UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION

Transcription

1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION In re PROVIDIAN FINANCIAL CORP. SECURITIES ) Master File No. C CRB LITIGATION ) ) ) This Document Relates to: All Actions ) ) NOTICE OF PROPOSED SETTLEMENT OF CLASS ACTION, MOTION FOR ATTORNEYS FEES AND REIMBURSEMENT OF EXPENSES AND SETTLEMENT FAIRNESS HEARING If you purchased or otherwise acquired the common stock of Providian Financial Corporation ( Providian ) during the period from June 6, 2001 through and including October 18, 2001, you may be entitled to a payment from a class action settlement. A federal court authorized this notice. This is not a solicitation from a lawyer. The settlement will provide $65 million in cash to pay claims on behalf of investors who purchased or otherwise acquired Providian common stock during the period from June 6, 2001 through and including October 18, The settlement resolves lawsuits over whether Providian misled investors about its current financial condition and future prospects by allegedly making false and misleading statements to securities analysts and public statements contained in its press releases and financial statements filed with the Securities and Exchange Commission in alleged violation of certain federal securities laws. Providian denies these allegations. Your legal rights are affected whether you act, or do not act. Read this notice carefully. YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT: SUBMIT A CLAIM FORM The only way to get a payment. OBJECT Write to the Court about why you don t like the settlement. GO TO A HEARING Ask to speak in Court about the fairness of the settlement. DO NOTHING Get no payment. Give up rights. These rights and options and the deadlines to exercise them are explained in this notice. The Court in charge of this case still has to decide whether to approve the settlement. Payments will be made if the Court approves the settlement and after appeals are resolved. Please be patient. Statement of Plaintiff Recovery SUMMARY NOTICE Pursuant to the settlement described herein, a Gross Settlement Fund consisting of $65 million in cash, plus accrued interest, has been established. Lead Plaintiff estimates that there were approximately 230 million shares of Providian common stock traded during the Class Period that are entitled to participate in the settlement. Lead Plaintiff estimates that the average recovery per share of Providian common stock entitled to participate in the settlement is approximately $.28 per share before deduction of Court-awarded attorneys fees and expenses. The number of claimants who send in a Proof of Claim and Release varies widely from case to case. If less than 100% of the Class sends in a claim form, you could be eligible to get more money. Depending on the number of claims submitted, when during the Class Period a Class Member purchased or acquired his or her shares of Providian common stock and whether those shares were held at the end of the Class Period or sold during the Class Period, and if sold, when they were sold, an individual Class Member may receive more or less money than this average amount. For purposes of the Settlement herein, a Class Member s distribution from the Net Settlement Fund will be governed by the proposed Plan of Allocation described below at pages 5-6, or such other Plan of Allocation as may be approved by the Court. Statement of Potential Outcome of Case The parties disagree on both liability and damages and do not agree on the average amount of damages per share that would be recoverable if Lead Plaintiff and the Class were to have prevailed on each claim alleged. Defendants deny that they are liable to Lead Plaintiff or the Class and deny that Lead Plaintiff or the Class have suffered any damages.

