<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PROVIDIAN FINANCIAL CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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<PAGE>
(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
Providian Financial Corporation [PROVIDIAN
201 Mission Street FINANCIAL
San Francisco, CA 94105 LOGO]
(415) 543-0404
March 31, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Providian Financial Corporation to be held at 10:00 a.m., Pacific Time, on
Wednesday, May 6, 1998, in the Embassy Room of the Mandarin Oriental Hotel,
222 Sansome Street, San Francisco, California. Your Board of Directors and
management look forward to personally greeting those stockholders able to
attend.
This year you are being asked to consider and vote upon the election of
three directors, adoption of the Company's 1997 Employee Stock Purchase Plan,
and ratification of the appointment of independent auditors. These matters are
discussed in greater detail in the accompanying Notice of Annual Meeting of
Stockholders and Proxy Statement.
Your Board of Directors unanimously believes that the three items proposed
by the Board are in the best interests of the Company and its stockholders
and, accordingly, recommends a vote FOR each of the proposals.
Regardless of the number of shares you own or whether you plan to attend, it
is important that your shares are represented and voted at the meeting. You
are requested to sign, date and mail the enclosed proxy promptly.
If you have any questions or comments about matters discussed in the Proxy
Statement, we'd be happy to hear from you. Please call our Investor Relations
Department at (415) 543-0404.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Shailesh J. Mehta
- ---------------------
Shailesh J. Mehta
Chairman, President and Chief Executive Officer
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Holders of Common Stock
of Providian Financial Corporation:
The Annual Meeting of Stockholders of Providian Financial Corporation (the
"Company") will be held at 10:00 a.m., Pacific Time, on Wednesday, May 6,
1998, in the Embassy Room of the Mandarin Oriental Hotel, 222 Sansome Street,
San Francisco, California, for the following purposes:
(1) To elect three directors to serve until the 2001 Annual Meeting of
Stockholders or until their earlier retirement, resignation or removal;
(2) To approve the adoption of the Company's 1997 Employee Stock Purchase
Plan;
(3) To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for 1998; and
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors has fixed the close of business on March 16, 1998 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting. The Proxy Statement and form of proxy for
the Annual Meeting are first being mailed to stockholders with and on the date
of this notice.
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1997 is enclosed. The Annual Report contains financial and other
information about the activities of the Company, but it is not to be deemed a
part of the proxy soliciting materials.
By Order of the Board of Directors
Ellen Richey
Executive Vice President, General Counsel and Secretary
Providian Financial Corporation
San Francisco, California
March 31, 1998
<PAGE>
PROVIDIAN FINANCIAL CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
PROXY STATEMENT
GENERAL INFORMATION
The Board of Directors of Providian Financial Corporation (the "Company") is
soliciting proxies to be voted at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at 10:00 a.m., Pacific Time, on Wednesday, May 6,
1998, in the Embassy Room of the Mandarin Oriental Hotel, 222 Sansome Street,
San Francisco, California, and at any adjournment or postponement thereof. The
Company is first sending this Proxy Statement and accompanying proxy to
stockholders on or about March 31, 1998.
On June 10, 1997 (the "Distribution Date"), Providian Corporation
distributed all of the then outstanding shares of the Company's common stock
(the "Spinoff") to its stockholders of record on the Distribution Date. As a
result of the Spinoff, Providian Corporation fully divested its ownership of
the Company and the Company became a publicly owned company. This is the
Company's first solicitation of proxies since the Spinoff.
VOTING RIGHTS AND QUORUM
The Board of Directors has fixed the close of business on March 16, 1998
(the "Record Date") as the record date for determining stockholders entitled
to receive notice of, and to vote at, the Annual Meeting. On the Record Date,
there were 95,151,043 shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), outstanding. For each share of Common Stock held
on the Record Date, a stockholder is entitled to one vote on each matter to be
voted upon at the Annual Meeting. A majority of such shares of Common Stock
present in person or by proxy will constitute a quorum for the transaction of
business at the Annual Meeting.
Each share of Common Stock represented at the Annual Meeting by a properly
executed proxy will be voted according to the instructions indicated on the
proxy. IF NO INSTRUCTIONS ARE INDICATED, SUCH SHARES OF COMMON STOCK WILL BE
VOTED FOR THE ELECTION OF ALL NOMINEES FOR DIRECTOR,FOR THE ADOPTION OF THE
COMPANY'S 1997 EMPLOYEE STOCK PURCHASE PLAN AND FOR THE RATIFICATION OF ERNST
& YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS. A stockholder may revoke a
proxy by giving written notice of revocation to the Secretary of the Company
or submitting a later-dated proxy at any time before the voting, or by voting
in person at the Annual Meeting.
VOTES REQUIRED
Votes cast by proxy or in person at the Annual Meeting will be tabulated by
the inspector of election appointed for the Annual Meeting, who also will
determine whether or not a quorum is present. The inspector of election will
treat abstentions as shares that are present and entitled to vote for purposes
of determining the presence of a quorum, but as unvoted for purposes of
determining the approval of any matter submitted to the stockholders for a
vote. If a broker indicates on the proxy that it does not have discretionary
authority as to certain shares to vote on a particular matter, those shares
will be considered as present but not entitled to vote with respect to that
matter.
Election of directors requires a plurality of the votes of the shares
present in person or represented by proxy at the Annual Meeting and entitled
to vote on the election of directors. Approval of all other matters submitted
to a vote of the stockholders at the Annual Meeting requires the affirmative
vote of a majority of shares present in person or represented by proxy at the
Annual Meeting and entitled to vote on such matters.
1
<PAGE>
PROXY SOLICITATION
The Company will bear the expense of soliciting proxies. In addition to the
use of the mails, proxies may be solicited personally or by telephone or other
means of communication. The Company has retained D. F. King & Co., Inc. to
help solicit proxies for a fee of $5,000 plus out-of-pocket costs and
expenses.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of March 16, 1998, information regarding
ownership of the outstanding shares of Common Stock by any entity or person
known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, and is based on Schedule 13G filings made
by such entities or persons as of December 31, 1997:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK OWNED
------------------------------------ -------------------- ------------------
<S> <C> <C>
FMR Corp.; Edward C. Johnson 3d;
Abigail P. Johnson; and Fidelity
Management & Research Company(1)
82 Devonshire Street
Boston, MA 02109..................... 8,861,300(2) 9.31%
J. P. Morgan & Co. Incorporated(3)
60 Wall Street
New York, NY 10260................... 7,178,569(4) 7.54%
</TABLE>
- --------
(1) According to a Schedule 13G filed with the Securities and Exchange
Commission by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson on
February 11, 1998.
(2) FMR Corp. reports sole voting power with respect to 151,915 shares and
sole dispositive power with respect to 8,861,300 shares. Each of Edward C.
Johnson 3d and Abigail P. Johnson reports sole dispositive power with
respect to 8,861,300 shares. Fidelity Management & Research Company
("Fidelity"), a wholly-owned subsidiary of FMR Corp. and an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940, is the beneficial owner of 8,560,485 shares, or 9.00%, of the Common
Stock as a result of acting as an investment adviser to various investment
companies registered under Section 8 of the Investment Company Act of
1940. FMR Corp. (through its control of Fidelity), Edward C. Johnson 3d
and Fidelity Funds each has sole power to dispose of the 8,560,485 shares
owned by Fidelity Funds.
(3) According to a Schedule 13G filed with the Securities and Exchange
Commission by J.P. Morgan & Co. Incorporated on February 13, 1998.
