein, exclude realized investment gains
and losses. Consolidated revenues for the three months were
$876.0 million, up 5.3% from the $831.7 million reported in the
prior year, primarily due to higher revenues at Providian
Bancorp. Investment income increased $14.3 million, or 3.1%, and
consumer loan servicing fees increased $17.0 million, or 34.1%,
both due to significant growth in total managed loans at
Providian Bancorp. Other income increased by $9.2 million, or
28.3%, due to growth in fee-based income as the Company continues
to focus on building its fee-based business.
Total benefits and expenses for the three months ended March 31,
1996 were up $36.0 million, or 5.2%, over the same period in the
prior year. Benefit and contract reserves decreased by $14.6
million, or 7.1%, due to lower credited rates on policyholder
balances during first quarter 1996. General, administrative and
other expenses were up by $19.4 million, or 12.3%, due to an
increase in the provision for loan losses by Providian Bancorp to
address significant on-balance sheet loan growth and higher
credit loss rates. Amortization expense increased $18.3 million,
or 31.0%, primarily due to the acceleration of deferred
acquisition cost amortization as Providian Bancorp prepares to
securitize a portion of its home loan portfolio.
Business Segment Results
Providian Bancorp
Providian Bancorp's (PBI) outstanding earnings growth continued
with pretax earnings of $51.3 million for the first three months
of 1996, up 22.1% from 1995. These results reflected continued
growth in credit card receivables and the home equity loan
product, as well as growth in fee-based income.
Total managed loans, including $3.7 billion of securitized
receivables and $790.0 million of loans in the process of
securitization, were $7.1 billion at March 31, 1996, up 39.8%
over
March 31, 1995 balances. The Primary Lender strategy was a
significant reason for the $1.7 billion growth in credit card
receivables since March 31, 1995. Additionally, the home loan
portfolio reflected significant growth of $256.7 million over
March 31, 1995 balances. PBI is preparing to securitize, for the
first time, a portion of its home loan portfolio.
The net interest margin on managed credit card receivables was
11.88% for the three months, down from 12.85% for the three
months ended March 31, 1995. The decrease in margins from prior
year reflected the increase in market rates on the variable rate
cost of funds and, as expected, lower yields on new credit card
loans reflecting the guaranteed savings feature of the Primary
Lender strategy. Loan loss reserves related to on-balance sheet
credit card receivables, excluding receivables in the process of
securitization, were 4.19% at March 31, 1996 as compared to 4.21%
at March 31, 1995 and 3.97% at December 31, 1995. Net credit
losses for managed credit card receivables were 5.07% for the
three months ended March 31, 1996, up from 4.28% for the same
period last year. Balances past due greater than 30 days related
to on-balance sheet credit card receivables, increased to 2.34%
at March 31, 1996 compared to 2.20% at March 31, 1995. Including
securitized credit card receivables, balances past due greater
than 30 days were 3.46% at March 31, 1996 compared to 3.02% at
March 31, 1995.
Providian Direct Insurance
Providian Direct Insurance (PDI) pretax earnings were $21.8
million for the quarter ended March 31, 1996, down 26.5% from
1995, primarily due to higher than expected property and casualty
losses from the severe winter storms. Additionally, Health
earnings were lower, as anticipated, resulting from the continued
lapsation of the Medicare supplement in force block of business.
These factors were partially offset by fee-based product growth.
PDI premiums and fee-based revenues were down $2.0 million, or
1.1%, primarily from declining Health premiums. Health premiums
declined $1.9 million, as expected, from the continued lapsation
of the Medicare supplement business as noted above. Fee-based
income more than doubled to $1.6 million and Property and
Casualty premiums declined slightly due to the late 1995
repositioning of the military auto and agency businesses.
However, Property and Casualty sales grew 3.2% over 1995 sales
due to an improvement in direct response auto sales (our
strategic focus). Total PDI sales decreased $2.7 million, or
9.3%, driven by a 51.4% decline in Health sales (excluding fee-
based products). The decline is a result of the lower Medicare
supplement sales as well as lower sales from two products
introduced in 1995 that experienced high attrition rates. One of
the products is no longer being sold and the second is being
reconfigured for a possible late 1996 offering. Sales in the
direct response Life channel were strong, increasing 14.5% over
the same period in 1995 and fee-based product sales grew to $1.3
million.
