<PAGE>
Filed Pursuant to Rule 424(b)(5)
File No. 333-55937
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 14, 1999
$1,000,000,000
[LOGO OF PROVIDIAN FINANCIAL]
Providian Financial Corporation
Medium-Term Notes, Series A
Due 9 Months or More from Date of Issue
We plan to offer and sell notes with various terms, which may include the
following:
. Either senior notes or subordinated notes
. Interest at fixed or floating rates, or no interest at all. The floating
interest rate may be based on one or more of the following indices, plus or
minus a spread and/or spread multiplier:
. CD Rate
. CMT Rate
. Commercial Paper Rate
. Eleventh District Cost of Funds Rate
. Federal Funds Rate
. LIBOR
. Prime Rate
. Treasury Rate
. Any other rate specified by us inthe pricing supplement
. Any combination of rates specified by us in the pricing supplement
. A currency in which the notes will be denominated, which may be U.S. dollars
or any foreign currency
. An interest payment date or dates (the interest payment dates for fixed rate
notes will be April 1 and October 1 of each year, unless otherwise specified
in the applicable pricing supplement)
. Book-entry (through The Depository Trust Company) or certificated form in
minimum denominations of U.S. $1,000 increased in multiples of $1,000 or
other specified denominations for foreign currencies
. Redemption and/or repayment provisions, whether mandatory or at our option
or the option of the holder
We will specify the final terms for each note, which may be different from the
terms described in this prospectus supplement, in the applicable pricing
supplement.
Holders of subordinated notes may not accelerate the maturity of the
subordinated notes except upon our bankruptcy or insolvency.
-------------------------------------------------
Investing in the notes involves certain risks. See "Risk Factors" on page S-3.
-------------------------------------------------
The notes are not savings accounts, deposits or other obligations of a bank.
The notes are not guaranteed by any bank and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency. The notes are
not secured.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the notes or determined that this
prospectus supplement, the prospectus or any pricing supplement is accurate or
complete. Any representation to the contrary is a criminal offense.
-------------------------------------------------
We may sell notes to the agents as principal for resale at varying or fixed
offering prices or through the agents as agent on our behalf. If we sell all
of the notes, we expect to receive proceeds from such sales of between
$989,500,000 and $998,750,000, after paying the agents' discounts and
commissions of between $10,500,000 and $1,250,000. However, the agents'
discounts and commissions may exceed these amounts with respect to sales of
notes with stated maturities in excess of 30 years. We may also sell notes
without the assistance of the agents (whether acting as principal or as
agent). Out of our proceeds, we expect to incur approximately $200,000 in
expenses.
Chase Securities Inc.
Credit Suisse First Boston
Goldman, Sachs & Co.
Lehman Brothers
-------------------------------------------------
The date of this prospectus supplement is May 14, 1999
<PAGE>
In making your investment decision, you should rely only on the information
contained or incorporated by reference in this prospectus supplement and the
attached prospectus. We have not authorized anyone to provide you with any
other information. If you receive any unauthorized information, you must not
rely on it.
We are offering to sell the notes only in places where sales are permitted.
You should not assume that the information contained or incorporated by
reference in this prospectus supplement or the attached prospectus is accurate
as of any date other than their respective dates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement Page Prospectus Page
--------------------- ---- ---------- ----
<S> <C> <C> <C>
About This Prospectus Supplement Index of Terms.................................... 6
and Pricing Supplements.................. S-3 Available Information............................. 7
Risk Factors................................ S-3 Incorporation of Certain Documents by Reference... 7
Providian Financial Corporation............. S-5 Providian Financial Corporation................... 8
Description of Notes........................ S-11 The Financing Trusts.............................. 8
Special Provisions Relating to Foreign Use of Proceeds................................... 9
Currency Notes........................... S-47 Ratio of Earnings to Fixed Charges and Ratio of
Certain United States Federal Earnings to Combined Fixed Charges and
Income Tax Consequences.................. S-49 Preferred Stock Dividend Requirements.......... 9
Supplemental Plan of Distribution........... S-59 General Description of Securities and
Risk Factors................................... 10
Description of the Common Stock................... 10
Description of the Preferred Stock................ 11
Description of the Depositary Shares.............. 12
Description of the Debt Securities................ 15
Description of the Warrants to Purchase
Common Stock or Preferred Stock................ 17
Description of the Third Party Warrants........... 18
Description of the Warrants to Purchase
Debt Securities................................ 19
Description of the Stock Purchase Contracts
and Stock Purchase Units....................... 20
Description of the Preferred Securities........... 21
Description of the Guarantees..................... 21
Description of the Other Units.................... 24
Plan of Distribution.............................. 24
ERISA and Tax Considerations...................... 26
Legal Matters..................................... 26
Experts........................................... 26
</TABLE>
S-2
<PAGE>
ABOUT THIS PROSPECTUS SUPPLEMENT
AND PRICING SUPPLEMENTS
This prospectus supplement sets forth certain terms of the Medium-Term
Notes, Series A (the "notes"), that we may offer and supplements the prospectus
that is attached to the back of this prospectus supplement. This prospectus
supplement supersedes the prospectus to the extent it contains information that
is different from the information in the prospectus.
Each time we offer notes, we will attach a pricing supplement to this
prospectus supplement. The pricing supplement will contain the specific
description of the notes we are offering and the terms of the offering. The
pricing supplement will supersede this prospectus supplement or the prospectus
to the extent it contains information that is different from the information
contained in this prospectus supplement or the prospectus.
It is important for you to read and consider all information contained in
this prospectus supplement and the accompanying prospectus and pricing
supplement in making your investment decision. You should also read and
consider the information contained in the documents identified in "Where You Can
Find More Information" in the prospectus.
In this prospectus supplement, the terms "Providian Financial," the
"Company," "we," "us" and "our" mean Providian Financial Corporation and, where
relevant, its wholly owned subsidiaries.
RISK FACTORS
Your investment in the notes will involve certain risks. This prospectus
supplement does not describe all of those risks, including those that result
from the denomination of or payment on any notes in a foreign currency or that
result from the calculation of any amounts payable under any notes by reference
to one or more interest rates, currencies or other indices or formulas. Neither
we nor the agents will be responsible for advising you of these risks now or as
they may change in the future.
In consultation with your own financial and legal advisors, you should
carefully consider, among other matters, the following discussion of risks
before deciding whether an investment in the notes is suitable for you. The
notes are not an appropriate investment for you if you are unsophisticated with
respect to the significant elements of the notes or financial matters. In
particular, those notes denominated or payable in a foreign currency are not
suitable for you if you are unsophisticated with respect to foreign currency
transactions, and those notes with payments calculated by reference to one or
more interest rates, currencies or other indices or formulas are not suitable
for you if you are unsophisticated with respect to transactions involving the
applicable interest rate index or currency index or other indices or formulas.
Structure and Market Risks
Investment in indexed notes and foreign currency notes entails significant
risks not associated with similar investments in conventional fixed rate or
floating rate debt securities.
If you invest in notes indexed to one or more interest rates or currencies,
including exchange rates and swap indices between currencies, commodities or
other indices or formulas, there will be significant risks that are not
associated with similar investments in a conventional fixed rate or floating
rate debt
S-3
<PAGE>
security. These risks include fluctuation of the indices or formulas and the
possibility that you will receive a lower amount of or no principal, premium or
interest, and that you will receive principal, premium or interest at different
times, than you expected. We have no control over a number of matters, including
economic, financial and political events that are important in determining the
existence, magnitude and longevity of these risks and their results. In
addition, if an index or formula used to determine any amounts payable in
respect of the notes contains a multiplier or leverage factor, the effect of any
change in the index or formula will be magnified. In recent years, values of
certain indices and formulas have been highly volatile, and volatility in those
and other indices and formulas may be expected in the future. However, past
experience is not necessarily indicative of what may occur in the future.
Redemption--We may choose to redeem notes when prevailing interest rates
are relatively low.
If your notes are redeemable, we may choose to redeem your notes from time
to time. In the event that prevailing interest rates are relatively low, you
would not be able to reinvest the redemption proceeds in a comparable security
at an effective interest rate as high as the interest rate on the notes being
redeemed.
Uncertain Trading Markets--We cannot assure that a trading market for your
notes will ever develop or be maintained.
We cannot assure you that a trading market for your notes will ever develop
or be maintained. Many factors independent of our creditworthiness affect the
trading market and market value of your notes. These factors include:
* the complexity and volatility of any index or formula applicable to
the notes;
* the method of calculating the principal, premium and interest for the
notes;
* the time remaining to the maturity of the notes;
* the outstanding amount of the notes;
* the redemption features of the notes;
* the amount of other debt securities linked to any index or formula
applicable to the notes; and
* the level, direction and volatility of market interest rates
generally.
In addition, certain notes may have a more limited trading market and
experience more price volatility because they were designed for specific
investment objectives or strategies. There may be a limited number of buyers
when you decide to sell your notes. This may affect the price you receive for
your notes or your ability to sell your notes at all. You should not purchase
notes unless you understand and know you can bear the foregoing investment
risks.