(4) J.P. Morgan & Co. Incorporated reports sole voting power with respect to
5,042,994 shares, shared voting power with respect to 7,340 shares, sole
dispositive power with respect to 7,156,889 shares, and shared dispositive
power with respect to 21,480 shares.
SECURITY OWNERSHIP OF MANAGEMENT
The number of shares of Common Stock beneficially owned by each director,
nominee and executive officer named in the Summary Compensation Table in this
Proxy Statement, and directors, nominees and executive officers as a group, as
of March 16, 1998, is shown in the following table, except that Common Stock
dividends reinvested on the March 16, 1998 dividend payment date are not
included. For purposes of this disclosure, shares are considered to be
"beneficially" owned if the person has or shares the power to vote or direct
the voting of shares, the power to dispose of or direct the disposition of the
shares, or the right to acquire beneficial ownership (as so defined) within 60
days after the Record Date. Subject to applicable community property laws and
shared voting or investment power with a spouse, each individual has sole
investment and voting power with respect to the shares set forth in the table
that follows unless otherwise noted.
2
<PAGE>
<TABLE>
<CAPTION>
PERCENT OF
NAME OF DIRECTOR OR EXECUTIVE AMOUNT AND NATURE OF COMMON STOCK
OFFICER BENEFICIAL OWNERSHIP (1)(2)(3) OWNED
- ----------------------------- ------------------------------ ------------
<S> <C> <C>
Shailesh J. Mehta.................. 628,407 *
John M. Cranor III................. 10,413 *
Christina L. Darwall(4)............ 0 *
James V. Elliott................... 17,289(5) *
Lyle Everingham.................... 11,834(6) *
J. David Grissom................... 26,610(7) *
F. Warren McFarlan................. 8,616(8) *
Ruth M. Owades(4).................. 500 *
Larry D. Thompson.................. 6,975 *
John L. Weinberg................... 28,354 *
David Alvarez...................... 50,835 *
Seth A. Barad...................... 76,970 *
Ellen Richey....................... 30,092 *
David B. Smith..................... 60,179 *
All directors, nominees and execu-
tive officers as a group
(15 persons)...................... 985,649 1.04%
</TABLE>
- --------
* Less than 1%.
(1) Includes the following restricted shares granted under the Company's
Stock Ownership Plan: Mr. Mehta, 155,035 shares; Mr. Cranor, 1,268
shares; Mr. Elliott, 1,268 shares; Mr. Everingham, 1,268 shares; Mr.
Grissom, 1,268 shares; Dr. McFarlan, 1,285 shares; Mr. Thompson, 1,285
shares; Mr. Weinberg, 1,268 shares; Mr. Alvarez, 25,027 shares; Mr.
Barad, 27,517 shares; Ms. Richey, 15,027 shares; and Mr. Smith, 27,325
shares.
(2) Includes the following shares subject to options granted under the
Company's 1997 Stock Option Plan which are now exercisable or are
exercisable within 60 days after the Record Date: Mr. Mehta, 411,987
shares; Mr. Alvarez, 18,216 shares; Mr. Barad, 43,760 shares; Ms. Richey,
10,155 shares; and Mr. Smith, 19,880 shares.
(3) Includes the following shares held in an account under the Company's
401(k) Plan as of December 31, 1997 (the latest Plan statement date),
over which limited investment power is held: Mr. Mehta, 1,186 shares; Mr.
Elliott, 1,454 shares; Mr. Alvarez, 1,628 shares; Mr. Barad, 787 shares;
Ms. Richey, 881 shares; and Mr. Smith, 1,571 shares.
(4) Appointed to fill a vacancy on the Board of Directors to serve for a term
beginning April 1, 1998 and expiring in 1999.
(5) Includes 196 shares held in Mr. Elliott's account under the Commonwealth
General Corporation Thrift and Savings Plan as of December 31, 1997 (the
latest Plan statement date), over which he holds limited investment
power.
(6) Includes 6,654 shares held in a trust, as to which Mr. Everingham has
sole voting and investment power.
(7) Includes 200 shares owned by Mr. Grissom's spouse, as to which Mr.
Grissom disclaims beneficial ownership.
(8) Includes 600 shares owned by Dr. McFarlan's spouse, as to which Dr.
McFarlan disclaims beneficial ownership.
The Company's Human Resource Committee has established stock ownership
guidelines for the Company's non-employee directors and senior officers. The
guidelines set certain stock ownership levels for outside directors and senior
management to further align their interests with stockholders. The stock
ownership levels provided by the guidelines are five times annual retainer for
directors; two, three or five times base salary for senior management,
depending on the office held; and ten times base salary for the Chief
Executive Officer. Restricted stock and vested stock options may be used to
satisfy the guidelines, and directors and senior management have a period of
four years from the introduction of the guidelines, or their election or
appointment, to meet the targeted stock ownership levels.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for the classification
of the Board of Directors into three classes, with each class of directors
serving staggered three-year terms (or a shorter term if a director is filling
a vacancy). Three directors are to be elected at the 1998 Annual Meeting to
serve for a term of three years expiring in 2001. All nominees have consented
to be named and to serve if elected. The Company does not presently know of
any reason that would preclude any nominee from serving if elected. If any
nominee, for any reason, should become unable or unwilling to stand for
election as a director, either the shares of Common Stock represented by all
proxies authorizing votes for such nominee will be voted for the election of
such other person as the Board of Directors may recommend, or, if the Board of
Directors so determines, the number of directors to be elected at the Annual
Meeting will be reduced accordingly. All of the nominees, together with
Messrs. Cranor and Thompson and Dr. McFarlan, were elected to the Board of
Directors effective as of the Distribution Date, and have served continuously
on the Board since that time. Irving W. Bailey II resigned as a director,
effective December 31, 1997, following his resignation from Aegon USA, Inc. On
February 18, 1998, Ruth M. Owades and Christina L. Darwall were elected to the
Board of Directors to fill the vacancies created by Mr. Bailey's resignation
and by an increase on such date in the number of directors from nine to ten,
in each case to serve for a term beginning on April 1, 1998 and expiring in
1999.
For each of the three nominees, as well as the seven directors whose terms
continue after the Annual Meeting, information follows as to age, length of
service as a director of the Company, positions and offices with the Company,
principal occupations during the past five years and other directorships of
publicly-held companies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED IN THIS
PROPOSAL.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING:
JAMES V. ELLIOTT, 54
Director since 1995.
Attorney at Law. Senior Vice President and General Counsel of Providian
Corporation from 1994 to 1997. General Counsel of the Company from 1989 to
1994; Senior Vice President of the Company from 1993 to 1994; responsible
for the Company's emerging business operations during 1994.
LYLE EVERINGHAM, 71
Director since 1997.
Retired Chairman and Chief Executive Officer, The Kroger Co.
J. DAVID GRISSOM, 59
Director since 1997.
Chairman, Mayfair Capital, from 1989 to present.
Other directorships: Churchill Downs, Incorporated, LG&E Energy Corp. and
Regal Cinemas, Inc.
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 1999 ARE:
JOHN M. CRANOR III, 51
Director since 1997.
Chairman of the Board, President and Chief Executive Officer, Long John
Silver's Restaurants, Inc., from 1996 to present; President and Chief
Executive Officer of KFC Corporation from 1989 to 1994.
4
<PAGE>
CHRISTINA L. DARWALL, 49
Director (effective April 1, 1998).
Executive Director, Harvard Business School California Research Center,
from 1997 to present. Member of the Board of Directors and Consultant to
ViewStar Corporation from 1986 to 1996; Vice President, Marketing and
Business Development of ViewStar Corporation from 1990 to 1992; Member of
the Board of Directors, Harvard Business School Publishing Corporation,
1995 to present.