2 The issues on which the parties disagree include: (a) the appropriate economic model for determining the amount by which Providian common stock was allegedly artificially inflated (if at all) during the Class Period; (b) the amount by which Providian common stock was allegedly inflated (if at all) during the Class Period; (c) the effect of various market forces influencing the trading price of Providian common stock at various times during the Class Period; (d) the extent to which external factors, such as general market and industry conditions, influenced the trading price of Providian common stock at various times during the Class Period; (e) the extent to which the various matters that Lead Plaintiff alleged were materially false or misleading influenced (if at all) the trading price of Providian common stock at various times during the Class Period; (f) the extent to which the various allegedly adverse material facts that Lead Plaintiff alleged were omitted influenced (if at all) the trading price of Providian common stock at various times during the Class Period; (g) whether Defendants made any false or misleading statements; (h) whether Defendants omitted to state any material facts necessary to prevent any prior statements from becoming false and misleading; and (i) whether the statements made or facts allegedly omitted were material or otherwise actionable under the federal securities laws. Statement of Attorneys Fees and Costs Sought Plaintiffs Lead Counsel are moving the Court to award attorneys fees not to exceed fourteen percent (14%) of the Gross Settlement Fund, and for reimbursement of expenses incurred in connection with the prosecution of these Actions in an amount not to exceed $2,000,000, plus accrued interest, which includes a request on behalf of Lead Plaintiff for an award of expenses and lost wages. The requested fees and expenses could amount to an average of approximately $.05 per share entitled to participate in the settlement, thus making the expected net average per share recovery to Class Members $.23 per share. Plaintiffs Counsel have expended considerable time and effort in the prosecution of this litigation on a contingent fee basis, and they have advanced the expenses of the litigation in the expectation that, if they were successful in obtaining a recovery for the Class, they would be paid from such recovery. In this type of litigation, it is customary for counsel to be awarded a percentage of the common fund recovery as their attorneys fees. Defendants Statement and Denials of Wrongdoing & Liability Defendants have denied and continue to deny the claims made by Lead Plaintiff, and Defendants deny all charges of wrongdoing or liability against them arising out of any of the conduct, statements, acts or omissions alleged in the Action. Defendants also deny that Lead Plaintiff or the Class has suffered damage, that the price of Providian common stock was artificially inflated by reason of any misrepresentation or that Lead Plaintiff or any Class Member was harmed by any of the conduct alleged in the Action. Nonetheless, Defendants have concluded that further conduct of the Action would be expensive, and that it is desirable to settle the action fully and finally, in order to limit further expense, inconvenience and distraction. Defendants also have taken into account the uncertainty and risks of litigation, especially in complex cases like these. Defendants have, therefore, determined that it is desirable and beneficial to them to settle the Action on the terms and conditions contained in the Stipulation. Further Information Further information regarding the Action and this Notice may be obtained by contacting Plaintiffs Lead Counsel: Martin D. Chitwood, Esq., Stuart J. Guber, Esq., Chitwood & Harley, LLP, 2300 Promenade II, 1230 Peachtree Street, NE, Atlanta, Georgia 30309, Telephone (404) You can also inspect the Stipulation and other documents filed in this Action at the Office of the Clerk of the District Court, 450 Golden Gate Avenue, San Francisco, California during normal business hours. Reasons for the Settlement The principal reason for the settlement from Lead Plaintiff s perspective is the benefit to be provided to the Class now. This benefit must be compared to the risk that no recovery might be achieved after a contested trial and likely appeals, possibly years into the future. Plaintiffs Lead Counsel also believe this settlement provides an excellent recovery in this case because of facts learned in the course of the litigation. Among other things, Plaintiffs Lead Counsel learned that Defendants have several defenses that, if believed by a jury, could have resulted in no recovery or in a reduced recovery to the Class. Defendants, for example, produced evidence that their external auditor gave Providian guidance that Providian s financial statements were prepared in accordance with Generally Accepted Accounting Principles and that there were no material misstatements contained within Providian s financial statements. If this reason was believed by the jury, the jury could have determined that Defendants justifiably relied on the advice of their external auditor and therefore, there was no material misstatement or omission issued during the Class Period. Defendants also claim that the reasons for the drop in the price of Providian common stock were due to reasons unrelated to the fraud alleged by the Class and thus that damages are not recoverable. Additionally, Defendants claim that the reason that Providian was unable to achieve its previously issued earnings guidance was due to adverse effects that the events of September 11, 2001 had on the economy, in general. 2