Exchange Rates and Exchange Controls
Investment in foreign currency notes entails significant risks that are not
associated with an investment in a debt security denominated and payable in U.S.
dollars.
S-4
<PAGE>
If you invest in notes denominated and/or payable in a currency other than
U.S. dollars, called foreign currency notes, there will be significant risks
that are not associated with an investment in a debt security denominated and
payable in U.S. dollars. These risks include the possibility of material
changes in the exchange rate between U.S. dollars and your payment currency and
the possibility that either the United States or foreign governments will impose
or modify foreign exchange controls.
We have no control over the factors that generally affect these risks, such
as economic, financial and political events and the supply and demand for the
applicable currencies. Moreover, if payments on your foreign currency notes are
determined by reference to a formula containing a multiplier or leverage factor,
the effect of any change in the exchange rates between the applicable currencies
will be magnified. In recent years, the exchange rates between certain
currencies have been highly volatile, and volatility between these currencies or
with other currencies may be expected in the future. However, fluctuations
between currencies in the past are not necessarily indicative of fluctuations
that may occur in the future. Depreciation of your payment currency would
result in a decrease in the U.S. dollar equivalent yield of your foreign
currency notes, in the U.S. dollar equivalent value of the principal and any
premium payable at maturity or earlier redemption of your foreign currency notes
and, generally, in the U.S. dollar equivalent market value of your foreign
currency notes.
Governmental exchange controls could affect exchange rates and the
availability of your payment currency on a required payment date. Even if there
are no exchange controls, it is possible that your payment currency will not be
available on a required payment date due to circumstances beyond our control or
because the payment currency is no longer in use. In such cases, we will be
allowed to satisfy our obligations on your foreign currency notes in U.S.
dollars.
PROVIDIAN FINANCIAL CORPORATION
General
The Company, based in San Francisco, California, was incorporated in
Delaware in 1984 under the name "First Deposit Corporation." The name of the
Company was changed from First Deposit Corporation to Providian Bancorp, Inc. in
1994 and to Providian Financial Corporation in 1997. The Company conducted its
operations as a wholly owned subsidiary of Providian Corporation until June 10,
1997, when all of the then outstanding shares of common stock of the Company
were spun off to the stockholders of Providian Corporation. The Company is
listed on the New York Stock Exchange and the Pacific Exchange under the symbol
PVN.
The Company, operating through its subsidiaries, is a diversified consumer
lender, offering a range of loan products, including credit cards, revolving
lines of credit, home loans, secured credit cards, and fee-based products. The
Company also offers various deposit products. With $15.9 billion in assets
under management and nine million customers as of March 31, 1999, the Company
ranks among the ten largest bankcard issuers in the nation as of that date.
Organizational Structure
The Company conducts its business through its wholly owned subsidiaries.
Each subsidiary performs a particular role in support of the business, depending
in part on the powers granted to it by its chartering regulator or state of
incorporation. However, the Company's various business areas are generally
operated in a consolidated manner among the different legal entities. Since the
Company is a
S-5
<PAGE>
holding company and generally does not independently engage in any businesses,
the source of funds for payment of principal, interest and premium, if any, on
the notes currently is almost entirely limited to those funds that are available
to the Company from its subsidiaries. The Company's right to participate as a
stockholder in any distribution of assets of any subsidiary upon its liquidation
or reorganization or winding-up (and thus the ability of holders of the notes to
benefit, as creditors of the Company, from such distribution) is subject to the
prior claims of creditors of any such subsidiary. PNB and PB (as defined below)
are subject to claims by creditors for long-term and short-term debt
obligations, including deposit liabilities, obligations for federal funds
purchased and securities sold under repurchase agreements. There are also
various legal limitations on the extent to which PNB, PB and other subsidiaries
may pay dividends or otherwise supply funds to the Company or its affiliates.
See "Regulatory Matters" herein.
The Company operates principally through the following wholly owned
subsidiaries.
Providian National Bank. Headquartered in Tilton, New Hampshire, Providian
National Bank (PNB) is a national banking association organized under the laws
of the United States and is a member of the Federal Deposit Insurance
Corporation (the FDIC). PNB was originally organized as a state bank in 1853
and converted to a national bank charter in 1865. It changed its name from
First Deposit National Bank (FDNB) on January 1, 1998, when the former Providian
National Bank, then an affiliate of FDNB, merged with and into FDNB.
Providian Bank. Headquartered in Salt Lake City, Utah, Providian Bank (PB)
is an industrial loan corporation organized under the laws of Utah and is a
member of the FDIC.
Providian Bancorp Services. Headquartered in San Francisco, California,
Providian Bancorp Services (PBS) provides legal and human resources support,
accounting and finance services, data processing, loan and deposit processing,
credit card account opening, customer service, collections, and related services
for its affiliates on a cost reimbursement basis.
Regulatory Matters
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to the Company and its subsidiaries. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. Certain of these regulations restrict the ability of the Company to
obtain funds from its regulated subsidiaries and thus could impact the Company's
ability to pay principal, interest and premium, if any, on the notes. To the
extent that the following information describes statutory and regulatory
provisions, it is qualified in its entirety by reference to those provisions. A
change in the statutes, regulations or regulatory policies applicable to the
Company or its subsidiaries may have a material effect on the business of the
Company.
General Status
As a national bank, PNB is subject to regulation by its primary regulator,
the Office of the Comptroller of the Currency (the Comptroller). The deposits
of PNB are insured up to applicable limits by the Bank Insurance Fund (the BIF)
of the FDIC. Accordingly, PNB is subject to assessment for deposit insurance
premiums and is subject to certain regulations of the FDIC. As a member of the
Federal Reserve System, PNB is also subject to regulation by the Board of
Governors of the Federal Reserve System (the Federal Reserve Board).
S-6
<PAGE>
The operations of PNB's international branch in London, England,
established in April 1999 with the approval of the Federal Reserve Board and the
Financial Services Authority of the United Kingdom (the FSA), are subject to
regulation and supervision by the FSA and the Comptroller.
As an FDIC-insured Utah industrial loan corporation that is not a member of
the Federal Reserve System, PB is subject to regulation by its primary federal
regulator, the FDIC, and by the Utah Department of Financial Institutions. The
deposits of PB are insured up to applicable limits by the BIF. Accordingly PB
is subject to assessment for deposit insurance premiums and is subject to
certain regulations of the FDIC. PB is also subject to limited regulation by
the Federal Reserve Board with respect to reserves it must maintain against its
transaction accounts and certain other deposits.
Holding Company Status
Although the Company is the holding company of PNB and PB, it is not
required to register as a bank holding company under the BHCA. PNB is a
national banking association, but prior to 1987 it was not a "bank" under the
Bank Holding Company Act of 1956, as amended (the BHCA), because it did not both
accept demand deposits and make commercial loans. PNB is a "bank" under the
BHCA, as amended by the Competitive Equality Banking Act of 1987 (CEBA), which
revised the definition of "bank" to include generally all FDIC-insured
institutions. However, CEBA allowed companies that owned "nonbank banks" on
March 5, 1987 to retain ownership of such nonbank banks without registering as a
bank holding company, subject to certain restrictions. These restrictions
include prohibitions on new activities and on affiliate overdrafts and
limitations on PNB's ability to cross-market its products and services with
products and services of its affiliates. PB is not a "bank" as defined in the
BHCA because it qualifies for an exemption under CEBA as an industrial loan
corporation organized under the laws of Utah and acquired by the Company on or
before August 10, 1987.
The Company could be required to register as a bank holding company under
the BHCA if PNB ceases to observe the CEBA restrictions or if the Company or any
of its affiliates acquires an additional insured depository institution
(excluding exempt institutions such as credit card banks) or a significant
portion of such an institution's assets. If the Company were required to
register as a bank holding company, it would be subject to the restrictions set
forth in the BHCA, which, among other things, would limit the Company's
activities to those deemed by the Federal Reserve Board to be closely related to
banking and a proper incident thereto; however, such restrictions, if they were
to apply to the Company, would not have a material adverse effect on the
Company's business as currently conducted. While CEBA has imposed regulatory
burdens on the Company, it has had no material effect on the Company's ability
to execute its business plan.
Investment in the Company and its Subsidiary Banks
Each of PNB and PB is an "insured depository institution" within the
meaning of the Change in Bank Control Act of 1978 (the CIBC Act). Consequently,
written approval of the applicable primary federal regulatory is required before
an individual or entity may acquire "control," as such term is defined in the
CIBC Act, of the Company. A change in control of PB would also require approval
from the Utah Commissioner of Financial Institutions under the Utah Financial
Institutions Act.
For purposes of the BHCA, an individual or entity may not acquire "control"
of the Company, and a bank holding company may not directly or indirectly
acquire ownership or control of more than 5% of the voting shares of the
Company, without the prior written approval of the Federal Reserve Board.
Because the Company's CEBA grandfather rights are nontransferable, if an
individual or entity acquired "control" of the Company or if a bank holding
company acquired ownership or control of more than 5% of the voting shares of
the Company, the Company would be required to limit its activities and its non-
S-7
<PAGE>
banking subsidiaries' activities to those deemed by the Federal Reserve Board to
be closely related to banking and a proper incident thereto.