Providian Agency Group
Providian Agency Group pretax earnings were $46.2 million for the
three months ended March 31, 1996, up 3.8% from the same period
in 1995. Earnings, which consist mostly of individual Life
earnings, increased as Life premium growth, continuing cost
management initiatives and improved Health loss ratios were
partially offset by higher Life claims and modestly lower
investment spreads.
Life premiums were up $1.2 million, or 1.4%, due primarily to
growth in premium in force, while total premiums and fee-based
revenues were essentially even with 1995. Total sales for the
quarter, including fee-based product sales, were down 1.2% from
the first quarter of 1995 but were higher than the third and
fourth quarters of 1995. The combined Life and Health policy
termination rate of 14.0% improved slightly from the 14.1% rate
for the first quarter of 1995. Including fee-based products in
1996, the termination rate was 14.6%, compared to the full year
1995 rate of 14.5%.
Providian Capital Management
Providian Capital Management (PCM) pretax earnings were $38.7
million for the three months ended March 31, 1996, up a strong
29.4% from the same period last year, as spread-based margins
continued to benefit from the downward trend of credited rates in
late 1995 and early 1996. Earnings also improved due to higher
fee-based income, offset by increased amortization of acquisition
costs due to the expected higher lapses of Individual spread-
based deposits. Profit margins on spread-based deposits for the
three months ended March 31, 1996 were 109 basis points, up from
85 basis points in the same period last year and 92 basis points
for full year 1995.
PCM continues to focus on growing the Individual and Group fee-
based and the Individual spread-based businesses. Individual fee-
based deposits were $1.7 billion at March 31, 1996, an increase
of 56.7% over March 31, 1995 balances. Higher product sales and
positive market value growth contributed to the increase. The
Group fee-based Trust GIC product has grown to $12.2 billion,
despite a recent increase in competition. Individual spread-
based product balances were up $501.2 million from March 31, 1995
due to the coinsurance agreement entered into with North American
Security Life Insurance Company (NASL), during June of last year.
Individual spread-based product balances declined somewhat from
year end due to anticipated withdrawals as credited rates reset
downward. Sales of spread-based deposits and Group fee-based
products remain challenging due to the large amount of funds
flowing into the equity market and a very competitive pricing
environment.
Analysis of Financial Condition
Significant variations between March 31, 1996 and December 31,
1995 balance sheet items are discussed below.
Assets
Cash and invested assets were $21.5 billion at March 31, 1996,
down 1.9% from
December 31, 1995. The decrease in invested assets is due to the
decline in market value of the Company's available for sale
portfolio. Net consumer loans and consumer loans held for
securitization increased 8.4% due to growth in credit card
receivables from the continued success of the Primary Lender
strategy and growth in home equity loans as a result of the
strong demand in the market. Separate account assets and
liabilities increased $239.2 million, or 11.6%, due to asset
appreciation and sales in the Vanguard variable annuity product
line. (For additional information on the Company's invested
assets see the section titled "Asset/Liability Review")
Liabilities
Banking deposits increased $276.9 million, or 12.8%, due to
increased deposits necessary to fund the growth in consumer
loans. Providian Bancorp issued $50.0 million in three year
notes during the first quarter of 1996. Deferred federal income
tax decreased by $130.5 million from year end due primarily to
the deferred tax change of $123.8 million associated with the
gross unrealized investment gains (losses) on the available for
sale portfolio.