3 WHAT THIS NOTICE CONTAINS BASIC INFORMATION PAGE 4 1. Why did I get this notice package? 2. What is this lawsuit about? 3. Why is this a class action? 4. Why is there a settlement? WHO IS IN THE SETTLEMENT..PAGE 4 5. How do I know if I am part of the settlement? 6. Are there exceptions to being included? 7. I m still not sure if I am included? THE SETTLEMENT BENEFITS WHAT YOU GET..PAGE 5 8. What does the settlement provide? 9. How much will my payment be? a. The Plan of Allocation HOW YOU GET A PAYMENT SUBMITTING A CLAIM FORM.PAGE How can I get a payment? 11. When would I get my payment? 12. What am I giving up to get a payment or stay in the Class? EXCLUDING YOURSELF FROM THE SETTLEMENT..PAGE What if I previously excluded myself from the Settlement? THE LAWYERS REPRESENTING YOU..PAGE Do I have a lawyer in this case? 15. How will the lawyers be paid? OBJECTING TO THE SETTLEMENT. THE MOTION FOR AN AWARED OF ATTORNEYS FEES AND REIMBURSEMENT OF EXPENSES, AND THE PLAN OF ALLOCATION PAGE How do I tell the Court that I don t like the settlement, the amount of attorneys fees and expenses requested and the plan of allocation? 17. What s the difference between objecting and excluding? THE COURT S FAIRNESS HEARING PAGE When and where will the Court decide whether to approve the settlement, the motion for an award of attorneys fees and reimbursement of expenses, and the plan of allocation? 19. Do I have to come to the hearing? 20. May I speak at the hearing? IF YOU DO NOTHING.PAGE What happens if I do nothing? GETTING MORE INFORMATION PAGE Are there more details about the settlement? 23. How do I get more information? NOTICE TO BANKS, BROKERS AND OTHER NOMINEES.PAGE 10 3

4 BASIC INFORMATION 1. Why did I get this notice package? You or someone in your family or an entity you represent may have purchased Providian common stock during the period from June 6, 2001 through and including October 18, If you or someone in your family or an entity you represent did purchase Providian common stock during this period, you are a member of the Class. The Court directed that this Settlement Notice be sent to you because you have a right to know about a proposed settlement of a class action lawsuit, and about all of your options, before the Court decides whether to approve the settlement. If the Court approves it and after objections and appeals are resolved, an administrator appointed by the Court will make the payments that the settlement allows. This package explains the lawsuit, the settlement, your legal rights, what benefits are available, who is eligible for them, and how to get them. The Court in charge of the case is the United States District Court for the Northern District of California, San Francisco Division, and the case is known as In re Providian Financial Corp. Securities Litigation, No. C CRB. The people who sued are called the Plaintiffs, and the Company and the persons that were sued, Providian Financial Corp., David Alvarez, Shailesh J. Mehta, James Rowe and David J. Petrini 1, are called the Defendants. Mssrs. Alvarez, Mehta, Rowe and Petrini are the Individual Defendants. 2. What is this lawsuit about? Providian is engaged in the business of lending money to people through the issuance of credit cards. The lawsuit claimed that Providian misled investors about its current financial condition and future prospects by making false and misleading statements to securities analysts and in its press releases and financial statements filed with the Securities and Exchange Commission, in alleged violation of the federal securities laws. Defendants deny they did anything wrong. The Court did not decide which side was right. But both sides agreed to the settlement to ensure a resolution and to provide benefits to Class Members. 3. Why is this a class action? In a class action, one or more people called Class Representatives (in this case Retirement Systems of Alabama, the Lead Plaintiff), sue on behalf of people who have similar claims. All these people are a Class or Class Members. One court resolves the issues for all Class Members, except for those who timely and validly exclude themselves from the Class. This case was assigned to Judge Charles R. Breyer of the United States District Court for the Northern District of California, San Francisco Division. 4. Why is there a settlement? The Court did not decide in favor of Lead Plaintiff or Defendants. Instead, both sides agreed to a settlement. That way, they avoid the risks and cost of a trial, and the people affected will get compensation. The Class Representative and the attorneys support the settlement, believe it is fair and reasonable given the risks involved in this complex litigation and believe that the settlement is in the best interests of the Class. WHO IS IN THE SETTLEMENT To see if you will get money from this settlement, you first have to decide if you are a Class Member. 