RUTH M. OWADES, 49
Director (effective April 1, 1998).
President and Chief Executive Officer, Calyx & Corolla from 1988 to
present.
Other directorships: DM Management Co.
JOHN L. WEINBERG, 73
Director since 1997.
Senior Chairman, Goldman Sachs & Co.(/1/), from November 1990 to present;
Senior Partner, The Goldman Sachs Group, L.P. and its principal affiliate,
Goldman Sachs & Co., until November 1990.
Other directorships: Knight Ridder, Inc., Champion International Corp. and
Tricon Global Restaurants, Inc.
DIRECTORS CONTINUING IN OFFICE WHOSE TERMS EXPIRE IN 2000 ARE:
SHAILESH J. MEHTA, 48
Director since 1988.
Chief Executive Officer of the Company from 1988 to present and Chairman of
the Board and President of the Company from June 1997 to present. President
and Chief Operating Officer of Providian Corporation from 1994 to June
1997. Executive Vice President of Providian Corporation, and Chairman and
Chief Executive Officer of Providian Direct Insurance, a division of
Providian Corporation, from 1993 to 1994.
Other directorships: Hanover Direct, Inc. and MasterCard International
Incorporated, U.S. Region.
F. WARREN MCFARLAN, D.B.A., 60
Director since 1997.
Professor of Business Administration, Harvard Business School, from 1973 to
present; Senior Associate Dean, Harvard Business School, from 1991 to
present; Director of External Affairs, Harvard Business School, from 1995
to present; member of the Harvard University faculty from 1964 to present.
Other directorships: Pioneer Hi-Bred International, Inc. and Computer
Sciences Corporation.
LARRY D. THOMPSON, 52
Director since 1997.
Partner, King & Spalding (/2/), a law partnership, from 1986 to present.
- --------
(/1/)Goldman, Sachs & Co. performed investment banking and financial advisory
services for the Company during 1997. In the future, Goldman, Sachs & Co.
may be called upon to provide similar services for the Company.
(/2/)The Company retained King & Spalding during 1997 to perform certain legal
services.
5
<PAGE>
COMMITTEES OF THE BOARD
The Board has several committees which perform various functions, including
those described below.
The AUDIT COMMITTEE supervises and reviews the Company's risk management and
internal controls programs, makes recommendations to the Board of Directors as
to appointment of independent auditors, and confers with independent auditors
and internal auditors regarding the scope of proposed audits and audit
findings, reports and recommendations. In addition, the Committee reviews
reports of material actual or threatened litigation, significant changes in
accounting practice, the status of tax audits and appeals and annual or
operating results which differ significantly from publicly available
forecasts. The members of the Audit Committee are Messrs. Thompson (Chair),
Elliott and Grissom. The Audit Committee met twice during 1997.
The HUMAN RESOURCES COMMITTEE reviews and approves the compensation and
benefits policies and practices of the Company, except that approval of the
salary and bonus of the Chief Executive Officer is reserved to the full Board
of Directors. The Human Resources Committee recommends to the Board
nominations for directors and the Chief Executive Officer of the Company and
is responsible for the appointment of other officers. The Committee also
reviews matters related to management succession. In addition, the Committee
administers certain employee benefit plans. The Human Resources Committee is
comprised of Dr. McFarlan (Chair) and Messrs. Cranor, Everingham and Weinberg.
The Human Resources Committee met four times during 1997.
The ASSET LIABILITY COMMITTEE reviews the Company's capital adequacy,
funding, investment, securitization, liquidity and interest rate risk
management strategies and policies, periodically monitors management's
activities and key measurements in these areas, and makes recommendations to
the Board of Directors concerning proposed activities and programs. During
1997, the members of the Asset Liability Committee were Messrs. Bailey
(Chair), Cranor and Mehta and Dr. McFarlan. The Asset Liability Committee met
twice during 1997.
DIRECTORS' MEETINGS
During 1997, the Company's Board of Directors held two meetings prior to the
Spinoff and three meetings after the Spinoff. Each director attended at least
75 percent of the total number of meetings of the Board, and the total number
of meetings held by all committees of the Board, on which he served during the
period that he served as a member of the Board or such committees, except Mr.
Grissom, who attended 66-2/3% of the total number of such meetings.
DIRECTORS' COMPENSATION
Directors who also are officers of the Company receive no additional
compensation for serving on the Company's Board of Directors. All other
directors are paid an annual retainer of $54,000 and an additional $2,000
annually for serving as a committee chair. Directors may elect to receive 25%
or more of their total annual retainer in unrestricted Common Stock. Directors
who elect to receive all or a portion of their retainer in Common Stock
receive an additional award equal to 25% of their total retainer in shares of
restricted stock under the Company's Stock Ownership Plan. Such restricted
stock vests one-half after three years, and the balance after six years, if
the director does not dispose of the related shares of unrestricted Common
Stock during such vesting periods. In addition, in 1997, directors other than
Mr. Mehta and Mr. Bailey each received an additional 813 shares of restricted
stock and options to purchase 10,000 shares of Common Stock which, in each
case, vest in equal annual amounts over a three-year period. The Company's
directors also are reimbursed for necessary and reasonable expenses incurred
in the performance of their duties as directors.
6
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table presents for the last three fiscal years information
with regard to compensation for services rendered in all capacities to the
Company by the Chief Executive Officer and the four other most highly
compensated executive officers of the Company (collectively, the "Named
Executive Officers"). Certain of the amounts shown represent payments made to
such officers by Providian Corporation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------- ---------------------------------
AWARDS PAYOUTS
RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
COMPENSATION AWARD(S)($) OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($) ($)(1) (2)(3)(4)(5) (#)(6)(7) ($)(8) ($)(9)(10)(11)
- --------------------------- ---- --------- --------- ------------ ------------ ------------ ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAILESH J. MEHTA........ 1997 771,056 1,125,013 170,136 5,832,263 1,219,694 100,710(12)
Chairman, CEO 1996 629,327 844,900 28,953 256,647 96,013 181,968 20,318
and President 1995 528,755 362,900 26,184 156,851 83,088 264,603 16,808
SETH A. BARAD............ 1997 284,522 270,032 928,176 50,000 9,413
Executive Vice President 1996 245,000 200,000 49,947 18,464 8,085
1995 234,580 130,000 32,490 17,356 7,741
DAVID B. SMITH........... 1997 285,240 255,036 39,930 918,168 278,020 39,260(13)
Executive Vice President 1996 229,112 200,000 71,037 24,003 84,382 7,561
1995 226,219 125,000 60,555 14,525 117,418 6,822
ELLEN RICHEY............. 1997 220,644 202,550 709 524,594 30,000 5,630
Executive Vice 1996 207,760 150,000 37,447 9,232 22,930
President, 1995 146,571 70,000 17,463 6,462 17,672
General Counsel and
Secretary
DAVID ALVAREZ............ 1997 206,840 202,550 11,303 907,719 84,126 6,930
Executive Vice President 1996 159,644 125,000 31,196 13,848 20,005
1995 131,385 85,000 21,209 7,939 17,541
</TABLE>
- --------
(1) Includes amounts reimbursed during the year for payment of taxes and
includes above-market interest on deferred compensation paid or payable
during the year but deferred at the election of the Named Executive
Officer.