Shareholders' Equity
The net unrealized investment gain component of shareholders'
equity decreased $229.9 million from December 31, 1995,
reflecting the decrease in the fair value of the Company's
available for sale investment portfolio from the year-end 1995
balance. The adjustments to record the effect of the unrealized
investment gains on shareholders' equity and the related balance
sheet accounts are as follows:
March 31, December
31,
1996 1995 Change
(Dollars in millions)
Unrealized investment gain
(loss)
on available for sale $ 207.8 $ 592.6 $ (384.8)
securities
Adjusted by:
Increase (decrease) in
deferred
policy acquisition costs (9.0) (40.1) 31.1
Decrease (increase) in
deferred
federal income taxes (69.5) (193.3) 123.8
Net unrealized investment gain
(loss)
on available for sale $ 129.3 $ 359.2 $ (229.9)
securities
Asset/Liability Review
Excluding Providian Bancorp, invested assets related to insurance
operations were $17.9 billion compared to $18.5 billion at
December 31, 1995. The distribution of invested assets at March
31, 1996 has not changed significantly from December 31, 1995.
Exposure to below investment grade bonds March 31, 1996 was 5.1%,
up from 4.9% at December 31, 1995. Default and loss experience
in the securities portfolio was excellent with no defaults and no
significant losses as a result of impairments this year. As of
March 31, 1996, there were minimal securities in the bond or
preferred stock portfolios that were delinquent as to interest or
dividends.
Problem commercial mortgage loans (based on the American Council
of Life Insurance definition, which includes loans past due 60
days or more, loans in the process of foreclosure, restructured
loans and real estate acquired through foreclosure) as of March
31, 1996, amounted to 3.0% of total commercial loans, unchanged
from December 31, 1995. The industry average for problem
commercial mortgage loans was 15.3% at December 31, 1995 (the
most recently published statistics). Problem residential
mortgage loans (based on Mortgage Bankers Association (MBA)
standards, which is based on the number of loans that are past
due 30 days or more, and loans in the process of foreclosure)
were 3.4% at March 31, 1996 compared to 3.3% at December 31,
1995. The MBA average for problem residential mortgage loans was
5.4% at December 31, 1995 (the most recently published
statistics). Loans on which the Company has discontinued the
accrual of interest and restructured loans accruing interest as
of March 31, 1996 and December 31, 1995 were as follows:
<TABLE> Commercial Loans Residential Loans
March 31, December March 31, December
1996 31, 1995 1996 31, 1995
<S> (Dollars in millions)
Non-accrual <C> <C> <C> <C>
loans $31.0 $28.5 $34.7 $31.8
Restructured
loans,
accruing
interest 14.1 14.5 - -
$45.1 $43.0 $34.7 $31.8
</TABLE>
As of March 31, 1996, there were approximately $67.9 million of
commercial mortgage loans with identified potential problems
which could cause these loans to be included in a problem
category in the future; the Company does not anticipate any
material additional losses to arise from these loans.
Liquidity and Capital Resources
Providian is a legal entity, separate and distinct from its
subsidiaries and has no business operations. The primary sources
of cash to meet its obligations, including principal and interest
payments with respect to indebtedness, are dividends and other
statutorily permitted payments from its subsidiaries. Management
believes that overall sources of cash and liquidity available to
the Company and its subsidiaries will continue to be sufficient
to satisfy its foreseeable financial obligations.
Net cash flows from operations were $369.1 million during the
three months, compared to $403.1 million last year, a decrease of
$34.0 million. The decrease from last year primarily related to
lower credited interest rates on reduced policyholder
liabilities.
Investment commitments are planned to coincide with expected cash
flows. Normal day-to-day cash variations are met by a commercial
paper program, supplemented by committed lines of credit.
Commercial paper borrowings averaged $49.7 million during the
three months at a weighted average interest rate of 5.53%.
Commercial paper outstanding at March 31, 1996 was $49.7 million.
The Company has committed lines of credit of $850.0 million which
would provide additional liquidity should adverse conditions
materialize, and as back-up to the commercial paper program. At
March 31, 1996, there were no borrowings under these lines of
credit. In addition, the Company's bond and stock portfolio of
$10.6 billion at March 31, 1996 provides a significant source of
short-term liquidity.
Providian Bancorp (PBI) analyzes its current and future liquidity
needs to support its deposit portfolio and asset growth and has a
$800 million credit agreement. The agreement provides liquidity
for the existing deposit base as well as satisfying short-term
funding requirements. Outstanding borrowings under the agreement
were $336.0 million at March 31, 1996.