5. How do I know if I am part of the settlement? The Court decided that everyone who fits this description is a Class Member: all persons who purchased or otherwise acquired Providian common stock during the period from June 6, 2001 through and including October 18, Are there exceptions to being included? You are not a Class Member if you are one of the following: (i) Defendants; (ii) members of the immediate families of each Individual Defendant; (iii) any entity in which any Defendant has or had a controlling interest; (iv) any person who was an officer or director of Providian or its subsidiaries or affiliates during the Class Period including members of the immediate families of such persons; (v) the legal representatives, heirs, successors or assigns of any such excluded party; and (vi) you previously excluded yourself or opted out of the Class by filing a timely and valid request for exclusion. 1 Plaintiffs also sued David Alvarez, but the Court dismissed Mr. Alvarez from the suit pursuant to Mr. Alvarez s motion for summary judgment. 4

5 If one of your mutual funds own Providian common stock, that alone does not make you a Class Member. You are a Class Member only if you purchased Providian common stock individually. Feel free to contact your broker to see if you have or held Providian common stock. If you sold Providian common stock during the period from June 6, 2001 through and including October 18, 2001, that alone does not make you a Class Member. You are a Class Member only if you bought or otherwise acquired Providian common stock during the period from June 6, 2001 through and including October 18, I m still not sure if I am included? If you are still not sure whether you are included, you can ask for free help. You can call or visit for more information. Or you can fill out and return the claim form described in the answer to question 10, to see if you qualify. 8. What does the settlement provide? THE SETTLEMENT BENEFITS WHAT YOU GET Defendants agreed to create a $65 million cash fund (the Gross Settlement Fund ) to be divided among Class Members who send in a valid claim form. A portion of the funds will be used for certain administrative expenses. 9. How much will my payment be? Your share of the fund will depend on the number of valid claim forms that Class Members send in, how many shares of Providian common stock you bought, and when you bought and sold them. The proposed Plan of Allocation is set forth below. Please also see the Statement of Plaintiff Recovery in the Summary Notice section of this Settlement Notice for more information about your potential payment. By following the instructions set forth in the Plan of Allocation below, you can calculate what is called your Recognized Claim. It is unlikely that you will get a payment for all of your Recognized Claim. After all Class Members have sent in their claim forms, the payment you get will be a part of the Net Settlement Fund equal to your Recognized Claim divided by the total of everyone s Recognized Claim. See the Plan of Allocation below. a. Plan of Allocation The $65 million in cash and the interest earned thereon shall be the Gross Settlement Fund. The Gross Settlement Fund, less all taxes, approved costs, fees and expenses (the Net Settlement Fund ) shall be distributed to members of the Class who submit an acceptable Proof of Claim and Release ( Authorized Claimants ). The Claims Administrator shall determine each Authorized Claimant s pro rata share of the Net Settlement Fund based upon each Authorized Claimant s Recognized Claim. The Recognized Claim formula is not intended to be an estimate of the amount of what a Class Member might have been able to recover after a trial; nor is it an estimate of the amount that will be paid to Authorized Claimants pursuant to the settlement. The Recognized Claim formula is the basis upon which the Net Settlement Fund will be proportionately allocated to the Authorized Claimants. The Recognized Claim will be calculated using the first in first out ( FIFO ) methodology. In utilizing the FIFO methodology, sales of Providian common stock during the Class Period will first be matched against shares of Providian common stock purchased or otherwise acquired as of the close of business on June 5, 2001, then against purchases of Providian common stock purchased or otherwise acquired during the Class Period. Pursuant to the FIFO methodology, where shares sold during the Class Period are matched against pre-class period purchases, there will be no effect on an Authorized Claimant s Recognized Claim. Pursuant to the FIFO methodology, where shares sold during the Class Period are matched against Class Period purchases, any gains on sales of Providian common stock during the Class Period will be used to reduce any losses calculated pursuant to the Plan of Allocation. Where the gains exceed the losses pursuant to the Plan of Allocation, the Recognized Claim will be equal to zero. The following Plan of Allocation reflects Plaintiffs contention that the price of Providian common stock was artificially inflated during the Class Period. Claims based on a purchase on or before September 10, 2001 and a sale on or after September 17, 2001 (the stock market was closed between September 11, 2001 and September 17, 2001 due to the events of September 11, 2001) are discounted by $4.30 because the decline in the value of Providian common stock between September 11, 2001 and September 17, 2001 was due to the events of September 11, 2001, and not because of the alleged fraud. (1) For shares of Providian common stock purchased between June 6, 2001 through and including September 10, 2001, and held through the close of business on October 18, 2001, an Authorized Claimant s Recognized Claim shall mean: 5