(2) Represents the dollar value of restricted stock awarded under the
Company's Stock Ownership Plan (the "Providian Financial SOP") after the
Spinoff and under Providian Corporation's Stock Ownership Plan (the
"Providian Corporation SOP") prior to the Spinoff. Under the Providian
Corporation SOP, awards were made in common stock of Providian
Corporation, and under the Providian Financial SOP, awards are made in the
Company's Common Stock. Restricted stock awarded to the Named Executive
Officers under the Providian Corporation SOP vested immediately prior to
the Spinoff.
(3) Dividends are paid on restricted stock awards under the Providian
Financial SOP at the same rate as paid to all stockholders. On December
31, 1997, on which date the closing price of the Common Stock was
$45.1875, the Named Executive Officers held shares of restricted stock
(excluding restricted stock awarded in the first quarter of 1998) having a
then market value as follows: Mr. Mehta, 115,647 shares, $5,225,799; Mr.
Barad, 24,065 shares, $1,087,437; Mr. Smith, 24,065 shares, $1,087,437;
Ms. Richey, 12,439 shares, $562,087; and Mr. Alvarez, 22,439 shares,
$1,013,962.
(4) Includes the following shares of restricted stock awarded under the
Providian Financial SOP in the first quarter of 1998 as part of the
Company's annual incentive award for 1997, which vest in three equal
annual amounts beginning February 15, 1999: Mr. Mehta, 14,388 shares; Mr.
Barad, 3,452 shares; Mr. Smith, 3,260 shares; Ms. Richey, 2,588 shares;
and Mr. Alvarez, 2,588 shares. In addition, in the first quarter of 1998,
Mr. Mehta received an award of 25,000 shares of restricted stock based on
the Company's performance in 1997, which vest in five equal annual amounts
beginning February 15, 1999.
(footnotes continued on next page)
7
<PAGE>
(5) Includes the following shares of restricted stock received in June 1997
under the Providian Financial SOP, which vest in five equal annual
amounts beginning June 25, 1998: Mr. Mehta, 75,000 shares; Mr. Barad,
20,000 shares; Mr. Smith, 20,000 shares; Ms. Richey, 10,000 shares; and
Mr. Alvarez, 10,000 shares. In addition, includes the following shares of
restricted stock received in August 1997 under the Providian Financial
SOP: Mr. Mehta, 40,647 shares; Mr. Barad, 4,065 shares; Mr. Smith, 4,065
shares; Ms. Richey, 2,439 shares; and Mr. Alvarez, 2,439 shares. Mr.
Alvarez received an additional 10,000 shares of restricted stock in
August 1997 which vest in five equal annual amounts beginning August 7,
1998.
(6) Represents the number of shares of Common Stock underlying options.
Options granted in 1996 and 1995 to purchase Providian Corporation common
stock were replaced in connection with the Spinoff, to the extent such
options were then outstanding, by options to purchase the Company's
Common Stock in amounts reflecting the economic value of the Providian
Corporation option grants at the time of the Spinoff.
(7) Includes options granted under the Company's Stock Option Plan in June
1997 to purchase the following number of shares of Common Stock: Mr.
Mehta, 500,000 shares; Mr. Barad, 50,000 shares; Mr. Smith, 50,000
shares; Ms. Richey, 30,000 shares; and Mr. Alvarez, 30,000 shares. In
June 1997 Messrs. Mehta, Smith and Alvarez also received options to
purchase 719,694, 228,020 and 34,126 shares, respectively, of Common
Stock, in connection with the termination of the Company's Equity Unit
Plan. In addition, in August 1997 Mr. Alvarez received options under the
Company's Stock Option Plan to purchase 20,000 shares of Common Stock.
(8) The Long-Term Incentive Plan was a Providian Corporation plan which paid
awards based on the long-term performance of Providian Corporation. The
plan has not been continued by the Company.
(9) Includes Providian Corporation contributions under the Providian
Corporation Thrift Savings Plan and Providian Corporation's nonqualified
defined contribution plan during 1995 for Messrs. Mehta and Smith and
during 1996 and 1997 for Mr. Mehta, and also includes the Company's
contributions to each Named Executive Officer under the Company's 401(k)
Plan and nonqualified defined contribution plan. In 1997, Mr. Mehta
received Providian Corporation contributions of $4,667 and $5,560,
respectively, under the Providian Corporation Thrift Savings Plan and
Providian Corporation's nonqualified defined contribution plan. In 1997,
the following Company contributions were made to the Company's 401(k)
Plan: $5,225 for Mr. Barad, $5,225 for Mr. Smith, $3,465 for Ms. Richey
and $5,225 for Mr. Alvarez; and the following contributions were made to
the Company's nonqualified defined contribution plan: $14,605 for Mr.
Mehta, $4,109 for Mr. Barad, $4,133 for Mr. Smith, $2,001 for Ms. Richey
and $1,546 for Mr. Alvarez.
(10) Under the retirement component of the Company's 401(k) Plan, annual
contributions are made by the Company after the end of each fiscal year,
in an amount based on a percentage of the employee's compensation. The
percentage is determined each year by the Company at its discretion. The
percentage for 1997 has not yet been determined, and the amounts of such
annual contributions to the Named Executive Officers are therefore not
included in this column.
(11) Includes above-market interest earned on deferred compensation in the
following amounts: $643 for Mr. Mehta, $78 for Mr. Barad, $94 for Mr.
Smith, $164 for Ms. Richey and $159 for Mr. Alvarez.
(12) Includes $75,236 in Company contributions to Mr. Mehta's supplemental
retirement plan.
(13) Includes $29,808 accrued under an agreement between the Company and Mr.
Smith that gives Mr. Smith the right to receive certain amounts
contingent upon, and determined by reference to the length of, his
continued employment with the Company.
8
<PAGE>
OPTION GRANTS
The following table contains information concerning the grant of stock
options in 1997 under the Company's 1997 Stock Option Plan to the Named
Executive Officers. Included is information on potential realizable value(s)
to the Named Executive Officers, assuming growth of the Common Stock at the
stated rates of appreciation.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR-
INDIVIDUAL GRANTS OPTION TERM (1)
------------------------------------------------- ------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- ---- ---------- ------------ ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Shailesh J. Mehta....... 500,000 14.7% 32.1063 6/25/07 10,095,740 25,584,587
719,694(3) 21.2% 32.1063 6/25/02 6,383,958 14,106,878
Seth A. Barad........... 50,000 1.5% 32.1063 6/25/07 1,009,574 2,558,459
David B. Smith.......... 50,000 1.5% 32.1063 6/25/07 1,009,574 2,558,459
228,020(3) 6.7% 32.1063 6/25/02 2,022,624 4,469,470
Ellen Richey............ 30,000 0.9% 32.1063 6/25/07 605,744 1,535,075
David Alvarez........... 30,000 0.9% 32.1063 6/25/07 605,744 1,535,075
34,126(3) 1.0% 32.1063 6/25/02 302,711 668,911
20,000 0.6% 38.3125(4) 8/07/07 481,891 1,221,205
</TABLE>
- --------
(1) The amounts shown represent certain assumed rates of appreciation only.
Actual gains on stock option exercises, if any, are dependent on the
future performance of the Common Stock and overall condition of the stock
market, as well as the option holder's continued employment through the
vesting period. The amounts reflected in this table may not necessarily be
achieved.
(2) Except as noted in footnote 4, equals the average of the high and low
prices of the Common Stock during the ten trading days beginning on the
Distribution Date.
(3) Represents shares underlying options granted to replace the future
appreciation potential of terminated Equity Units which were granted under
the Company's Equity Unit Plan (the "Equity Unit Plan"). The Equity Unit
Plan was established in 1989 as a specialized compensation plan designed
to align the interests of key employees with the Company's long term goals
and performance.