The Company issued $56.0 million of its Series D medium-term
notes during the first three months of 1996. In addition, $25.0
million of long-term debt matured through March 31, 1996. During
first quarter 1996, PBI issued $50.0 million of three year notes.
During the first three months of 1996, the Company repurchased
1,151,000 shares of its common stock at an average price of
$43.38 per share. Another 104,000 shares were repurchased from
April 1, 1996 through April 12, 1996, to complete the 2.5 million
share repurchase program announced during the third quarter of
1995.
In May 1996, Standard & Poor's Ratings Group (Standard & Poor's)
upgraded Providian Life and Health Insurance Company's claims-
paying ability rating to AA+ from AA . Standard & Poor's also
changed the claims-paying ability ratings for Commonwealth
Insurance and Peoples Security Insurance to AA+ from AAA and the
Company's senior debt rating to AA- from AA. Standard & Poor's
also affirmed its AA- rating of the Company Obligated Mandatorily
Redeemable Preferred Securities of Providian LLC and the
commercial paper ratings of A-1+ of the Company and these three
subsidiaries.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company and its
subsidiaries are parties to a number of lawsuits. Management
believes that these suits will be resolved with no material
financial impact to the Company.
Item 2. Change in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's annual meeting of shareholders was held on May 1,
1996. Following are the results of proposals voted upon at that
meeting. As of the record date (March 8, 1996) there were
93,844,698 issued and outstanding shares eligible to vote.
Proposal 1:
Irving W. Bailey,II, John L. Clendenin, Raymond V. Gilmartin and
Shailesh J. Mehta were elected to the Board of Directors. Below
is the number of votes cast for or withheld for each director
elected.
Name For Withheld
Irving W.
Bailey, II 80,428,826 277,549
John L.
Clendenin 80,450,023 256,352
Raymond V.
Gilmartin 80,452,316 254,059
Shailesh J.
Mehta 80,469,504 236,871
Directors continuing to serve on the Board are Lyle Everingham,
Watts Hill, Jr., Ned C. Lautenbach, Larry D. Thompson, John M.
Cranor, J. David Grissom, F. Warren McFarlan, Ph.D. and Martha R.
Seger, Ph.D.
Proposal 2:
The shareholders approved the appointment of Ernst & Young LLP as
the Company's independent auditors. The results of the vote were
80,392,793 for, 141,411 against, and 172,171 abstained.
Item 5. Other Information
On April 8 1996, the Company announced Frederick C. Kessell has
been named president of Providian Capital Management (PCM), a
major operating business within the Company. Kessel has been with
PCM since 1985 and chief investment officer since 1988. He will
retain this role along with his new appointment. Kessel replaces
William R. Gernert who resigned to pursue other professional
interests and spend more time with his family.
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: May 13, 1996 Robert L. Walker
Senior Vice President --
Finance and Chief
Financial Officer
Date: May 13, 1996 Steven T. Downey
Vice President and
Controller
PROVIDIAN CORPORATION AND SUBSIDIARIES
LIST AND INDEX OF EXHIBITS
Reference Exhibit
Number Per Description of Exhibit Number Page
Exhibit Table
(10) Employment Agreements between 10.1 --
Providian Corporation and David J.
Miller, David B. Smith, James V.
Elliott, Robert S. Greer, Jr.,
Frederick C. Kessell, Stephen J.