6 (a) the difference between the purchase price per share and $7.72 per share 2, multiplied by the number of shares purchased between June 6, 2001 through and including September 10, 2001, and held through the close of business on October 18, (2) For shares of Providian common stock purchased between June 6, 2001 through and including September 10, 2001, and sold between June 6, 2001 through and including September 10, 2001, on Authorized Claimant s Recognized Claim shall mean: (a) the difference between the purchase price per share and the sales price per share multiplied by the number of shares purchased between June 6, 2001 through and including September 10, 2001, and sold between June 6, 2001 through and including September 10, (3) For shares of Providian common stock purchased between June 6, 2001 through and including September 10, 2001, and sold between September 17, 2001 through and including October 18, 2001, an Authorized Claimant s Recognized Claim shall mean: (a) the difference between (i) the purchase price per share and (ii) the sales price per share plus $4.30, multiplied by the number of shares purchased between June 6, 2001 through and including September 10, 2001, and sold between September 17, 2001 through and including October 18, (4) For shares of Providian common stock purchased between September 17, 2001 through and including October 18, 2001, and sold between September 17, 2001 through and including October 18, 2001, an Authorized Claimant s Recognized Claim shall mean: (a) the difference between the purchase price per share and the sales price per share multiplied by the number of shares purchased between September 17, 2001 through and including October 18, 2001, and sold between September 17, 2001 through and including October 18, (5) For shares of Providian common stock purchased between September 17, 2001 through and including October 18, 2001, and held through the close of business on October 18, 2001, an Authorized Claimant s Recognized Claim shall mean: (a) the difference between the purchase price per share and $3.42, multiplied by the number of shares purchased between September 17, 2001 through and including October 18, 2001, and held through the close of business on October 18, Each Authorized Claimant shall be allocated a pro rata share of the Net Settlement Fund based on his, her or its Recognized Loss as compared to the total Recognized Claim of all Authorized Claimants. Class Members who do not submit an acceptable Proof of Claim and Release will not share in the settlement proceeds. Class Members who do not submit an acceptable Proof of Claim and Release will nevertheless be bound by the settlement and the Order and Final Judgment of the Court dismissing this Action. Distributions will be made to Authorized Claimants after all claims have been processed and after the Court has finally approved the settlement. If any funds remain in the Net Settlement Fund by reason of un-cashed checks or otherwise, then, after the Claims Administrator has made reasonable and diligent efforts to have Class Members who are entitled to participate in the distribution of the Net Settlement Fund cash their distributions, any balance remaining in the Net Settlement Fund one (1) year after the initial distribution of such funds shall be re-distributed to Class Members who have cashed their initial distributions and who would receive at least $10.00 from such re-distribution, after payment of any unpaid costs or fees incurred in administering the Net Settlement Fund for such re-distribution. If any funds remain in the Net Settlement Fund six months after such re-distribution, then such balance shall be contributed to non-sectarian, notfor-profit, 501(c)(3) organization(s) designated by Plaintiffs Lead Counsel. 2 The $7.72 figure is calculated by taking the $4.30 drop in the price of Providian common stock between September 10, 2001, and September 17, 2001, which was unrelated to the alleged fraud and adding to it the figure of $3.42, which is the average closing price per share of Providian common stock for the 90 calendar days subsequent to the end of the Class Period on October 18, The calculation used to determine the $3.42 figure is consistent with the damages formula set forth in the Private Securities Litigation Reform Act of The figure of $4.30 per share is added to the sales price in determining the calculation. The $4.30 represents the drop in the per share price of Providian common stock during the period September 11, 2001, and the reopening of the market on September 17, 2001, as a result of the events of September 11, 2001, which were unrelated to the fraud. Thus, the calculation is purchase price per share (sales price per share + $4.30) x the number of shares. 6