(4) Equals the average of the high and low price of the Common Stock on the
date of grant.
9
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Named
Executive Officers concerning the exercise of options during 1997, and
unexercised options held as of the end of 1997.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/97 (#) 12/31/97 ($)(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shailesh J. Mehta....... 411,987 1,311,398 5,045,302 23,422,372
Equity Units(2) 117,827 20,466,230 -- -- -- --
Seth A. Barad........... 43,760 68,094 1,072,075 1,102,005
David B. Smith.......... 63,367 696,452 19,880 301,284 505,873 4,252,458
Equity Units(2) 37,331 6,524,874 -- -- -- --
Ellen Richey............ 10,155 38,308 261,684 598,328
David Alvarez........... 18,216 96,004 461,324 1,277,489
Equity Units(2) 4,300 662,595 -- -- -- --
</TABLE>
- --------
(1) Based on the average of the high and low price of the Common Stock on
December 31, 1997, equal to $45.375 per share.
(2) Represents the number of Equity Units previously outstanding under the
Equity Unit Plan and the dollar amount paid by the Company, reflecting
past appreciation in such Equity Units, in connection with the termination
of the Equity Unit Plan. The appreciation in such Equity Units reflected
the increase in the Equity Unit price (based on the estimated value of the
Company) over the Equity Unit grant price. Messrs. Mehta, Smith and
Alvarez also acquired options to purchase shares of Common Stock to
replace the future appreciation potential of the terminated Equity Units.
See footnote 3 under the table "Option Grants in Last Fiscal Year."
10
<PAGE>
HUMAN RESOURCES COMMITTEE
EXECUTIVE COMPENSATION REPORT
FEBRUARY 18, 1998
The Company's executive compensation programs are administered by the Human
Resources Committee (the "Committee"), a committee of the Board of Directors
composed exclusively of non-employee directors. The Committee either approves
or recommends to the Board of Directors payment amounts and awards levels for
the Company's executive officers. None of the non-employee directors has any
interlocking or other relationship with the Company that would call into
question his or her independence as a Committee member.
COMPENSATION PHILOSOPHY
The policies which govern executive compensation continue to align changes in
total compensation with changes in the value created for our shareholders.
These policies require that our executive compensation program:
. reflect a clear relationship between compensation and Company
performance;
. reward executives with direct ownership in the Company and align their
personal interests with shareholder interests to continually reinforce
building shareholder value; and
. attract and retain key executives critical to the Company's long-term
success.
The Company's executive compensation program has been and continues to be
based on the following components, each of which supports our overall
compensation philosophy.
BASE SALARY
The Company uses a consistent methodology to determine base salaries for all
employees. Market reference points are determined for specific positions and
job classifications using relevant salary surveys. Individual salaries are
then established to assure competitive pay given individual performance. For
executive positions, the Company annually participates in surveys of financial
service companies. Base salaries for executives are reviewed by the Committee
relative to competitive pay levels, as well as against individual performance
objectives.
In June 1997, the Committee approved an employment contract with Mr. Mehta
for the position of Chief Executive Officer. The contract calls for an initial
base salary of $800,000, which the Committee established as competitive with
the base salaries paid by comparable financial service companies.
ANNUAL INCENTIVES
The Company provides annual incentive award opportunities for executives
based upon the pretax earnings of the Company, as well as the successful
achievement of individual performance objectives for the year. The earnings
plan is adopted by the Committee in connection with the Board's approval of
the Company's annual business plan at the start of the fiscal year. In the
first quarter following the completion of each year, the Committee reviews and
approves awards based upon the prior year's performance results. A portion of
each annual incentive award may be paid to a participant in stock, under the
provisions of the Company's Stock Ownership Plan. It has been the Company's
policy to set earnings targets which, if achieved, would position total annual
cash compensation above median competitive levels. Achieving target pretax
earnings would position Mr. Mehta's total annual cash compensation at
$1,800,000. Earnings performance above or below this target results in a
formula-driven award.
Mr. Mehta's annual incentive award for 1997 was based on the degree to which
target pretax earnings for the Company were achieved. The Committee has
approved an annual incentive award for Mr. Mehta of $1,125,000 in cash and
14,388 shares of restricted stock, based upon the Company's achieving pretax
earnings of $325 million, which was well above the earnings target established
for 1997. The Committee also approved a special grant of 25,000 shares of
restricted stock for Mr. Mehta based on the Company's 1997 performance.
Through the Company's Stock Ownership Plan, a portion of all executives'
annual incentive awards is paid in restricted stock, and matched with an equal
number of restricted shares. Restricted stock awarded to
11
<PAGE>
participants under the Stock Ownership Plan is deposited into an account in
the participant's name until it becomes vested. Under the Stock Ownership
Plan, the Committee may also authorize discretionary restricted stock grants
to executives. Mr. Mehta received a grant of 75,000 restricted shares (vesting
over a five-year period) upon his being named Chief Executive Officer in June
1997. An additional grant to Mr. Mehta was approved by the Committee in August
1997 for 40,647 restricted shares (vesting over a three-year period) as a
reward for the Company's strong performance following the spin-off.
The Company also provides grants of stock options under the 1997 Stock
Option Plan to executives and other employees. These option grants tie awards
to the future performance of the Common Stock and provide value only when the
price of the Common Stock increases above the option exercise price
(determined by the average of the high and low price of the Common Stock on
the date of grant). Options generally vest in equal amounts over a three-year
period and require that the executive remain employed by the Company until the
time of vesting. Options expire no later than ten years from the date of
grant. Stock option grants are intended to motivate executives to improve
long-term stock performance.
In granting stock options, the Committee takes into account competitive
grant practices within the financial services industry and the executive's
level of responsibility, individual contribution and total annual
compensation. Based on these factors, on June 25, 1997, Mr. Mehta was granted
500,000 stock options at an exercise price of $32.1063 per share.
DEDUCTIBILITY OF COMPENSATION EXPENSES
Section 162(m) of the Internal Revenue Code ("Section 162(m)") limits
federal income tax deductions by the Company for compensation paid to the
chief executive officer and the four other most highly compensated officers to
$1 million per officer per year, unless it qualifies as "performance-based"
compensation. To qualify as "performance-based," compensation payments must
satisfy certain conditions, including limitations on the discretion of the
Committee in determining the amounts of such compensation.
The Committee believes that a substantial portion of an executive's
compensation should be based on Company performance and will generally seek to
award performance-based compensation in a manner that complies with Section
162(m). However, the Committee believes that payment of compensation that is
not deductible under Section 162(m) is sometimes in the best interests of the
Company and may approve such arrangements in certain circumstances.
HUMAN RESOURCES COMMITTEE
F. Warren McFarlan (Chair)
John M. Cranor III
Lyle Everingham
John L. Weinberg
12
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line-graph presentation comparing the cumulative total
stockholder return on the Company's Common Stock on an indexed basis since
June 11, 1997, when the Common Stock first began trading on the New York Stock
Exchange, with the cumulative total stockholder return on the Standard &
Poor's 500 Stock Index and the Standard & Poor's Financial Composite Index
over the same period. The graph assumes that the value of the investment in
the Common Stock and in each index was $100 on June 11, 1997 and assumes
reinvestment of all dividends. Historical stock price is not indicative of
future stock price performance.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PROVIDIAN S&P
DATE FINANCIAL S&P 500 FINANCIAL
---- --------- ------- ---------
<S> <C> <C> <C>
06/11/97........................................ 100 100 100
06/30/97........................................ 107 102 101
07/31/97........................................ 131 110 113
08/29/97........................................ 124 104 104
09/30/97........................................ 132 109 113
10/31/97........................................ 123 106 110
11/28/97........................................ 147 111 115
12/31/97........................................ 151 113 120
</TABLE>
EXECUTIVE EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
The Company has entered into an employment agreement with Shailesh J. Mehta
(the "Employment Agreement"), pursuant to which Mr. Mehta has been employed as
Chairman, Chief Executive Officer and President of the Company. Mr. Mehta's
term of employment under the Employment Agreement commenced on June 11, 1997
and initially ends on June 11, 2000. On each June 11, however, the term of
employment will automatically be extended by one year, so that the remaining
term of employment is once again three years, unless either party gives the
other at least one year's notice that the term of employment will not be
extended.