Leaman, Shailesh J. Mehta, Julie
A. Montanari, Lawrence Pitterman,
A. Sami Siddiqui, Steven T.
Downey, David M. McDonough, David
C. Daulton and Robert L. Walker
and Second Admendment to
Employment Agreement between
Providian Corporation and Irving
W. Bailey, II.
(27) Financial Data Schedule 27 --
37
SECOND AMENDMENT
SECOND AMENDMENT dated as of February 21, 1996,
between Providian Corporation, a Delaware corporation (the
"Company"), and Irving W. Bailey, II (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company and the Executive are parties
to an employment agreement dated as of February 17, 1988, as
amended August 9, 1989 (as so amended, the "Employment
Agreement"); and
WHEREAS, the Company and the Executive desire to
amend the Employment Agreement;
NOW, THEREFORE, it is agreed as follows:
1. Section 1(f) of the Employment Agreement is amended
to read in its entirety as follows:
(f) a "Change in Control" shall mean:
(i) The acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3)
or 14(d)(2) of the Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated
under the Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities
of the Company entitled to vote generally in the elec
tion of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of
this clause (i), the following acquisitions shall not
constitute a Change in Control: (A) any acquisition
directly from the Company, (B) any acquisition by the
Company, (C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or
(D) any acquisition by any corporation pursuant to a
transaction which complies with parts (A), (B) and (C)
of clause (iii) of this Section 1(f); or
(ii) 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 Company's
shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the
election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Consummation of a reorganization,
merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Company
or the acquisition of assets of another corporation (a
"Business Combination"), in each case, unless,
following such Business Combination, (A) all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then
outstanding shares of common stock and the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of direc
tors, as the case may be, of the corporation resulting
from such Business Combination (including, without
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially
all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities,
as the case may be, (B) no Person (excluding any
employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or the combined voting
power of the then outstanding voting securities of such
corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at
least a majority of the members of the board of
directors of the corporation resulting from such Busi
ness Combination were members of the Incumbent Board at
the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the
Company of a complete liquidation or dissolution of the
Company.
2. Section 1(k) of the Employment Agreement is amended
by deleting the word "or" at the end of clause (vi) thereof;
deleting the period and inserting "; or" at the end of
clause (vii) thereof; and inserting a new clause (viii) at
the end thereof, reading in its entirety as follows:
(viii) a termination by the Executive for
any reason during the 30-day period immediately
following the first anniversary of the date a Change in
Control occurs.
3. Section 1(l) of the Employment Agreement is
deleted.
4. Section 2(b) of the Employment Agreement is amended
by adding the following new sentence at the end thereof:
Upon the occurrence of a Change in Control, the Term of
Employment shall automatically be extended until the
third anniversary of the date on which a Change in
Control occurs; provided, that any extension pursuant
to this sentence shall not extend the Term of
Employment beyond the Executive's 65th birthday.
5. Section 10(e)(i) of the Employment Agreement is
amended to read in its entirety as follows:
(i) his Base Salary through the date on
which his termination occurs (disregarding, for this
purpose, any reduction in his Base Salary following a
Change in Control, or that serves as a basis for a
termination of the Executive's employment for Good
Reason) (the annualized amount of such Base Salary is
hereafter referred to as the "Base Salary Amount");
6. Section 10(e)(ii) of the Employment Agreement is
amended to read in its entirety as follows:
(ii) a bonus equal to the product of (A) the
Base Salary Amount prorated to the date of such
Termination Without Cause and (B) the Bonus Percentage;
7. Section 10(e)(iii) of the Employment Agreement is
amended to read in its entirety as follows:
(iii) a lump sum payment equal to the sum of three
times
(A) the Base Salary Amount plus
(B) the Base Salary Amount multiplied
by the Bonus Percentage;
8. Section 10(e)(viii)(A) of the Employment Agreement
is amended to read in its entirety as follows:
(A) the third anniversary of the date on which
the Executive is terminated;
9. Section 10(e)(ix) of the Employment Agreement is
amended to read in its entirety as follows:
(ix) an amount equal to the excess of
(A) the actuarial equivalent as of his date
of his Termination Without Cause (utilizing for this
purpose the actuarial assumptions in effect with
respect to the Plan (or any successor plan thereto)
(the "Retirement Plan") during the 90-day period
immediately preceding the date on which a Change in
Control occurs) of the benefit paid or payable under
the Plan, any excess retirement plan and any other
supplemental retirement plan providing retirement
benefits for the Executive (except the supplemental
pension pursuant to Section 7 of this Agreement) (such
excess retirement plans and supplemental retirement
plans being referred to as (the "SERP") which the
Executive would receive if the Executive's employment
continued for three years after the date on which his
termination occurs and he received compensation for
each of such three years equal to the Base Salary
Amount times the sum of (I) one plus (II) the Bonus
Percentage, assuming for this purpose that all accrued
benefits are fully vested, that benefit accrual
formulas are no less advantageous to the Executive than
those in effect during the 90-day period immediately
preceding the date on which a Change in Control occurs
and that such three years after the date of termination
are treated as three full years of credited service
under the Retirement Plan without regard to any
provision to the contrary in the Retirement Plan, over
(B) the actuarial equivalent as of the date
of his Termination Without Cause (utilizing for this
purpose the actuarial assumptions in effect with
respect to the Retirement Plan during the 90-day period
immediately preceding the date on which a Change in
Control occurs) of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and the
SERP; and
10. Section 10(g) of the Employment Agreement is
amended to read in its entirety as follows:
(g) Offset The Executive shall have no
obligation to offset any payments he receives from the
Company following a Termination Without Cause by any
payments he receives from a subsequent employer,
provided, however, that if the Executive becomes
eligible to receive medical benefits under a plan
provided by a subsequent employer, the medical benefits
provided for in this Section 10 shall be secondary to
those provided under such other plan during such
applicable period of eligibility.