7 10. How can I get a payment? HOW YOU GET A PAYMENT SUBMITTING A CLAIM FORM To qualify for a payment, you must send in a Proof of Claim and Release. A Proof of Claim and Release is being circulated with this Settlement Notice. You may also get a claim form on the Internet at Read the instructions carefully, fill out the form, include all the documents the form asks for, sign it, and mail it postmarked no later than December 31, When would I get my payment? The Court will hold a hearing on September 24, 2004, to decide whether to approve the settlement. If the Court approves the settlement after that, there may be appeals. It s always uncertain whether these appeals can be resolved, and resolving them can take time, perhaps more than a year. It also takes time for all the Proof of Claim and Release forms to be processed. In addition, some Proof of Claim and Release forms may suffer from a deficiency, and those persons submitting such deficient Proof of Claim and Release forms will be given an opportunity to cure such deficiencies. All of this takes time. Please be patient. 12. What am I giving up to get a payment or stay in the Class? Once the settlement is approved, you will release all Released Claims (as defined below) against the Released Parties (as defined below). In other words, if you are a Class Member, you will be giving up your right to sue the Defendants for any claims arising from your purchase of Providian common stock between June 6, 2001 through and including October 18, It also means that all of the Court s orders will apply to you and legally bind you. Released Claims means any and all claims or causes of action (including Unknown Claims as defined below), demands, rights, liabilities, suits, debts, obligations and causes of action of every nature and description whatsoever, known or unknown, contingent or absolute, mature or unmatured, discoverable or undiscoverable, whether concealed or hidden, asserted or that might have been asserted, by Lead Plaintiff or the Class Members, or any of them, against the Released Parties based upon, arising out of, or related to (a) the purchase of Providian common stock during the Class Period; (b) any of the facts, transactions, events, occurrences, disclosures, statements, acts, omissions or failures to act which were or could have been alleged in or embraced or otherwise referred to or encompassed by the Action, regardless of upon what legal theory based, including, without limitation, claims for negligence, gross negligence, fraud, breach of fiduciary duty, breach of the duty of care and/or loyalty or violations of the common law, administrative rule or regulation, tort, contract, equity, or otherwise or of any state or federal statutes, rules or regulations. Unknown Claims means any Released Claims that Lead Plaintiff or any other Class Member does not know or suspect to exist in his, her, or its favor at the time of the release of the Released Parties which, if known by him, her, or it, might have affected his, her, or its Settlement with and release of the Released Parties, or might have affected his, her, or its decision not to object to this Settlement. With respect to any and all Released Claims against the Released Parties, the Settling Parties stipulate and agree that, upon the Effective Date, Lead Plaintiff shall expressly waive and relinquish, and the other Class Members shall be deemed to have, and by operation of the Judgment shall have expressly waived and relinquished, to the fullest extent permitted by law, the provisions, rights, and benefits conferred by 1542 of the California Civil Code, which provides: A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR and by any law of any state or territory of the United States, or principle of common law, or of international or foreign law, that is similar, comparable or equivalent to 1542 of the California Civil Code. Lead Plaintiff or any other Class Members may hereafter discover facts in addition to or different from those that he, she, or it now knows or believes to be true with respect to the Released Claims, but the Settling Parties hereby stipulate and agree that upon the Effective Date, Lead Plaintiff fully, finally and forever settles and releases, and each of the other Class Members shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever settled and released any and all Released Claims against the Released Parties, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, that now exist, or heretofore have existed, upon any theory of law or equity now existing or coming into existence in the future, including, but not limited to, conduct that is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. Released Parties means each and all of the Defendants and each and any of Defendants respective past, present or future directors, officers, employees, partnerships and partners, principals, agents, controlling shareholders, any entity in which any Defendant and/or any member(s) of that Defendant s immediate family has or have a controlling interest (directly or indirectly), attorneys, accountants, auditors, investment banks and investment bankers, underwriters, advisors, 7