13
<PAGE>
Mr. Mehta's base salary is $800,000 per annum and he is entitled to incentive
bonus payments pursuant to the terms of the Company's Management Incentive
Plan. The Employment Agreement provides that, in the first year, Mr. Mehta's
minimum bonus opportunity, subject to meeting performance goals established by
the Human Resources Committee of the Board, will be $1 million. Under the
Employment Agreement, Mr. Mehta received qualified and nonqualified stock
options and restricted stock upon the Spinoff. Mr. Mehta is also entitled to
participate in and receive benefits under all other bonus plans, short- or
long-term incentive plans, savings and retirement plans, and welfare benefit
plans, practices, policies and programs maintained or provided by the Company
for the benefit of senior executives. In the event the Company terminates Mr.
Mehta's employment without Cause (as defined in the Employment Agreement), or
Mr. Mehta terminates his employment for Good Reason (as defined in the
Employment Agreement), Mr. Mehta will receive severance benefits. If such
termination is prior to a Change in Control (as defined below) of the Company,
the benefits will include continuation of salary, bonus and other benefits,
and continued vesting of options and restricted stock, for three years
following termination. If such termination is within three years after a
Change in Control, the benefits will include a lump sum payment equal to three
times Mr. Mehta's annual salary and bonus, immediate vesting of all options
and restricted stock, and continuation of other benefits for three years
following termination. Additionally, if any payment or distribution to Mr.
Mehta would be subject to any "golden parachute payment" excise tax or similar
tax, then Mr. Mehta will be entitled to receive gross-up payments in an amount
such that, after payment of such excise tax or similar tax, and all taxes
attributable to such gross-up payments, Mr. Mehta retains an amount equal to
the amount he would have retained if such excise tax or similar tax had not
applied.
In addition to the Employment Agreement with Mr. Mehta described above,
during 1997 the Company entered into change in control employment agreements
with the Named Executive Officers. In these agreements, a "Change in Control"
is defined as the acquisition by a person or group of 20% or more of the
Common Stock or other voting securities of the Company (subject to specified
exceptions), certain changes in the majority of the Company's Board of
Directors, certain mergers involving the Company, or the liquidation,
dissolution or sale of all or substantially all of the assets of the Company.
If within three years of a Change in Control the officer's employment is
terminated by the Company, other than for disability or Cause (as defined in
such agreements), or if the officer terminates his or her employment for Good
Reason (as defined in such agreements) or within a 30-day period beginning one
year after the Change in Control, the officer will be entitled to the
following benefits: base salary and a pro rata bonus through the date of
termination, a severance payment equal to three times the officer's base
salary and annual bonus, any deferred compensation not yet paid by the
Company, a special retirement benefit equal to a specified retirement
contribution percentage multiplied by three times his or her base salary and
annual bonus, a payment in an amount equal to the unvested portion of the
qualified and nonqualified retirement contribution account (in addition to any
vested amounts due under any of the Company's retirement plans), and, for a
period of three years after the date of termination, medical, welfare and
other benefits under any plans, policies and programs under which the officer
is eligible to receive such benefits. Additionally, if any payment or
distribution to the officer by the Company or any subsidiary or affiliate
would be subject to any "golden parachute payment" excise tax or similar tax,
then the officer will be entitled to receive gross-up payments in an amount
such that, after payment of such excise tax or similar tax, and all taxes
attributable to such gross-up payments, the officer retains an amount equal to
the amount the officer would have retained if such excise tax or similar tax
had not applied. The Company has also entered into change in control
employment agreements with certain other officers, the specific terms of which
are no more favorable to such officers than those described in this paragraph.
In addition to the change in control employment agreements described in this
paragraph, the Company has entered into an agreement with David B. Smith that
gives Mr. Smith the right to receive certain payments determined by reference
to the value of the Common Stock and the length of Mr. Smith's continued
employment with the Company.
14
<PAGE>
PROPOSAL 2: APPROVAL OF THE ADOPTION
OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN
A proposal to approve the adoption of the 1997 Employee Stock Purchase Plan
(the "Plan") will be presented to stockholders at the Annual Meeting. The
Board of Directors adopted the Plan on August 7, 1997 and reserved for
issuance 1,000,000 shares of Common Stock pursuant to the Plan. The
effectiveness of the Plan is subject to stockholder approval.
The following is a summary of the 1997 Employee Stock Purchase Plan, which
is incorporated by reference into this summary description. This summary is
qualified entirely by reference to the Plan, a copy of which is available to
stockholders upon written request to the Secretary of the Company. Any
capitalized terms which are used in this summary description but not defined
herein have the meanings assigned to them in the Plan.
PURPOSE
The purpose of the Plan is to provide a means by which eligible employees of
the Company may be given an opportunity to purchase Common Stock through
payroll deductions. In addition, the Board of Directors believes the Plan
provides a means of attracting and retaining employees and providing
incentives for employees to exert maximum efforts for the success of the
Company. The rights granted under the Plan to purchase Common Stock are
intended to qualify as options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Internal Revenue Code.
ADMINISTRATION
The Board of Directors of the Company has delegated the administration of
the Plan to the Human Resources Committee of the Board. The Board of Directors
has the full power and authority to take any action that may be taken by the
Human Resources Committee under the Plan. As used below in this discussion of
the Plan, the term "Board of Directors" includes the Human Resources Committee
acting under such delegated authority.
OFFERINGS
The Board of Directors may grant rights from time to time to eligible
employees of the Company to purchase Common Stock pursuant to an offering.
Each offering will have a duration not exceeding 27 months and may contain
multiple purchase periods. No shares of Common Stock have yet been purchased
under the Plan.
STOCK SUBJECT TO PLAN
An aggregate of 1,000,000 shares of Common Stock have been authorized for
issuance under the Plan. If rights granted under the Plan expire, lapse or
otherwise terminate without being exercised, the shares of Common Stock not
purchased under such rights again become available for issuance under the
Plan.
ELIGIBILITY
Any person who is customarily employed by the Company at least 20 hours per
week and five months per calendar year as of the first day of an offering
period under the Plan is eligible to participate in that offering, provided
that such employee has been in the continuous employ of the Company for a
minimum period of time, as determined by the Board of Directors, preceding the
first day of the offering period. The required period of continuous employment
must be shorter than two years. The Board of Directors may provide that an
employee who becomes eligible during the course of an offering may participate
in that offering. Employees who have received options to purchase Common Stock
under the Company's 1997 Stock Option Plan are not currently eligible to
participate in the Plan.
An employee is not eligible for the grant of any rights under the Plan if,
immediately after such grant, the employee would own stock constituting 5% or
more of the total combined voting power or value of all classes of stock of
the Company or of any affiliate of the Company. In addition, an employee will
not be granted rights to
15
<PAGE>
buy more than $25,000 worth of Common Stock (determined at the fair market
value of the shares at the time such rights are granted) under all employee
stock purchase plans of the Company in any calendar year. At January 1, 1998,
3,686 employees of the Company were eligible to participate in the Plan.