11. General. Except for the amendments specified
in Sections 1 through 10 above, the Employment Agreement
shall continue in effect without any change.
IN WITNESS WHEREOF, the undersigned have executed
this Amendment as of the date first written above.
Providian Corporation
By: ________________________
Its: ________________________
/s/ Irving W. Bailey II
Irving W. Bailey II
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and David J. Miller (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
David J. Miller
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ David J. Miller
David J. Miller
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Steven T. Downey (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Steven T. Downey
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Steven T. Downey
Steven T. Downey
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and David B. Smith (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
David B. Smith
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ David B. Smith
David B. Smith
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and James V. Elliott (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
James V. Elliott
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ James. V. Elliott
James V. Elliott
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Robert S. Greer, Jr.
(the "Executive"), dated as of the 21st day of February,
1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Robert S. Greer, Jr.
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Robert S. Greer, Jr.
Robert S. Greer, Jr.
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Frederick C. Kessell
(the "Executive"), dated as of the 21st day of February,
1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Frederick C. Kessell
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Frederick C. Kessell
Frederick C. Kessell
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Stephen J. Leaman (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Stephen J. Leaman
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Stephen J. Leaman
Stephen J. Leaman
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Shailesh J. Mehta (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Shailesh J. Mehta
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Shailesh J. Mehta
Shailesh J. Mehta
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Julie A. Montanari (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Julie A. Montanari
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Julie A. Montanari
Julie A. Montanari
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Lawrence Pitterman (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Lawrence Pitterman
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Lawrence Pitterman
Lawrence Pitterman
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and A. Sami Siddiqui (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
A. Sami Siddiqui
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ A. Sami Siddiqui
A. Sami Siddiqui
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and Robert L. Walker (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) three
and (2) the sum of (x) the Executive's Annual Base Salary,
and (y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
Robert L. Walker
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
/s/ Irving W. Bailey, II
Irving W. Bailey, II
Chairman and Chief Executive
Officer
/s/ Robert L. Walker
Robert L. Walker
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and David C. Daulton (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
David C. Daulton
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
______________________________
David C. Daulton
EMPLOYMENT AGREEMENT
AGREEMENT between Providian Corporation, a Delaware
corporation (the "Corporation"), and David M. McDonough (the
"Executive"), dated as of the 21st day of February, 1996.
