EXHIBIT 10.3
SUPPLEMENTAL COMPENSATION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of August 25, 1997
("Effective Date") by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇") and PROVIDIAN
FINANCIAL CORPORATION ("PFC") with reference to the following facts:
A. PFC wishes to provide ▇▇▇▇▇ with certain supplemental compensation
("Supplemental Compensation") as a financial incentive to ▇▇▇▇▇ to remain
employed by PFC for up to three years commencing with the Effective Date; and
▇. ▇▇▇▇▇ wishes to avail himself of this incentive (understanding that his
employment with PFC is nonetheless at will and subject to termination by either
PFC or ▇▇▇▇▇ at any time, with or without cause).
NOW, THEREFORE, in consideration of the promises and mutual covenants set
forth below, the parties hereby agree as follows:
1. DEFINITIONS. As used in this Agreement:
1.1 "Determination Date" means the earlier of (a) the third
anniversary of the Effective Date, or (b) the date ▇▇▇▇▇'▇ employment with PFC
is terminated for any reason (voluntarily or involuntarily).
1.2 "N" equals the total number of ▇▇▇▇▇'▇ unexercised stock options
(vested and unvested) as of August 25, 1997, which is 321,164 options.
1.3 "X" equals the agreed stock value for any Determination Date,
which is the average of the daily high and low trading prices of PFC common
stock on the NYSE for the twenty (20) trading days immediately prior to such
Determination Date.
1.4 "Y" equals an agreed-upon portion of the
value of the common stock issuable upon exercise of ▇▇▇▇▇'▇ stock options (both
vested and unvested), which is (X minus $40) multiplied by N. If X is less than
or equal to $40, then Y will equal 0.
2. PAYMENT OF SUPPLEMENTAL COMPENSATION. PFC shall pay to ▇▇▇▇▇
Supplemental Compensation on the terms and conditions set forth below:
2.1 If ▇▇▇▇▇ is still employed with PFC on the three-year anniversary
of the Effective Date, he will be entitled to Supplemental Compensation in an
amount equal to $1,000,000 minus Y.
2.2 If ▇▇▇▇▇ leaves the employment of PFC for any reason whatsoever
(voluntarily or involuntarily) before the first anniversary of the Effective
Date, he will not be entitled to any Supplemental Compensation under this
Agreement.
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2.3 If ▇▇▇▇▇ leaves the employment of PFC on or after the one-year
anniversary of the Effective Date, but prior to the two-year anniversary of
the Effective Date, he will be entitled to Supplemental Compensation in an
amount equal to $333,333 minus Y.
2.4 If ▇▇▇▇▇ leaves the employment of PFC on or after the two-year
anniversary of the Effective Date, but prior to the three-year anniversary of
the Effective Date, he will be entitled to Supplemental Compensation in an
amount equal to $666,667 minus Y.
2.5 In addition, PFC will pay to ▇▇▇▇▇ the interest to accrue on
$1,000,000 from the Effective Date of the Agreement through the earlier of (a)
the three-year anniversary of the Effective Date, or (b) ▇▇▇▇▇'▇ employment
termination date. This interest will accrue at a variable annual rate equal to
the Prime Rate (as published in The Wall Street Journal from time to time).
The accrued interest will be paid on the one, two and three-year anniversaries
of the Effective Date if ▇▇▇▇▇ is still employed by PFC on those dates. If
▇▇▇▇▇'▇ employment is terminated for any reason on the one-year anniversary of
the Effective Date or thereafter, he will be paid the accrued, unpaid interest
through his last day of employment, within seven (7) days after his
termination date. If ▇▇▇▇▇'▇ employment is terminated for any reason
(voluntarily or involuntarily) prior to the one-year anniversary of the
Effective Date, he will not be entitled to any interest.
All payments that become due under this Agreement will be subject to applicable
employee tax withholdings and deductions and will be paid in cash within seven
(7) days of becoming due in accordance with written notice to be delivered to
PFC by ▇▇▇▇▇ not later than three (3) days prior to the applicable payment date.
3. MISCELLANEOUS.
3.1 PFC CHANGE OF CONTROL AGREEMENT. ▇▇▇▇▇ has received a standard
form Change of Control Agreement from PFC. Payments due under this Agreement
are independent of any payments which may become due to ▇▇▇▇▇ under his PFC
Change of Control Agreement.
3.2 AT-WILL EMPLOYMENT. ▇▇▇▇▇ understands and agrees that this
Agreement does not modify or change in any way the at-will nature of his
employment with PFC and that both he and PFC shall remain free to terminate
their employment relationship at any time, with or without cause.
3.3 CONFIDENTIALITY. The parties shall hold
the provisions of this Agreement in strictest confidence and not publicize or
disclose them in any manner whatsoever; provided, however, that: (a) ▇▇▇▇▇ may
disclose this Agreement to his immediate family; (b) the parties may disclose
this Agreement to their respective attorneys, accountants, auditors, tax
preparers and financial advisors; and (c) the parties may disclose this
Agreement insofar as such disclosure may be required by law.
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3.4 NOTICES. Any notices required or permitted hereunder shall be
given to the appropriate party at the address specified below or at such other
address as the party shall specify in writing. Such notice shall be deemed
given upon personal delivery to the appropriate address or delivery by
facsimile to the number specified below, or if sent by certified or registered
mail, upon receipt.
3.5 ARBITRATION; ATTORNEYS' FEES. In case of any dispute or
disagreement arising out of or related to this Agreement, such dispute or
disagreement shall be submitted to binding arbitration before JAMS/Endispute
in San Francisco, California. The rules of JAMS/Endispute then in effect and
applicable to the resolution of such disputes or disagreements shall apply,
except as set forth in this paragraph. The rules of evidence shall apply to
the arbitration, and any decision or award shall be final, binding and non-
appealable, except in cases of gross fraud or misconduct by the arbitrator.
The prevailing party in the arbitration shall be awarded his or its attorneys'
fees, costs and expenses incurred in the arbitration, including the fees,
costs and expenses charged by the arbitrator and JAMS/Endispute.
3.6 NO MODIFICATIONS. This Agreement may not be modified or amended
except by a writing signed by both ▇▇▇▇▇ and an authorized officer of PFC.
3.7 BINDING EFFECT. This Agreement shall bind the heirs, personal
representatives, successors and assigns of each party, and inure to the
benefit of each party and their directors, officers, employees, agents,
successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
▇▇▇▇▇ ▇. ▇▇▇▇▇ PROVIDIAN FINANCIAL CORPORATION
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Address: Address: ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------- ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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FAX: FAX: (▇▇▇) ▇▇▇-▇▇▇▇
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