PARTICIPATION IN THE PLAN; PAYROLL DEDUCTIONS
An eligible employee becomes a participant in the Plan by delivering a
participation agreement to the Company within the time specified in the
offering. The participation agreement contains an authorization from the
employee to the Company to make payroll deductions up to a maximum percentage,
as specified by the Board of Directors, of such employee's compensation during
that offering. The payroll deductions made for each employee are credited to
an account for such employee under the Plan and deposited with the general
funds of the Company. A participant may increase, reduce or commence payroll
deductions after the beginning of any offering period only as provided for in
such offering. The accumulated payroll deductions are applied to the purchase
of shares of Common Stock on each purchase date.
PURCHASE PRICE
The purchase price per share for shares sold in an offering under the Plan
cannot be less than 85% of the fair market value of a share of the Common
Stock on the date of commencement of the offering or 85% of the fair market
value of a share of the Common Stock on the date of purchase, whichever is
lower.
WITHDRAWAL; TERMINATION OF EMPLOYMENT
A participant may withdraw from a given offering by delivering to the
Company a notice of withdrawal at any time before the end of the applicable
offering period. Upon a withdrawal from an offering, the Company will
distribute all of a participant's accumulated payroll deductions under the
offering, to the extent they have not been used to acquire shares of Common
Stock for the participant, without interest, and the participant's right to
acquire Common Stock under that offering will be automatically terminated. An
employee is eligible to participate in subsequent offerings under the Plan
after withdrawing from an offering.
Rights granted pursuant to any offering under the Plan terminate immediately
when an employee's employment ceases for any reason. Upon termination of an
employee's interest in an offering following a termination of employment, the
Company will distribute to the employee all of the employee's accumulated
payroll deductions, to the extent they have not been used to acquire shares of
Common Stock for such employee, without interest.
DURATION, AMENDMENT AND TERMINATION
The Board of Directors may suspend, terminate or amend the Plan at any time.
Any amendment of the Plan must be approved by the stockholders of the Company
within 12 months of the adoption of such amendment by the Board of Directors,
if stockholder approval is required in order for the Plan to obtain employee
stock purchase plan treatment under Section 423 of the Internal Revenue Code
or to comply with the requirements of Rule 16b-3 under the Securities Exchange
Act of 1934 or any stock exchange listing requirements.
EFFECT OF CERTAIN CORPORATE EVENTS
In the event of a dissolution or liquidation of the Company, certain mergers
involving the Company, or the acquisition of securities of the Company
representing 50% or more of the voting power entitled to vote in the election
of directors, the Board of Directors may in its discretion determine that (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those outstanding under the Plan, (ii) the outstanding rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described and the participants' rights under any ongoing offering
be terminated.
16
<PAGE>
FEDERAL INCOME TAX INFORMATION
Rights granted under the Plan are intended to qualify for favorable federal
income tax treatment associated with rights granted under an employee stock
purchase plan which are qualified under the provisions of Section 423 of the
Internal Revenue Code.
A participant will be taxed on amounts withheld for the purchase of shares
as if such amounts were actually received. No other income with respect to the
shares purchased will be taxable to a participant until disposition of the
shares acquired, and the method of taxation will depend on the holding period
of the purchased shares.
If the shares purchased in an offering are sold or otherwise disposed of
more than two years after the beginning of the offering and more than one year
after the stock was transferred to the participant, then (i) the excess of the
fair market value of the shares at the time of such disposition over the
purchase price or (ii) the excess of the fair market value of the shares as of
the beginning of the offering over the purchase price (determined as of the
beginning of the offering), whichever is less, will be treated as ordinary
income. Any further gain or any loss will be taxed as capital gain or loss.
If the shares are sold or disposed of before the expiration of either of the
holding periods described above, then the excess of the fair market value of
the shares on the purchase date over the purchase price will be treated as
ordinary income at the time of such disposition, and the Company may, in the
future, be required to withhold income taxes relating to such ordinary income
from other payments made to the participant. The balance of any gain will be
treated as a capital gain. Even if the shares are later disposed of for less
than their fair market value on the purchase date, the same amount of ordinary
income is attributed to the participant, and a capital loss is recognized
equal to the difference between the sales price and the fair market value of
the stock on such purchase date. Any capital gain or loss will be long-term,
mid-term or short-term depending on how long the shares were held.
There are no federal income tax consequences to the Company by reason of the
grant or the exercise of rights (i.e., purchase of stock) under the Plan. The
Company is entitled to a deduction to the extent amounts are taxed as ordinary
income to a participant by reason of a disposition before the expiration of
the holding periods described above (subject to the requirement of
reasonableness and a tax reporting obligation).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
ADOPTION OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors, adopting the recommendation of the Audit Committee,
has appointed the certified public accounting firm of Ernst & Young LLP as the
Company's independent auditors for the year ending December 31, 1998, subject
to ratification by the stockholders at the Annual Meeting. Representatives of
the firm are expected to attend the Annual Meeting to answer appropriate
questions and, if they desire, to make a statement. Ernst & Young LLP has
served as the Company's independent auditors since 1984.
If the appointment of Ernst & Young LLP is not ratified by a majority of the
votes cast at the Annual Meeting, or if Ernst & Young LLP declines or is
incapable of acting, the appointment of independent auditors will be submitted
to the Board of Directors for reconsideration.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR
1998.
17
<PAGE>
OTHER PROPOSED ACTION
The Company knows of no business to come before the Annual Meeting other
than the matters described above. Should any other business properly come
before the Annual Meeting, stockholders' proxies will be voted in accordance
with the judgment of the person or persons voting the proxies.
STOCKHOLDER PROPOSALS
Any stockholder may submit a proposal for consideration at an annual
meeting. To be included in next year's Proxy Statement, stockholder proposals
for the 1999 Annual Meeting must be received in writing by November 27, 1998
by the Secretary, Providian Financial Corporation, 201 Mission Street, San
Francisco, CA 94105. The Board of Directors will decide, subject to the rules
of the Securities and Exchange Commission, whether such proposals are to be
included in the proxy and Proxy Statement.
Stockholders also may recommend candidates for directors. The Human
Resources Committee of the Board of Directors, which serves as the nominating
committee for the Board in recommending nominations for directors of the
Company, will consider such recommendations for the 1999 Annual Meeting and
subsequent annual meetings. To be considered by the Human Resources Committee,
recommendations for directors to be elected in any year must be submitted in
writing no later than October 31 of the prior year to the Human Resources
Committee, c/o Secretary, Providian Financial Corporation, 201 Mission Street,
San Francisco, CA 94105.
In addition to the requirements described in the preceding paragraphs, the
Company's By-laws impose notice requirements on a stockholder nominating a
director or submitting a proposal for consideration at an annual meeting. Such
notice requirements apply even if the stockholder does not desire to have his
or her nomination or proposal included in the Company's Proxy Statement. In
order for a nomination or proposal to be considered at an annual meeting,
notice thereof must be submitted to the Secretary of the Company not earlier
than the close of business on the 120th day, nor later than the close of
business on the 90th day, prior to the first anniversary of the preceding
year's annual meeting. If the date of the annual meeting is more than 30 days
before, or more than 60 days after, such anniversary date, notice by the
stockholder to be timely must be so delivered not earlier than the close of
business on the 120th day prior to such annual meeting nor later than the
close of business on the later of the 90th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of
such meeting is first made by the Company. Such stockholder's notice must
contain the information prescribed by the By-laws, copies of which are
available from the Secretary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than
10% of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of the Common Stock and other equity securities of the
Company. Executive officers, directors and greater than 10% stockholders are
required by Securities and Exchange Commission regulations to furnish the
Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and on written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% stockholders were complied with for
the Company's 1997 fiscal year.