Dividends and Transfers of Funds
The primary source of funds for the Company to pay dividends on stock, make
payments on debt securities and meet other obligations is dividends from its
banking subsidiaries. Federal law limits the extent to which PNB or PB can
supply funds to the Company and its affiliates through dividends, loans or
otherwise. These limitations include minimum regulatory capital requirements,
restrictions concerning the payment of dividends, and Sections 23A and 23B of
the Federal Reserve Act of 1913 governing transactions between a financial
institution and its affiliates. In addition, PNB and PB are subject to federal
regulatory oversight to assure safety and soundness. In general, federal
banking laws prohibit an insured depository institution from making dividend
distributions if such distributions are not paid out of available earnings or
would cause the institution to fail to meet applicable capital adequacy
standards. See "--Capital Requirements" below. PB is subject to similar Utah
laws governing industrial loan corporations and the general supervision of the
Utah Department of Financial Institutions.
Capital Requirements
PNB is subject to risk-based capital guidelines adopted by the Comptroller,
and PB is subject to risk-based capital guidelines adopted by the FDIC. Risk-
based capital ratios are determined by allocating assets and specified off-
balance sheet commitments to several weighted categories, with higher levels of
capital being required for the categories perceived as representing greater
risk.
Under current guidelines, institutions are required to maintain a minimum
total risk-based capital ratio (total Tier 1 and Tier 2 capital to risk-weighted
assets) of 8%, and a Tier 1 risk-based capital ratio (Tier 1 capital to risk-
weighted assets) of 4%. The Comptroller and the FDIC may, however, set higher
capital requirements when an institution's particular circumstances warrant.
The Comptroller and the FDIC have established guidelines prescribing a minimum
"leverage ratio" (Tier 1 capital to adjusted total assets as specified in the
guidelines) of 3% for institutions that meet certain criteria, including the
requirements that they have the highest regulatory rating, and a minimum of 4%
for institutions that do not meet the criteria. Institutions experiencing or
anticipating significant growth are expected to maintain capital ratios well
above the minimum. As of March 31, 1999, PNB had a total risk-based capital
ratio of 11.67%, a Tier 1 risk-based capital ratio of 10.26% and a leverage
ratio of 12.00%, and PB had a total risk-based capital ratio of 11.31%, a Tier 1
risk-based capital ratio of 9.96% and a leverage ratio of 7.07%.
In 1995, the Comptroller and the FDIC amended the risk-based capital
standards pertaining to asset transfers in which an institution retains recourse
risk but contractually limits its exposure. Under the "low level recourse"
regulation that was adopted, the amount of risk-based capital required in
connection with such asset transfers will not exceed the institution's maximum
contractual liability. In addition, in November 1997 the federal banking
regulators proposed for comment regulations establishing new risk-based capital
requirements for recourse arrangements and direct credit substitutes. If
adopted, these regulations may increase the cost of credit enhancement provided
by banks in connection with the securitization of consumer loan receivables
while possibly reducing the cost of senior securities issued in such
transactions. We are unable at this time to assess the impact this proposal
would have on the Company's business.
S-8
<PAGE>
Federal Deposit Insurance Corporation Improvement Act of 1991
The Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA)
expanded the powers of federal bank regulatory authorities to take corrective
action with respect to banks that do not meet minimum capital requirements. For
these purposes, FDICIA established five capital tiers: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. Under regulations adopted by the Comptroller and
the FDIC, an institution is generally considered to be "well capitalized" if it
has a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based
capital ratio of 6% or greater, and a leverage ratio of 5% or greater;
"adequately capitalized" if it has a total risk-based capital ratio of 8% or
greater, a Tier 1 risk-based capital ratio of 4% or greater and, generally, a
leverage ratio of 4% or greater; and "undercapitalized" if it does not meet any
of the "adequately capitalized" tests. An institution is deemed to be
"significantly undercapitalized" if it has a total risk-based capital ratio
under 3% and "critically undercapitalized" if it has a ratio of tangible equity
(as defined in the regulations) to total assets that is equal to or less than
2%.
An "adequately capitalized" institution is permitted to accept brokered
deposits only if it receives a waiver from the FDIC and pays interest on
deposits at a rate that is not more than 75 basis points higher than the
prevailing rate in its market. Undercapitalized institutions cannot accept
brokered deposits, are subject to growth limitations and must submit a capital
restoration plan. "Significantly undercapitalized" institutions may be subject
to a number of additional requirements and restrictions. "Critically
undercapitalized" institutions are subject to appointment of a receiver or
conservator and, beginning 60 days after becoming "critically undercapitalized,"
may not make any payment of principal or interest on their subordinated debt
(subject to certain exceptions).
As of March 31, 1999, each of PNB and PB met the requirements to be
considered a "well capitalized" institution. Under the regulatory definition of
brokered deposits, as of March 31, 1999, PNB had brokered deposits of $1.8
billion.
FDICIA also required federal banking agencies to revise their risk-based
capital standards to adequately address concentration of credit risk, interest
rate risk and risk arising from non-traditional activities. The Comptroller and
the FDIC have identified these risks and an institution's ability to manage them
as important factors in assessing overall capital adequacy, but have not
quantified them for use in formula-based capital calculations. The Comptroller
and the FDIC have further revised their risk-based capital rules to address
market risk. Financial institutions with 10% of total assets in trading
activity, or $1 billion in trading, are required to use internal risk
measurement models to calculate their capital exposure for market risk and to
hold capital in support of that exposure. The level of the Company's trading
activity is currently below these thresholds.
Deposit Insurance Assessments
Under the FDIC's risk-based insurance assessment system, each insured
institution is placed in one of nine risk categories, based on its level of
capital, supervisory evaluations, and other relevant information. The
assessment rate applicable to PNB and PB depends in part on the risk assessment
classification assigned to them by the FDIC and in part on the BIF assessment
schedule adopted by the FDIC. BIF-insured institutions such as PNB and PB are
currently assessed premiums at an annual rate between 0% to 0.27% of eligible
deposits. PNB and PB are currently assessed at the 0% rate. PNB and PB are
also subject to assessment for payment of Financial Corporation (FICO) bonds
issued in the 1980s as part of the resolution of the problems of the savings and
loan industry. The FICO assessment rate applicable to BIF-insured deposits is
0.0122% for the first quarter of 1999 and may be adjusted quarterly to reflect a
change in assessment base for the BIF. BIF-insured deposits are required to be
assessed at one-fifth the rate assessed on deposits insured by the Savings
Association Insurance Fund (SAIF) through
S-9
<PAGE>
year-end 1999, or until the insurance funds are merged, whichever occurs first.
Thereafter, BIF- and SAIF-insured deposits will be assessed at the same rate by
FICO.
The Financial Institutions Reform, Recovery and Enforcement Act of 1989 Cross-
Guarantee Provisions
The Financial Institutions Reform, Recovery and Enforcement Act of 1989
imposes various liabilities on our subsidiary banks. Each of PNB and PB is
liable to the FDIC for any losses it may incur as a result of the failure or
near failure of the other. Claims of depositors of any such non-failing bank
and claims of general creditors of any such non-failing bank would be paid prior
to any claims of the FDIC.
Consumer Protection Laws
The relationship of the Company's lending subsidiaries and their customers
is extensively regulated by federal and state consumer protection laws. The
most significant laws include the Truth-in-Lending Act of 1968, Equal Credit
Opportunity Act of 1974, Fair Credit Reporting Act of 1970, Truth-in-Savings Act
of 1991, Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, and
Electronic Funds Transfer Act of 1978. These statutes, among other things,
impose disclosure requirements when a consumer credit loan is advertised, when
the account is opened and when monthly billing statements are sent. In
addition, these statutes limit the liability of credit card holders for
unauthorized use, prohibit discriminatory practices in extending credit, and
impose limitations on the types of charges that may be assessed on consumer
credit loans and on the use of consumer credit reports.
The National Bank Act of 1864 authorizes national banks to charge customers
interest at the rates allowed by the laws of the state in which the bank is
located, regardless of an inconsistent law of a state in which the bank's
customers are located. PNB relies on this ability to "export" rates to
facilitate its nationwide credit card and consumer lending business. State
institutions such as PB enjoy a similar right under the Depository Institutions
Deregulation and Monetary Control Act of 1980. In 1996, the United States
Supreme Court held that late payment fees are "interest" and therefore can be
"exported" under the National Bank Act, deferring to the Comptroller's
interpretation that interest includes late payment fees, insufficient funds
fees, overlimit fees and certain other fees and charges associated with consumer
credit loans. This decision does not directly apply to state institutions such
as PB. Although several courts have upheld the ability of state institutions to
export certain types of fees, a number of lawsuits have been filed alleging that
the laws of certain states prohibit the imposition of late fees. It is
impossible to determine whether courts will follow existing precedents, and if
not, what impact it will have on PB's ability to impose certain fees.