8 financial advisors, personal or legal representatives, analysts, agents, associates, servants, insurers, co-insurers and reinsurers, predecessors, successors, parents, subsidiaries, divisions, assigns, joint ventures and joint venturers, spouses, heirs, executors, administrators, related or affiliated entities, members of an Individual Defendant s immediate family, and any trust of which any Defendant is the settlor or which is for the benefit of any Individual Defendant and/or member(s) of his family, and all other Persons. All of the Court s orders will apply to you and legally bind you. EXCLUDING YOURSELF FROM THE SETTLEMENT When the Court determined that this case could proceed as a class action, a notice was sent out to all members of the Class. At that time, you were given the opportunity of excluding yourself, or opting out of the Class. If you notified the Claims Administrator, Gilardi & Co., LLC, that you did not want to be part of the class action, you are excluded from the settlement. If you did not already send in this notification, you are part of the Class for purposes of this settlement and need to complete the Proof of Claim and Release to receive a distribution from the Net Settlement Fund. It is too late to exclude yourself from the Class now, but you still have the opportunity to object to the Settlement. If you choose to object to the settlement, you need to read pages 8-9 of this Settlement Notice to find out the steps to notify the Court of your objection to the Settlement. 13. What if I previously excluded myself from the Settlement? If you previously excluded yourself from the Settlement, do not send in a claim form to ask for any money. But, you may sue, continue to sue, or be part of a different lawsuit against Providian and the Individual Defendants. 14. Do I have a lawyer in this case? THE LAWYERS REPRESENTING YOU The law firm that represented Lead Plaintiff, Retirement Systems of Alabama, in this litigation and was approved by the Court as Plaintiffs Lead Counsel, Chitwood & Harley, LLP of Atlanta, Georgia, will represent you and the other Class Members. These lawyers are called Plaintiffs Lead Counsel. You will not be charged for these lawyers. If you want to be represented by your own lawyer, you may hire one at your own expense. Plaintiffs Lead Counsel are available to answer questions you may have concerning your Proof of Claim or concerning any notice that you may receive from the claims administrator, after the claims administrator reviews your submission. Please note, Plaintiffs Lead Counsel cannot represent you if you chose to exclude yourself and initiate your own action against Providian and/or the Individual Defendants. 15. How will the lawyers be paid? Plaintiffs Lead Counsel are requesting that the Court award attorneys fees from the Gross Settlement Fund in an amount not greater than fourteen percent (14%) of the Gross Settlement Fund and for reimbursement of expenses (including an award of expenses and lost wages on behalf of Lead Plaintiff) up to a maximum amount of $2,000,000, plus interest at the same rate as earned by the Gross Settlement Fund. Plaintiffs Lead Counsel intend to file a joint petition with the Court on behalf of all Plaintiffs Counsel who were involved in the lawsuit and on behalf of Lead Plaintiff. Plaintiffs Lead Counsel, without further notice to the Class, may subsequently apply to the Court for fees and expenses incurred in connection with administering and distributing the settlement proceeds to the members of the Class and any proceedings subsequent to the Settlement Fairness Hearing. OBJECTING TO THE SETTLEMENT, THE MOTION FOR AN AWARD OF ATTORNEYS FEES AND REIMBURSEMENT OF EXPENSES, AND THE PLAN OF ALLOCATION You can tell the Court that you don t agree with the settlement or some part of it. 16. How do I tell the Court that I don t like the settlement, the amount of attorneys fees and expenses requested, and/or the plan of allocation? If you re a Class Member, you can object to the settlement, the amount of attorneys fees and expenses requested and the plan of allocation. You can give reasons why you think the Court should not approve the settlement, the amount of attorneys fees and expenses requested and/or the plan of allocation. The Court will consider your views. To object, you must send a letter saying that you object to In re Providian Financial Corp. Securities Litigation, No. C CRB. Be sure to include your name, address, telephone number, your signature and the reasons you object. You also must give evidence that you are a Class Member, including the number of shares of Providian common stock you purchased and sold during the Class Period. Mail the objection to these three different places postmarked no later than September 10,