18
<PAGE>
ANNUAL REPORT ON FORM 10-K
The Company has provided a copy of its 1997 Annual Report to each person
whose proxy is being solicited. The Company will provide, without charge,
copies of its Annual Report on Form 10-K for the year ended December 31, 1997
(including any financial statements and schedules, and a list describing any
exhibits not contained therein) upon written request addressed to:
Providian Financial Corporation
Investor Relations Department
201 Mission Street
San Francisco, CA 94105
The exhibits to the Annual Report on Form 10-K are available upon written
request and payment of charges which approximate the Company's cost of
reproduction.
19
<PAGE>
[RECYCLED LOGO]
Printed on Recycled Paper
<PAGE>
PROVIDIAN FINANCIAL CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
Adopted August 7, 1997
Approved by the Stockholders on [___________, 1998]
1. Purpose.
(a) The purpose of this 1997 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of Providian Financial Corporation, a
Delaware corporation (the "Company"), and its Affiliates, as defined in
subparagraph 1(b), which are designated as provided in subparagraph 2(b), may be
given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Human Resources Committee (the
"Committee") of the Board of Directors (the "Board") of the Company. The
Committee shall have, in connection with the administration of the Plan, all
powers possessed by the Board, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. Notwithstanding anything to the foregoing, the Board shall
have full power and authority to take any action that may be taken by the
Committee hereunder.
(b) The Board or the Committee shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which
need not be identical).
<PAGE>
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board or the Committee, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan, in a manner
and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent
that the Plan be treated as an "employee stock purchase plan" within the
meaning of Section 423 of the Code.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate one million (1,000,000) shares of the
Company's common stock (the "Common Stock"). If any right granted under the Plan
shall for any reason terminate without having been exercised, the Common Stock
not purchased under such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be equal to or greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
<PAGE>
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that
Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board or
the Committee may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding twenty percent (20%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
<PAGE>
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company
intended to comply with Section 401(k), Section 402(e)(3), Section 125, Section
402(h), or Section 403(b) of the Code, and also including any deferrals under a
non-qualified deferred compensation plan or arrangement established by the
Company), and may include, if determined by the Board or the Committee and set
forth in the terms of the Offering, all of the following items of compensation:
bonuses, commissions, overtime pay, incentive pay, profit sharing, or other
remuneration (excluding fringe benefits) paid directly to the employee.
Notwithstanding the foregoing, Earnings shall not include the cost of employee
benefits paid for by the Company or an Affiliate, education or tuition
reimbursements, imputed income arising under any group insurance or benefit
program, traveling expenses, business and moving expense reimbursements, income
received in connection with stock options, contributions made by the Company or
an Affiliate under any employee benefit plan, and similar items of compensation,
as determined by the Board or the Committee. The payroll deductions made for
each participant shall be credited to an account for such participant under the
Plan and shall be deposited with the general funds of the Company. A participant
may reduce (including to zero) or increase such payroll deductions, and an
eligible employee may begin such payroll deductions, after the beginning of any
Offering only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated. A
<PAGE>
participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. Exercise.
(a) On each Purchase Date specified in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. Unless
otherwise provided for in the applicable Offering, no fractional shares shall be
issued upon the exercise of rights granted under the Plan. The amount, if any,
of accumulated payroll deductions remaining in each participant's account after
the purchase of shares which is less than the amount required to purchase one
share of stock on the final Purchase Date of an Offering shall be held in each
such participant's account for the purchase of shares under the next Offering
under the Plan, unless such participant withdraws from such next Offering, as
provided in subparagraph 7(b), or is no longer eligible to be granted rights
under the Plan, as provided in paragraph 5, in which case such amount shall be
distributed to the participant after such final Purchase Date, without interest.
The amount, if any, of accumulated payroll deductions remaining in any
participant's account on the final Purchase Date of an Offering after the
purchase of shares which is equal to or in excess of the value of one whole
share of common stock shall be distributed in full to the participant after such
Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company
<PAGE>
shall at all times keep available as authorized but unissued shares that number
of shares of stock required to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).
12. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) the acquisition by any person,
entity or group within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then, as determined by the Board in its
sole discretion (i) any surviving or acquiring corporation may assume
outstanding rights or substitute similar rights for those under the Plan, (ii)
such rights may continue in full force and effect, or (iii) participants'
accumulated payroll deductions may be used to purchase Common Stock immediately
prior to the transaction described above and the participants' rights under the
ongoing Offering terminated.
<PAGE>
13. Amendment of the Plan.
(a) The Board or the Committee at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment if such amendment requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.
(b) The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(c) Rights and obligations under any rights granted before amendment of the
Plan shall not be altered or impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. Termination or Suspension of the Plan.
(a) The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. Effective Date of Plan.
<PAGE>
The Plan shall become effective upon adoption by the Board (the "Effective
Date"), but no rights granted under the Plan shall be exercised unless and until
the Plan has been approved by the stockholders of the Company within twelve (12)
months before or after the date the Plan is adopted by the Board, which date may
be prior to the Effective Date.
<PAGE>
P PROVIDIAN FINANCIAL CORPORATION
201 MISSION STREET
SAN FRANCISCO, CALIFORNIA 94105
R
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O The undersigned hereby appoints John M. Cranor III, Larry D. Thompson
and John L. Weinberg, and each of them, proxies with full power of
substitution to vote all shares of Common Stock which the undersigned
X would be entitled to vote at the Annual Meeting of Providian Financial
Corporation (the "Company") to be held at 10:00 a.m., Pacific Time, on
Wednesday, May 6, 1998, and any adjournments or postponements thereof,
Y upon the matters set forth below and any other business that may
properly come before the meeting.
1. Election of Three Directors. Nominees for directors are James V.
Elliott, Lyle Everingham and J. David Grissom.
2. Approval of the Adoption of the 1997 Employee Stock Purchase Plan.
3. Ratification of the Appointment of Ernst & Young LLP as Independent
Auditors.
[SEE REVERSE SIDE
STAMP APPEARS HERE}
[FOLD AND DETACH HERE]
[PROVIDIAN FINANCIAL LOGO APPEARS HERE]
PROVIDIAN FINANCIAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
DATE: MAY 6, 1998
TIME: 10:00 a.m.
PLACE: MANDARIN ORIENTAL HOTEL
222 SANSOME STREET
SAN FRANCISCO, CALIFORNIA 94104
<PAGE>
[X] Please mark your votes
as in this example
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS
- --------------------------------------------------------------------------------
The Board of Directors Recommends a Vote FOR All Proposals
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR WITHHELD FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
<S> <C> <C>
1. Election of 2. Approval of 3. Ratification of
Directors the Adoption Appointment of
of the 1997 Independent
Employee Stock Auditors
For all, except: Purchase Plan
- --------------------------
</TABLE>
- --------------------------------------------------------------------------------
Please sign exactly as name appears
hereon. Joint owners should each
sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as
such.
------------------------
------------------------
SIGNATURE(S) DATE
[PLEASE DETACH HERE. COMPLETE, SIGN AND RETURN CARD.]
[PROVIDIAN FINANCIAL LOGO APPEARS HERE]