Legislative Developments
Various legislative proposals have been introduced in Congress in recent
years. These include proposals imposing a statutory cap on credit card interest
rates and fees, substantially revising the laws governing consumer bankruptcy,
requiring additional disclosures and prohibiting certain practices with respect
to open-end credit plans, protecting consumer privacy by limiting the use of
social security numbers and the transfer of personal information, permitting
affiliations between banks and commercial, insurance or securities firms, and
other regulatory restructuring proposals. In recent years state legislatures
have entertained similar proposals, as well as proposals to restrict
telemarketing activities and to expand consumer protection laws. Neither the
outcome of these proposals nor their impact on the Company, should they become
law, can be predicted with any certainty.
S-10
<PAGE>
Several states have passed legislation to tax the income of out of state
lenders derived from loans, including credit card loans, made to residents of
such states. This development has not materially affected the Company's
business results.
Members of Congress and government officials have from time to time
suggested the full or partial elimination of the mortgage interest deduction for
federal income tax purposes. Since the interest paid on the real estate loans
made by the Company is generally deductible under current law, the reduction or
elimination of this tax benefit could have a material adverse effect on the
demand for those products.
DESCRIPTION OF NOTES
The notes we are offering by this prospectus supplement constitute a series
of debt securities for purposes of each of (i) the senior indenture dated as of
May 1, 1999 (the senior indenture) and (ii) the subordinated indenture dated as
of May 1, 1999 (the subordinated indenture), both as supplemented from time to
time. Notes issued under the senior indenture will be "senior notes" as
described below. Notes issued under the subordinated indenture will be
"subordinated notes" as described below. The trustee for the senior notes will
be The First National Bank of Chicago (the senior notes trustee) and the trustee
for the subordinated notes will be Chase Manhattan Bank and Trust Company,
National Association (the subordinated notes trustee). We will indicate on the
applicable pricing supplement whether the notes described therein are senior
notes or subordinated notes.
Any reference in this prospectus supplement to the "trustee" will mean the
senior notes trustee with respect to the senior notes and the subordinated notes
trustee with respect to the subordinated notes.
The following description of the particular terms of the notes we are
offering supplements, and to the extent inconsistent replaces, the description
of the general terms and provisions of debt securities described in the
accompanying prospectus, and we refer you to that description. The terms and
conditions described in this section "Description of Notes" will apply to each
note unless we otherwise specify in the applicable pricing supplement. Certain
terms used in this prospectus supplement have the meanings given to those terms
in the prospectus.
Unless we otherwise indicate in the applicable pricing supplement, currency
amounts in this prospectus supplement, the accompanying prospectus and any
pricing supplement are stated in U.S. dollars.
Senior Notes
The senior notes will be direct, unsecured obligations of the Company and
will rank on a parity with all outstanding unsecured senior indebtedness of the
Company.
Events of Default, Waivers, Etc.
An event of default with respect to senior notes of any series is defined
in the senior indenture as
* default in the payment of principal of or premium, if any, on any of
the senior notes of that series when due,
S-11
<PAGE>
* default in the payment of interest on any of the senior notes of that
series when due and continuance of such default for 30 days,
* default in the deposit of any sinking fund payment on any of the
senior notes of that series when due,
* default in the performance, or breach, of certain other covenants or
warranties of the Company in the senior indenture with respect to
senior notes of that series and continuance of such default or breach
for 60 days after written notice by the trustee or the holders of not
less than 25% in aggregate principal amount of the senior notes of
that series;
* any event of default under any mortgage, indenture or other
instrument under which any indebtedness for borrowed money in an
aggregate principal amount exceeding $5,000,000 of the Company or PNB
shall become due and payable, if such acceleration is not rescinded
or annulled within 30 days after written notice as provided in the
senior indenture,
* certain events of bankruptcy, insolvency or reorganization of the
Company, or
* any other event that may be specified in a pricing supplement with
respect to senior notes of that series.
If an event of default (other than an event of default arising from the
bankruptcy, insolvency or reorganization of the Company) with respect to any
series of senior notes for which there are senior notes outstanding under the
senior indenture occurs and is continuing, either the trustee or the holders of
not less than 25% in aggregate principal amount of the senior notes of such
series outstanding may declare the principal amount (or if such senior notes are
original issue discount notes, such portion of the principal amount as may be
specified in the terms of that series) of all senior notes of that series to be
immediately due and payable. If an event of default arising from the
bankruptcy, insolvency or reorganization of the Company with respect to any
series of senior notes for which there are senior notes outstanding under the
senior indenture occurs, the principal amount (or if such senior notes are
original issue discount notes, such portion of the principal amount as may be
specified in the terms of that series) of all senior notes of that series will
automatically, and without any action on the part of the trustee or any holder,
become immediately due and payable. The holders of a majority in aggregate
principal amount of the senior notes of any series outstanding under the senior
indenture may waive an event of default resulting in acceleration of such senior
notes, but only if all events of default with respect to senior notes of such
series have been remedied and all payments due (other than those due as a result
of acceleration) have been made.
If an event of default occurs and is continuing, the trustee may, in its
discretion, and shall, at the written request of holders of not less than a 25%
in aggregate principal amount of the senior notes of any series outstanding
under the senior indenture and upon reasonable indemnity against the costs,
expenses and liabilities to be incurred in compliance with such request and
subject to certain other conditions set forth in the senior indenture, proceed
to protect the rights of the holders of all the senior notes of such series.
Prior to acceleration of maturity of the senior notes of any series outstanding
under the senior indenture, the holders of a majority in aggregate principal
amount of such senior notes may waive any past default under the senior
indenture except a default in the payment of principal of, premium, if any, or
interest on the senior notes of such series.
S-12
<PAGE>
The senior indenture provides that upon the occurrence of an event of
default arising from either (i) the default in the payment of principal of or
premium, if any, on any of the senior notes of that series outstanding under the
senior indenture when due or (ii) the default in the payment of interest on any
of the senior notes of that series outstanding under the senior indenture when
due and continuance of such default for 30 days, the Company will, upon demand
of the trustee, pay to it, for the benefit of the holder of any such senior
note, the whole amount then legally due and payable on such senior notes for
principal, premium, if any, and interest. The senior indenture further provides
that if the Company fails to pay such amount forthwith upon such demand, the
trustee may, among other things, institute a judicial proceeding for the
collection thereof.
The senior indenture also provides that notwithstanding any other provision
of the senior indenture, the holder of any senior note of any series shall have
the right to institute suit for the enforcement of any payment of principal of,
premium, if any, and interest on such senior notes on the respective stated
maturities as expressed in such senior note and that such right shall not be
impaired without the consent of such holder.
The Company is required to file annually with the trustee a written
statement of officers as to the existence or non-existence of defaults under the
senior indenture.
Senior Indenture Covenants
The senior indenture contains certain covenants by the Company, described
below, which are not included in the subordinated indenture.
Limitation on Disposition of PNB. Subject to certain exceptions, so long
--------------------------------
as any of the senior notes are outstanding, the Company: (a) will not, nor will
it permit PNB to, sell, assign, transfer or otherwise dispose of any shares of,
securities convertible into or options, warrants or rights to subscribe for or
purchase shares of voting stock of PNB, nor will the Company permit PNB to issue
any shares of, or securities convertible into or options, warrants or rights to
subscribe for or purchase shares of voting stock of PNB (other than sales of
directors' qualifying shares) unless the Company will own, directly or
indirectly, at least 80% of the issued and outstanding voting stock of PNB after
giving effect to such transaction; or (b) will not permit PNB to either (i)
merge or consolidate with or into any corporation (other than the Company),
unless at least 80% of the surviving corporation's issued and outstanding voting
stock is, or upon consummation of the merger or consolidation will be, owned,
directly or indirectly by the Company, or (ii) lease, sell or transfer all or
substantially all of its properties and assets to any corporation or other
person (other than the Company), unless 80% of the issued and outstanding voting
stock of such corporation or other person is owned, or will be owned, upon such
lease, sale or transfer, directly or indirectly, by the Company; provided,
however, that nothing in this covenant shall prohibit the Company or PNB from
the sale or transfer of assets pursuant to any securitization transaction.
Limitation on Creation of Certain Liens. So long as any of the senior
---------------------------------------
notes are outstanding, the Company will not, nor will it permit PNB to, create,
assume, incur, or suffer to be created, assumed or incurred or to exist, any
pledge, encumbrance or lien, as security for indebtedness for borrowed money,
upon any shares of, or securities convertible into or options, warrants or
rights to subscribe for or purchase shares of, voting stock of PNB, directly or
indirectly, without making effective provision whereby the applicable senior
notes of all series shall be equally and ratably secured with any and all such
indebtedness if, treating such pledge, encumbrance or lien as a transfer of the
shares of, or securities convertible into or options, warrants or rights to
subscribe for or purchase shares of, voting stock of PNB subject thereto to the
secured party and after giving effect to the issuance of the maximum number of
shares of voting stock of PNB issuable upon the exercise of all such convertible
securities, options,
S-13
<PAGE>
warrants or rights, the Company would not continue to own, directly or
indirectly, at least 80% of the issued and outstanding voting stock of PNB.
Subordinated Notes
The subordinated notes will be direct, unsecured obligations of the Company
and will be subject to the subordination provisions described below.