9 COURT Clerk of the Court United States District Court for the Northern District of California, San Francisco Division 450 Golden Gate Avenue San Francisco, California PLAINTIFFS LEAD COUNSEL Martin D. Chitwood, Esq. Stuart J. Guber, Esq. Chitwood & Harley, LLP 2300 Promenade II 1230 Peachtree Street, NE Atlanta, Georgia DEFENDANTS COUNSEL Jordan Eth, Esq. Morrison & Foerster, LLP 425 Market Street San Francisco, California What s the difference between objecting and excluding? Objecting is simply telling the Court that you don t like something about the settlement, the amount of attorneys fees and expenses requested and/or the plan of allocation. You can object only if you stay in the Class. Excluding yourself is telling the Court that you don t want to be part of the Class. If you have already excluded yourself, you have no basis to object because the case no longer affects you. THE COURT S FAIRNESS HEARING The Court will hold a hearing to decide whether to approve the settlement, the plan of allocation and to determine the amount of attorneys fees and expenses to be awarded. You may attend and you may ask to speak, but you don t have to do either. 18. When and where will the Court decide whether to approve the settlement? The Court will hold a Fairness Hearing at 10:00 a.m. on September 24, 2004, at the United States District Court for the Northern District of California, San Francisco Division, 450 Golden Gate Avenue, San Francisco, California At this hearing, the Court will consider whether the settlement is fair, reasonable and adequate, whether to approve the plan of allocation, whether to dismiss the Action with prejudice, and determine the amount of attorneys fees and expenses to be awarded. If there are objections, the Court will consider them. The Court will listen to people who have asked to speak at the hearing. After the hearing, the Court will make these decisions. We do not know how long these decisions will take. 19. Do I have to come to the hearing? No. Plaintiffs Lead Counsel will answer questions the Court may have. But, you are welcome to come at your own expense or have your own attorney appear on your behalf. If you send an objection, you don t have to come to Court to talk about it. As long as you mailed your written objection on time, the Court will consider it. You may also pay your own lawyer to attend, but it s not necessary. 20. May I speak at the hearing? You may ask the Court for permission to speak at the Settlement Fairness Hearing. To do so, you must send a letter saying that it is your Notice of Intention to Appear in In re Providian Financial Corp. Securities Litigation, No. C CRB. Be sure to include your name, address, telephone number, and your signature. Your Notice of Intention to Appear must be postmarked no later than September 10, 2004, and be sent to the Clerk of the Court, Plaintiffs Lead Counsel, and Defendants Counsel, at the three addresses listed in the answer to question 16. You cannot speak at the hearing if you have already excluded yourself. 21. What happens if I do nothing at all? IF YOU DO NOTHING If you do nothing, you ll get no money from this settlement. But, unless you have already excluded yourself, you won t be able to start a lawsuit, continue with a lawsuit, or be part of any other lawsuit against Providian or the Individual Defendants about the legal issues in this case, ever again. 22. Are there more details about the settlement? GETTING MORE INFORMATION This notice summarizes the proposed settlement. More details are contained in a Stipulation and Agreement of Settlement dated July 20, 2004 (the Stipulation ). You can get a copy of the Stipulation by visiting or by writing to Martin D. Chitwood, Esq., or Stuart J. Guber, Esq., Chitwood & Harley, LLP, 2300 Promenade II, 1230 Peachtree Street, NE, Atlanta, Georgia

10 23. How do I get more information? For even more detailed information concerning the matters involved in this Action, reference is made to the pleadings, to the Stipulation, to the Orders entered by the Court and to the other papers filed in the Action, which may be inspected at the Office of the Clerk of the United States District Court for the Northern District of California, San Francisco Division, 450 Golden Gate Avenue, San Francisco, California during regular business hours. You can also call the claims administrator, Gilardi & Co., LLC, toll free at or visit where you will find answers to common questions about the settlement, a Proof of Claim and Release, plus other information to help you determine whether you are a Class Member and whether you are eligible for a payment. Plaintiffs Lead Counsel are available to answer questions you may have concerning your Proof of Claim and Release or concerning any notice that you may receive from the claims administrator, after the claims administrator reviews your submission. NOTICE TO BANKS, BROKERS AND OTHER NOMINEES Pursuant to an order of the Court, each bank, brokerage firm and other nominee who purchased Providian common stock during the Class Period for a beneficial owner is requested within ten days to forward by first class mail to such persons a copy of this Notice and a copy of the Proof of Claim and Release form enclosed herewith. Additional copies may be obtained, without charge, by written request to Providian Securities Litigation, c/o Gilardi & Co., at the following address: In re Providian Financial Corp. Securities Litigation c/o Gilardi & Co. LLC Claims Administrator Post Office Box 990 Corte Madera, California Alternatively, nominees may provide the names and addresses of persons for whom they purchased Providian common stock during the Class Period to Providian Securities Litigation, c/o Gilardi & Co. who, in turn, will mail the notices and Proof of Claim and Release forms. The Settlement Fund will reimburse all such nominees for reasonable administrative costs incurred in providing the Notice and Proof of Claim and Release forms to beneficial owners, upon submission of appropriate documentation. 10