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) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Ex
change Act")) (a "Person") of beneficial ownership (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
Company 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 Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i)
any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or main
tained by the Corporation or any corporation controlled by
the Corporation or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination
for election by 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 an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Corporation or the
acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners, respectively,
of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either
directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then out
standing shares of common stock of the corporation resulting
from such Business Combination or the combined voting power
of the then outstanding voting securities of such
corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution
of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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 third 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 Employment Period, (A) the Executive's
position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the
most significant of those held, exercised and assigned at
any time during the 90-day period immediately preceding the
Effective Date and (B) unless Executive otherwise agrees,
the Executive's services shall be performed at the location
where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 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 ex
pressly 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 Sal
ary, the Executive shall be awarded, for each fiscal year
during the Employment Period, an annual bonus under the
Corporation's Management Incentive Plan (or any successor
thereto) (the "Annual Bonus") in cash at least equal to the
average annualized (for any fiscal year consisting of less
than twelve full months or with respect to which the
Executive has been employed by the Corporation 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 Per
formance 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, poli
cies 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 consecu
tive 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 circum
stance 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;
(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; or
(vi) a termination by the Executive for any
reason during the 30-day period immediately following the
first anniversary of the date a Change in Control occurs.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by
the Corporation for 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, (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, and (4) any long-term incentive bonus
determined under Section 4(b)(iii) (the sum of the amounts
described in clauses (1), (2), (3) and (4) 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, and
(y) the Executive's Base Salary multiplied by the Bonus
Percentage. For purposes of this Section 6(a)(i)(B), "Bonus
Percentage" shall mean the highest percentage obtained by
dividing (1) the sum of (x) the annual bonus earned by the
Executive in any year beginning with the third full year
before the date on which a Change in Control occurs and (y)
the long-term incentive bonus, if any, received by the
Executive for the Performance Cycle that included such prior
year divided by the number of years in such Performance
Cycle, by (2) the base salary paid to the Executive for such
year. The amount described in the first sentence of this
clause B shall be paid in lieu of, and the Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
the Executive upon termination of employment of the
Executive under any severance plan, policy or arrangement of
the Corporation; and
C. a separate lump-sum supplemental retirement
benefit equal to the excess of (1) the actuarial equivalent
as of the Date of Termination (utilizing for this purpose
the actuarial assumptions in effect 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
paid or payable under the Retirement Plan, any excess
retirement plan and any other supplemental retirement plan
providing retirement benefits for the Executive (such excess
retirement plans and supplemental retirement plans being
referred to as 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 three years after the Date of Termination,
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 that such three years after the date of termination are
treated as three full years of credited service under the
Retirement Plan without regard to any provision to the
contrary in the Retirement Plan, over (2) the actuarial
equivalent as of the Date of Termination (utilizing for this
purpose the actuarial assumptions in effect 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 three years after the Date of
Termination, 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)(v) 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 imme
diately 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 ex
ecutives 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 dis
ability, 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 other
wise 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 Execu
tive 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 pro
ceedings 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 con
ferences 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 Pay
ment 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 Corpora
tion, 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:
David M. McDonough
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
______________________________
David M. McDonough
<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> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-30-1996
<DEBT-HELD-FOR-SALE> 10,536 <F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 5,796 <F2>
<REAL-ESTATE> 59 <F3>
<TOTAL-INVEST> 20,786
<CASH> 713
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,512
<TOTAL-ASSETS> 26,721 <F4>
<POLICY-LOSSES> 9,775 <F5>
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 6,592
<NOTES-PAYABLE> 802
<COMMON> 115
0
100 <F6>
<OTHER-SE> 2,655 <F7>
<TOTAL-LIABILITY-AND-EQUITY> 26,721 <F8>
299
<INVESTMENT-INCOME> 468
<INVESTMENT-GAINS> 5
<OTHER-INCOME> 109 <F9>
<BENEFITS> 427 <F10>
<UNDERWRITING-AMORTIZATION> 77 <F11>
<UNDERWRITING-OTHER> 198 <F12>
<INCOME-PRETAX> 149
<INCOME-TAX> 45
<INCOME-CONTINUING> 103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103
<EPS-PRIMARY> 1.09
<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 $445.
<F2>Includes Commercial and Residential mortgage loans.
<F3>Included in Other investments in the Consolidated Statements of Financial
Condition.
<F4>Includes Consumer Loans of $3,350.
<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 gain, Retained
earnings, Common stock held in treasury and Unearned restricted stock.
<F8>Includes Savings Deposits of $2,435.
<F9>Includes Consumer loan servicing fees of $67.
<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>