Subordination
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the payment of the principal of,
premium, if any, and interest on the subordinated notes is to be subordinated in
right of payment, to the extent provided in the subordinated indenture, to the
prior payment in full of all "senior indebtedness" (as defined below). In
certain events of bankruptcy or insolvency, the payment of the principal of,
premium, if any, and interest on the subordinated notes will, to the extent
provided in the subordinated indenture, also be effectively subordinated in
right of payment to the prior payment in full of all "designated obligations"
(as defined below).
Upon any distribution of assets of the Company upon any dissolution,
winding up, liquidation or reorganization, the holders of senior indebtedness
will first be entitled to receive payment in full of all amounts due or to
become due before the holders of the subordinated notes will be entitled to
receive any payment in respect of the principal of, premium, if any, or interest
on the subordinated notes. If upon any such payment or distribution of assets
there remain, after giving effect to such subordination provisions in favor of
the holders of senior indebtedness, any amounts of cash, property or securities
available for payment or distribution in respect of the subordinated notes
(excess proceeds) and if, at such time, any creditors in respect of designated
obligations have not received payment in full of all amounts due or to become
due on or in respect of such designated obligations, then such excess proceeds
shall first be applied to pay or provide for the payment in full of such
designated obligations before any payment or distribution may be made in respect
of the subordinated notes.
In addition, no payment may be made of the principal of, premium, if any,
or interest on the subordinated notes, or in respect of any redemption,
retirement, purchase or other acquisition of any of the subordinated notes, at
any time when (i) there is a default in the payment of the principal of,
premium, if any, interest on or otherwise in respect of any senior indebtedness
or (ii) any event of default with respect to any senior indebtedness has
occurred and is continuing, or would occur as a result of such payment on the
subordinated notes or any redemption, retirement, purchase or other acquisition
of any of the subordinated notes, permitting the holders of such senior
indebtedness to accelerate the maturity thereof. Except as described above, the
obligation of the Company to make payment of the principal of, premium, if any,
or interest on the subordinated notes will not be affected.
By reason of such subordination in favor of the holders of senior
indebtedness, in the event of a distribution of assets upon any dissolution,
winding up, liquidation or reorganization, certain creditors of the Company who
are not holders of senior indebtedness or of the subordinated notes may recover
less, ratably, than holders of senior indebtedness and may recover more,
ratably, than holders of the subordinated notes.
Subject to payment in full of all senior indebtedness, the holders of
subordinated notes will be subrogated to the rights of the holders of senior
indebtedness to receive payments or distributions of cash, property or
securities of the Company applicable to senior indebtedness. Subject to payment
in full of all designated obligations, the holders of the subordinated notes
will be subrogated to the rights of the
S-14
<PAGE>
creditors in respect of designated obligations to receive payments or
distributions of cash, property or securities of the Company applicable to such
creditors in respect of designated obligations.
"Senior indebtedness" for purposes of the subordinated indenture is the
principal of, premium, if any, and interest on (i) all of the Company's
indebtedness for money borrowed, other than subordinated securities (including
the subordinated notes) issued under (A) the subordinated indenture and (B) the
junior subordinated indenture, dated as of February 4, 1997, between the Company
(then known as Providian Bancorp, Inc.) and The Bank of New York, as trustee
(the junior subordinated indenture), whether outstanding on the date of
execution of the subordinated indenture or thereafter created, assumed or
incurred, except such indebtedness for money borrowed as is by its terms
expressly stated to be not superior in right of payment to the subordinated
securities issued under the subordinated indenture or the junior subordinated
indenture or to rank on a parity with the subordinated securities issued under
the subordinated indenture or the junior subordinated indenture; and (ii) any
deferrals, renewals or extensions of any such senior indebtedness. The term
"indebtedness for money borrowed" as used in the prior sentence includes,
without limitation, any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other written instruments, and any deferred obligation for
the payment of the purchase price of property or assets. There is no limitation
on the issuance of additional senior indebtedness of the Company.
"Designated obligations" means all obligations of the Company to make
payment on account of claims in respect of derivative products such as interest
and foreign exchange rate contracts, commodity contracts and similar
arrangements, other than (i) obligations on account of senior indebtedness, (ii)
obligations on account of indebtedness for money borrowed ranking on a parity
with or subordinate to the subordinated notes and (iii) obligations which by
their terms are expressly stated not to be superior in right of payment to the
subordinated notes or to rank on a parity with the subordinated notes; provided,
however, that notwithstanding the foregoing, in the event that any rule,
guideline or interpretation promulgated or issued by the Federal Reserve (or
other competent regulatory agency or authority), as from time to time in effect,
establishes or specifies criteria for the inclusion in regulatory capital of
subordinated debt which is applicable to bank holding companies requiring that
such subordinated debt be subordinated to obligations to creditors in addition
to those set forth above, then the term "designated obligations" shall also
include such additional obligations to creditors, as from time to time in effect
pursuant to such rules, guidelines or interpretations. For purposes of this
definition, "claim" will have the meaning assigned thereto in Section 101(4) of
the Bankruptcy Code of 1978, as amended to the date of the subordinated
indenture.
The subordinated notes will rank senior to junior subordinated indebtedness
of the Company. "Junior subordinated indebtedness", with respect to the
subordinated notes, means the principal of, premium, if any, and interest on all
of the Company's indebtedness for money borrowed (but excluding trade accounts
payable arising in the ordinary course of business) whether outstanding on the
date of execution of the subordinated indenture or thereafter created, assumed
or incurred and any deferrals, renewals or extensions of such debt, provided
such debt (i) is by its terms subordinated to the subordinated notes, (ii) is
between or among the Company and certain affiliated financing entities including
all debt securities and guarantees in respect of those debt securities issued to
certain financing entities or a trustee of a financing entity sponsored by the
Company, (iii) is evidenced by securities issued under the junior subordinated
indenture, or (iv) is a guarantee of the Company on a subordinated basis under
the guarantee agreement, dated as of February 4, 1997, between the Company (then
known as Providian Bancorp, Inc.) and The Bank of New York, as trustee, relating
to securities issued in connection with the junior subordinated indenture. The
term "indebtedness for money borrowed" as used in the prior sentence includes,
without limitation, any obligation of, or any obligation guaranteed by, the
Company for the repayment of borrowed money, whether or not evidenced by bonds,
debentures, notes or other
S-15
<PAGE>
written instruments, and any deferred obligation for the payment of the purchase
price of property or assets.
As of March 31, 1999, the aggregate amount of senior indebtedness and
designated obligations of the Company was approximately $949.3 million.
Limited Rights of Acceleration
Payment of principal of the subordinated notes may be accelerated only in
case of the bankruptcy, insolvency or reorganization of the Company. There is
no right of acceleration in the case of a default in the payment of principal
of, premium, if any, or interest on the subordinated notes or the performance of
any other covenant of the Company in the subordinated indenture.
Events of Default, Defaults, Waivers, Etc.
An event of default with respect to subordinated notes of any series is
defined in the subordinated indenture as certain events involving the
bankruptcy, insolvency or reorganization of the Company and any other event of
default that may be specified in a pricing supplement with respect to
subordinated notes of that series. A "default" with respect to subordinated
notes of any series is defined in the subordinated indenture as
* an event of default with respect to that series,
* default in the payment of the principal of or premium, if any, on any
subordinated notes of such series when due,
* default in the payment of interest on any subordinated notes of that
series when due and the continuance of such default for a period of
30 days,
* default in the deposit of any sinking fund payment on any of the
subordinated notes of that series when due,
* default in the performance, or breach, of certain covenants or
warranties of the Company in the subordinated indenture with respect
to subordinated notes of that series and continuance of such default
or breach for 60 days after written notice by the trustee or the
holders of not less than 25% in aggregate principal amount of the
subordinated notes of that series,
* any event of default under any mortgage, indenture or other
instrument under which any indebtedness for borrowed money in an
aggregate principal amount exceeding $5,000,000 of the Company or PNB
shall become due and payable, if such acceleration is not rescinded
or annulled within 30 days after written notice as provided in the
subordinated indenture, or
* any other default that may be specified in a pricing supplement with
respect to subordinated notes of that series.
If an event of default (other than an event of default arising from the
bankruptcy, insolvency or reorganization of the Company) with respect to any
series of subordinated notes for which there are subordinated notes outstanding
under the subordinated indenture occurs and is continuing, either the trustee or
the holders of not less than 25% in aggregate principal amount of the
subordinated notes of such
S-16
<PAGE>
series may declare the principal amount (or if such subordinated notes are
original issue discount notes, such portion of the principal amount as may be
specified in the terms of that series) of all subordinated notes of that series
to be immediately due and payable. If an event of default arising from the
bankruptcy, insolvency or reorganization of the Company with respect to any
series of subordinated notes for which there are subordinated notes outstanding
under the subordinated indenture occurs, the principal amount (or if such
subordinated notes are original issue discount notes, such portion of the
principal amount as may be specified in the terms of that series) of all
subordinated notes of that series will automatically, and without any action on
the part of the trustee or any holder, become immediately due and payable. The
holders of a majority in aggregate principal amount of the subordinated notes of
any series outstanding under the subordinated indenture may waive an event of
default resulting in acceleration of such subordinated notes, but only if all
defaults have been remedied and all payments due (other than those due as a
result of acceleration) have been made.
If a default occurs and is continuing, the trustee may in its discretion,
and shall, at the written request of holders of not less than a 25% in aggregate
principal amount of the subordinated notes of any series outstanding under the
subordinated indenture and upon reasonable indemnity against the costs, expenses
and liabilities to be incurred in compliance with such request and subject to
certain other conditions set forth in the subordinated indenture, proceed to
protect the rights of the holders of all the subordinated notes of such series.
Prior to acceleration of maturity of the subordinated notes of any series
outstanding under the subordinated indenture, the holders of a majority in
aggregate principal amount of such subordinated notes may waive any past default
under the subordinated indenture except a default in the payment of principal
of, premium, if any, or interest on the subordinated notes of such series.
The subordinated indenture provides that in the event of a default arising
from either (i) the default in the payment of principal of or premium, if any,
on any of the subordinated notes of that series outstanding under the
subordinated indenture when due or (ii) the default in the payment of interest
on any of the subordinated notes of that series outstanding under the
subordinated indenture when due and continuance of such default for 30 days, the
Company will, upon demand of the trustee, pay to it, for the benefit of the
holder of any such subordinated note, the whole amount then legally due and
payable on such subordinated note for principal, premium, if any, and interest.
The subordinated indenture further provides that if the Company fails to pay
such amount forthwith upon such demand, the trustee may, among other things,
institute a judicial proceeding for the collection thereof.
The subordinated indenture also provides that notwithstanding any other
provision of the subordinated indenture, the holder of any subordinated note of
any series shall have the right to institute suit for the enforcement of any
payment of principal of, premium, if any, and interest on such subordinated
notes on the respective stated maturities (as set forth in the subordinated
indenture) expressed in such subordinated note and that such right shall not be
impaired without the consent of such holder.
The Company is required to file annually with the trustee a written
statement of officers as to the existence or non-existence of defaults under the
subordinated indenture.
Other Indenture Provisions
Modifications of the Indentures
Each of the indentures provides that the Company and the trustee may enter
into a supplemental indenture to amend the indenture without the consent of any
holder of the notes,
S-17
<PAGE>
* to evidence the succession of another person to the Company and the
assumption by any such successor of the covenants of the Company
therein and in the notes,
* to add to the covenants of the Company for the benefit of the holders
of all or any series of notes (and if such covenants are to be for
the benefit of less than all series of notes, stating that such
covenants are expressly being included solely for the benefit of such
series) or to surrender any right or power herein conferred upon the
Company,
* to add any additional events of default (or in the case of the
subordinated indenture, any additional defaults or events of default)
for the benefit of the holders of all or any series of notes (and if
such additional defaults or events of default are to be for the
benefit of less than all series of notes, stating that such
additional defaults or events of default are expressly being included
solely for the benefit of such series),
* to add to or change any of the provisions of the indenture to such
extent as shall be necessary to permit or facilitate the issuance of
notes in bearer form, registrable or not registrable as to principal,
and with or without interest coupons, or to permit or facilitate the
issuance of notes in uncertificated form,
* to add to, change or eliminate any of the provisions of the indenture
in respect of one or more series of notes, provided that any such
addition, change or elimination (i) shall neither (A) apply to any
note of any series created prior to the execution of such
supplemental indenture and entitled to the benefit of such provision
nor (B) modify the rights of the holder of any such note with respect
to such provision or (ii) shall become effective only when there are
no such notes outstanding,
* to secure the notes,
* to establish the form or terms of notes permitted by the indenture,
* to evidence and provide for the acceptance of appointment by a
successor trustee with respect to the notes of one or more series and
to add to or change any of the provisions of the indenture as shall
be necessary to provide for or facilitate the administration of the
trusts by more than one trustee in accordance with the indenture, or
* to cure any ambiguity, defect or inconsistency, or to make any other
provisions with respect to matters arising under the indenture,
provided that such action will not adversely affect the interests of
the holders of notes of any series in any material respect.
Each of the indentures may be modified or amended at any time with the
consent of the holders of not less than 66-2/3% in aggregate principal amount of
all series of the notes at the time outstanding under such indenture and
affected by such modification or amendment; provided, however, that without the
consent of the holder of each note affected, no such modification or amendment
shall,
* change the stated maturity of the principal of, or any installment of
principal of or interest on, any note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon
the redemption thereof, or reduce the amount of the principal of an
original issue discount note or any other note which would be due and
payable upon a declaration of acceleration of the maturity thereof,
or change any place of payment where, or the coin or currency in
which, any note or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on
S-18
<PAGE>
or after the stated maturity thereof (or, in the case of redemption,
on or after the redemption date), or, in the case of the subordinated
indenture, modify the provisions of the subordinated indenture with
respect to the subordination of subordinated notes in a manner
adverse to the holders of the subordinated notes,
* reduce the percentage in principal amount of the outstanding notes of
any series, the consent of whose holders is required for any such
supplemental indenture or the consent of whose holders is required
for any waiver provided for in the indenture, or
* with the exception of certain provisions relating to the trustee,
modify any of the provisions relating to the amendment of the
indenture with the consent of the holders of the notes or the waiver
of past defaults, except to increase any such percentage or to
provide that certain other provisions of the indenture cannot be
modified or waived without the consent of the holder of each
outstanding note affected thereby.
Defeasance and Discharge
Each indenture provides, if such provision is made applicable to the notes
of any series pursuant to the indenture, that the Company may elect either (a)
to defease and be discharged from any and all obligations with respect to such
notes (except with respect to certain ongoing obligations regarding, among other
thing, registering and replacing notes and holding moneys for payments in trust)
or (b) to be released from its obligations with respect to certain covenants,
upon the deposit with the trustee (or other qualifying trustee), in trust for
such purpose, of money and/or U.S. government obligations (as defined below)
which through the payment of principal and interest in accordance with their
terms will, as certified by a nationally recognized firm of independent public
accountants, provide money in an amount sufficient to pay the principal of (and
premium, if any) and interest on such notes, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor. Such a trust
may only be established if, among other things, the Company has delivered to the
trustee an opinion of counsel (as specified in the indenture) to the effect that
the holders of such notes will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to the federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred. Such opinion, in the case of defeasance
under clause (a) above, must refer to and be based upon a ruling of the internal
revenue service or a change in applicable federal income tax law occurring after
the date of the indenture.
"U.S. government obligation" for purposes of each indenture means (x) any
security which is (i) a direct obligation of the United States of America for
the payment of which the full faith and credit of the United States of America
is pledged or (ii) an obligation of a person or entity controlled or supervised
by and acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i) or (ii),
is not callable or redeemable at the option of the issuer thereof, and (y) any
depositary receipt issued by a bank (as defined in Section 3(a)(2) of the
Securities Act of 1933, as amended) as custodian with respect to any such U.S.
government obligation which is specified in clause (x) above and held by such
bank for the account of the holder of such depositary receipt, or with respect
to any specific payment of principal of or interest on any such U.S. government
obligation which is so specified and held, provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. government obligation or the specific payment
of principal or interest evidenced by such depositary receipt.
S-19
<PAGE>
Corporate Existence, Consolidation, Merger and Sale of Assets
Except as described in the next paragraph, the Company will do or cause to
be done all things necessary to preserve and keep in full force and effect its
existence and the existence of PNB and its rights (charter or statutory) and
franchises and those of PNB; provided, however, that the Company will not be
required to preserve any such right or franchise if the Company determines that
the preservation thereof is no longer desirable in the conduct of its business
and that the loss thereof is not disadvantageous in any material respect to the
holders of the notes.
The Company may consolidate with or merge into any other entity or entities
or convey, transfer or lease its properties and assets substantially as an
entirety to any person without the consent of the holders of any of the notes
provided that (i) any successor or purchaser is a corporation, partnership or
trust organized under the laws of the United State of America, any state thereof
or the District of Columbia, and any such successor or purchaser expressly
assumes the Company's obligations on the notes under each of the indentures,
(ii) immediately after giving effect to the transaction no event of default
under the senior indenture or default under the subordinated indenture, and no
event which, after notice or lapse of time or both, would become an event of
default under the senior indenture or a default under the subordinated
indenture, shall have happened and be continuing, (iii) if as a result of such
transaction the Company would become subject to an encumbrance not permitted by
the indentures, the Company or such successor purchaser takes necessary steps to
effectively secure the notes equally and ratably with (or prior to) all
indebtedness secured thereby, and (iv) the Company has delivered to the trustee
under the applicable indenture an officers' certificate and an opinion of
counsel stating compliance with these provisions.
Concerning the Trustee
In certain instances, the Company or the holders of a majority of the then
outstanding principal amount of the notes issued under an indenture may remove
the trustee and appoint a successor trustee. Subject to the provisions of
applicable law, the trustee may become the owner or pledgee of any of the notes
with the same rights it would have if it were not the trustee. The trustee and
any successor trustee must be a person or entity eligible to be a trustee under
the Trust Indenture Act of 1939 and must have (or, in the case of a trustee or
successor trustee included in a bank holding company system, the related bank
holding company must have) a combined capital and surplus of at least
$100,000,000. From time to time and subject to applicable law relating to
conflicts of interest, the trustee may also serve as trustee under other
indentures relating to securities issued by the Company and may engage in
commercial transactions with the Company.
Legal Ownership
"Street Name" and Other Indirect Holders
Investors who hold notes in accounts at banks or brokers will generally not
be recognized by us as legal holders of notes. This is called holding in
"street name." Instead, we would recognize only the bank or broker, or the
financial institution the bank or broker uses to hold its notes. These
intermediary banks, brokers and other financial institutions pass along
principal, interest and other payments on the notes, either because they agree
to do so in their customer agreements or because they are legally required to.
If you hold notes in "street name," you should check with your own institution
to find out:
* How it handles securities payments and notices.
S-20
<PAGE>
* Whether it imposes fees or charges.
* How it would handle voting if ever required.
* Whether and how you can instruct it to send you notes registered in
your own name so you can be a direct holder as described below.
* How it would pursue rights under the notes if there were a default or
other event triggering the need for holders to act to protect their
interests.
Direct Holders
Our obligations, as well as the obligations of the trustee and those of any
third parties employed by us or the trustee, run only to those persons who are
registered as holders of notes. As noted above, we do not have obligations to
you if you hold in "street name" or through other indirect means, either because
you choose to hold notes in that manner or because the notes are issued in the
form of "global securities" as described below. For example, once we make
payment to the registered holder, we have no further responsibility for the
payment even if that holder is legally required to pass the payment along to you
as a "street name" customer but does not do so.
Global Securities
What Is a Global Security? A "global security" is a special type of
-------------------------
indirectly held security, as described above under "`Street Name' and Other
Indirect Holders." The ultimate beneficial owners can only be indirect holders
of those notes we issue in the form of global securities. We do this by
requiring that the global security be registered in the name of a financial
institution we select and by requiring that the notes included in the global
security not be transferred to the name of any other direct holder unless the
special circumstances described below occur. The financial institution that
acts as the sole direct holder of the global security is called the
"depositary." Any person wishing to own a note must do so indirectly by virtue
of an account with a broker, bank or other financial institution that in turn
has an account with the depositary. In general, as described further under
"Book-Entry System" below, each series of notes will be issued only in the form
of global securities.
Special Investor Considerations for Global Securities. As an indirect
-----------------------------------------------------
holder, an investor's rights relating to a global security will be governed by
the account rules of the investor's financial institution and of the depositary,
as well as general laws relating to securities transfers. We do not recognize
this type of investor as a holder of notes and instead deal only with the
depositary that holds the global security.
An investor should be aware that if notes are issued only in the form of
global securities:
* The investor cannot get notes registered in his or her own name.
* The investor cannot receive physical certificates for his or her
interest in the notes.
* The investor will be a "street name" holder and must look to his or
her own bank or broker for payments on the notes and protection of
his or her legal rights relating to the notes. See "`Street Name' and
Other Indirect Holders" above.
* The investor may not be able to sell interests in the notes to some
insurance companies and other institutions that are required by law
to own their securities in the form of physical certificates.
S-21
<PAGE>
* The depositary's policies will govern payments, transfers, exchange
and other matters relating to the investor's interest in the global
security. We and the trustee have no responsibility for any aspect of
the depositary's actions or for its records of ownership interests in
the global security. We and the trustee also do not supervise the
depositary in any way.
* The depositary will require that interests in a global security be
purchased or sold within its system using same-day funds for
settlement.
Special Situations When Global Security will be Terminated. In a few
----------------------------------------------------------
special situations, the global security will terminate and interests in it will
be exchanged for physical certificates representing notes (called "certificated
notes"). After that exchange, the choice of whether to hold notes directly or
in "street name" will be up to the investor. Investors must consult their own
banks or brokers to find out how to have their interests in notes transferred to
their own name, so that they will be direct holders. The rights of "street
name" investors and direct holders in the notes have been previously described
in the subsections entitled "`Street Name' and Other Indirect Holders" and
"Direct Holders" above. The special situations for termination of a global
security are described under "Book-Entry System" below. When a global security
terminates, the depositary (and not us or the trustee) is responsible for
deciding the names of the institutions that will be the initial direct holders.
General Features of the Notes
The notes will be unsecured obligations of the Company and will be issued
only in the form of one or more global securities registered in the name of a
nominee of The Depository Trust Company, as depositary, except for foreign
currency notes and except as specified in "Book-Entry System" below. Foreign
currency notes may be represented either by global notes or by certificated
notes, as specified in the applicable pricing supplement. As used in this
prospectus supplement, the term "holder" means those who own notes registered in
their own names and not those who own beneficial interests in notes registered
in "street name" or in notes represented by a global note or notes issued in
"book-entry" form through the depositary. For more information on certificated
and global notes, see "Legal Ownership" above and "Book-Entry System" below.
We may offer from time to time up to $1,000,000,000 aggregate principal
amount, including in such amount the offering price of any such notes sold at a
discount, of its notes or the equivalent in other currencies. However, we may
increase this limit if in the future we determine that we may wish to sell
additional notes. The U.S. dollar equivalent of foreign currency notes, called
the market exchange rate, will be determined by the exchange rate agent, as
identified below, on the basis of the noon buying rate for cable transfers in
The City of New York, as determined by the Federal Reserve Bank of New York for
such currencies on the business day immediately preceding the applicable issue
dates. The term "business day" has a special meaning described below. Special
tax considerations apply to foreign currency notes and are described below under
"Certain United States Federal Income Tax Consequences--United States Holders--
Nonfunctional Currency Notes."
The notes will be offered on a continuous basis and will mature nine months
or more from the date of issue, as selected by the initial purchaser and agreed
to by us.
The notes may be issued as original issue discount notes. Under the
indentures an original issue discount note is a note, including any zero-coupon
note, which is issued at a price lower than its principal amount and provides
that, upon redemption or acceleration of its maturity, an amount less than its
principal amount will be payable. For additional information regarding payments
upon acceleration of the maturity of an original issue discount note and
regarding the United States federal tax considerations
S-22
<PAGE>
of original issue discount notes, see "Payment of Principal and Interest" and
"Certain United States Federal Income Tax Consequences--United States Holders--
Original Issue Discount." Original issue discount notes will be treated as
original issue discount securities for purposes of the indentures.
Unless we otherwise specify in the applicable pricing supplement,
purchasers are required to pay for foreign currency notes in U.S. dollars or a
foreign currency as specified in the applicable pricing supplement. Such
foreign currency is called the specified currency. At the present time there
are limited facilities in the United States for the conversion of U.S. dollars
into foreign currencies and vice versa, and banks generally do not offer non-
U.S. dollar checking or savings account facilities in the United States.
However, if a purchaser of notes requests the agent who presented the offer to
purchase foreign currency notes to us, on or prior to the fifth business day
preceding the date of delivery of these foreign currency notes, or by such other
day as determined by the agent, the agent is prepared to arrange for the
conversion of U.S. dollars into the specified currency described in the
applicable pricing supplement to enable the purchasers to pay for the notes.
Each such conversion will be made by the applicable agent on terms and subject
to conditions, limitations and charges as the applicable agent may from time to
time establish in accordance with its regular foreign exchange practices. All
costs of exchange will be borne by the purchasers of the notes. See "Special
Provisions Relating to Foreign Currency Notes."
The senior notes may be registered for transfer or exchanged at the
principal office of the Corporate Trust Department of The First National Bank of
Chicago in Chicago, Illinois. The subordinated notes may be registered for
transfer or exchanged at the principal office of the Corporate Trust Department
of Chase Manhattan Bank and Trust Company, National Association in New York, New
York. The transfer or exchange of global notes will be effected as specified in
"Book-Entry System" below.
The indentures do not contain any provision which will restrict us from
incurring, assuming or becoming liable with respect to any indebtedness or other
obligations. In addition, the indentures do not contain any provision which
would afford holders of the notes other protection upon the occurrence of a
highly leveraged transaction involving Providian Financial which may adversely
affect the creditworthiness of the notes.
As used in this prospectus supplement, business day means:
* with respect to any note, any day that is not a Saturday or Sunday
and that, in The City of New York, is not a day on which banking
institutions generally are authorized or obligated by law to close,
and
* if the note is denominated in a specified currency other than U.S.
dollars, any day that is not a day on which banking institutions are
authorized or required by law to close in the financial center of the
country issuing the specified currency, and
* with respect only to LIBOR notes, as described below, a London
business day.
As used in the preceding sentence, financial center means the capital city of
the country issuing the specified currency or the capital city of the country to
which the LIBOR currency relates, as applicable, except that with respect to the
following currencies the financial center shall be the city or cities listed
next to each currency:
S-23
<PAGE>
<TABLE>
<CAPTION>
Currency Financial Center
-------------------- ---------------------------------------
<S> <C>
U.S. dollars The City of New York
Australian dollars Sydney and (solely in the case of
the specified currency) Melbourne
Canadian dollars Toronto
Deutsche marks Frankfurt
Dutch guilders Amsterdam
Euro London and Luxembourg
Italian lire Milan
Portuguese escudos London (solely in the case of the
LIBOR Currency)
South African rand Johannesburg
Swiss francs Zurich
</TABLE>
Unless otherwise specified in the applicable pricing supplement, London business
day means:
* if the LIBOR currency, as described below, is other than the Euro,
any day on which dealings in deposits in the LIBOR currency are
transacted in the London interbank market or
* if the LIBOR currency is the Euro, any day on which the Trans-
European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open.
Payment of Principal and Interest
Unless we otherwise specify in the applicable pricing supplement, payments
of principal of, and premium, if any, and interest on all notes will be made in
the applicable specified currency; provided, however, that payments of principal
of, and premium, if any, and interest on foreign currency notes will
nevertheless be made in U.S. dollars:
* if the foreign currency notes are certificated notes, at the option
of the holders of these notes under the procedures described below,
and
* if the foreign currency notes are global notes, unless the depositary
has received notice from any of its participants of their election to
receive payment in the specified currency as provided in "Book-Entry
System" below, and
* at our option if the specified currency is unavailable, in our good
faith judgment, due to the imposition of exchange controls or other
circumstances beyond our control.
See "Special Provisions Relating to Foreign Currency Notes--Payment Currency,"
for further information regarding payment of foreign currency notes.
Where payments of principal and premium, if any, and interest at maturity
are to be made in U.S. dollars, payments will be made in immediately available
funds, provided that the note is presented to the trustee in time for the
trustee to make the payments in such funds in accordance with its normal
procedures. Payments of interest, other than interest payable at maturity, to
be made in U.S. dollars with respect to global notes will be paid in immediately
available funds to the depositary or its nominee. The depositary will allocate
payments relating to a global note and make payments to the owners or holders of
the global notes in accordance with its existing operating procedures. Neither
we nor the trustee shall have any responsibility or liability for these payments
by the depositary. So long as the depositary or its
S-24
<PAGE>
nominee is the registered owner of any global note, the depositary or its
nominee will be considered the sole owner or holder of such note for all
purposes under the indenture.
Where payments of interest and, in the case of amortizing notes, principal
and premium, if any, with respect to any certificated note, other than amounts
payable at maturity, are to be made in U.S. dollars, the payments will be paid
by check mailed to the address of the person entitled to the payments as it
appears in the security register. However, unless otherwise specified in the
pricing supplement, a holder of U.S. $10,000,000 or more in aggregate principal
amount of certificated notes having the same provisions shall be entitled to
receive such payment of interest in U.S. dollars by wire transfer of immediately
available funds to such account with a bank located in the United States as such
holder designates in writing, but only if appropriate payment instructions have
been received in writing by the trustee on or prior to the regular record date
for such certificated notes.
Unless we otherwise indicate in the applicable pricing supplement, payments
of principal and premium, if any, and interest with respect to any note to be
made in a specified currency other than U.S. dollars will be paid in immediately
available funds by wire transfer to such account maintained by the holder with a
bank designated by the holder, which in the case of global notes will be the
depositary or its nominee, on or prior to the regular record date or at least 15
days prior to maturity, as the case may be, provided that such bank has the
appropriate facilities for such a payment in the specified currency. However,
it is also necessary that with respect to payments of principal and premium, if
any, and interest at maturity the note is presented to the trustee in time for
the trustee to make such payment in accordance with its normal procedures, which
shall require presentation no later than two business days prior to maturity in
order to ensure the availability of immediately available funds in the specified
currency at maturity. A holder must make such designation by filing the
appropriate information with the trustee and, unless revoked, any such
designation made with respect to any note will remain in effect with respect to
any further payments payable to such holder with respect to such note.
Unless we otherwise specify in the applicable pricing supplement, if we
redeem any original issue discount note as described below under "Redemption and
Repurchase," or we repay any such note at the option of the holder as described
below under "Repayment at Option of Holder," or if the principal of any such
note is declared to be due and payable immediately as described above under
"Senior Notes--Events of Default, Waiver, Etc." or "Subordinated Notes--Events
of Default, Default, Waiver, Etc." the amount of principal due and payable with
respect to such note shall be limited to the sum of the aggregate principal
amount of such note multiplied by the issue price, expressed as a percentage of
the aggregate principal amount, plus the original issue discount accrued from
the date of issue to the date of redemption, repayment or declaration, as
applicable, which accrual shall be calculated using the "interest method,"
computed in accordance with generally accepted accounting principles, in effect
on the date of redemption, repayment or declaration, as applicable.
If we so specify in the applicable pricing supplement, payments of
principal and premium, if any, and interest with respect to any foreign currency
note which is a certificated note will be made in U.S. dollars if the holder of
such note elects to receive all such payments in U.S. dollars by delivery of a
written request to the trustee either on or prior to the regular record date for
such certificated note or at least 15 days prior to maturity. Such election may
be in writing, mailed or hand delivered, or by cable, telex or other form of
facsimile transmission. A holder of a foreign currency note which is a
certificated note may elect to receive payment in U.S. dollars for all
principal, premium, if any, and interest payments and need not file a separate
election for each payment. Such election will remain in effect until revoked by
written notice to the trustee, but written notice of such revocation must be
received by the trustee either on or prior to the regular record date or at
least 15 days prior to maturity.
S-25
<PAGE>
Holders of foreign currency notes whose notes are held in the name of a
broker or nominee should contact such broker or nominee to determine whether and
how an election to receive payments in U.S. dollars may be made. Holders of
foreign currency notes which are global notes will receive payments in U.S.
dollars unless they notify the depositary of their election to receive payments
in the specified currency. See "Book-Entry System" for further information
regarding payment arrangements with respect to such notes.
The U.S. dollar amount to be received by a holder of a foreign currency
note will be based upon the exchange rate as determined by the exchange rate
agent based on the highest firm bid quotation for U.S. dollars received by such
exchange rate agent at approximately 11:00 a.m., New York City time, on the
second business day preceding the applicable payment date from three recognized
foreign exchange dealers in The City of New York selected by the exchange rate
agent and approved by us, one of which may be the exchange rate agent, for the
purchase by the quoting dealer, for settlement on such payment date, of the
aggregate amount of the specified currency payable on such payment date in
respect of all notes denominated in such specified currency. If no such bid
quotations are available, payments will be made in the specified currency,
unless such specified currency is unavailable due to the imposition of exchange
controls or to other circumstances beyond our control, in which case payment
will be made as described below under "Special Provisions Relating to Foreign
Currency Notes--Payment Currency." All currency exchange costs will be borne by
the holders of such notes by deductions from such payments. Unless we otherwise
specify in the applicable pricing supplement, The First National Bank of Chicago
will be the exchange rate agent for the notes.
Interest Rate
Each note, other than a zero-coupon note, will bear interest from and
including the date of issue, or in the case of notes issued upon registration of
transfer or exchange from and including the most recent interest payment date to
which interest on such note has been paid or duly provided for. Such interest
will be payable at the fixed rate per annum, or at the rate per annum determined
pursuant to the interest rate formula or formulas, stated in such note and in
the applicable pricing supplement until the principal of such note is paid or
made available for payment. Interest will be payable on each interest payment
date and at maturity. Interest will be payable to the person in whose name a
note is registered at the close of business on the regular record date next
preceding each interest payment date; provided, however, that interest payable
at maturity will be payable to the person to whom principal shall be payable.
The first payment of interest on any note originally issued between a regular
record date and an interest payment date will be made on the interest payment
date following the next succeeding regular record date to the registered owner
of such note on such next succeeding regular record date.
The regular record date with respect to floating rate notes, as such notes
are further described in the last paragraph of this subsection, shall be the
date 15 calendar days prior to such interest payment date, whether or not such
date shall be a business day. The regular record dates with respect to fixed
rate notes, as such notes are further described in the last paragraph of this
subsection, shall be the March 15 and September 15 next preceding the April 1
and October 1 interest payment dates, or if the interest payment dates are other
than April and October 1, the dates specified in the applicable pricing
supplement.
Interest rates we offer on the notes may differ depending upon, among other
things, the aggregate principal amount of notes purchased in any single
transaction. Interest rates, interest rate formulas and other variable terms of
the notes are subject to change by us from time to time, but no such change will
affect any note already issued or as to which an offer to purchase has been
accepted by us.
S-26
<PAGE>
Unless otherwise specified in the applicable pricing supplement, each note,
other than a zero-coupon note, will bear interest at either (a) a fixed rate, in
which case the note is a fixed rate note, or (b) a variable rate, in which case
the note is a floating rate note.
Fixed Rate Notes
The applicable pricing supplement relating to a fixed rate note will
designate a fixed rate of interest per annum payable on such fixed rate note,
which rate will also be stated on the face of such note. Each fixed rate note
will bear interest from and including the date of issue, or in the case of notes
issued upon registration or transfer or exchange, from and including the most
recent interest payment date to which interest on such note has been paid or
duly provided for, at such per annum rate. Unless otherwise specified in the
applicable pricing supplement, the date on which interest is payable, called the
interest payment dates, for the fixed rate notes will be April 1 and October 1
of each year until the principal of such note is paid or made available for
payment.
Unless we otherwise specify in the applicable pricing supplement, interest
payments, if any, on a fixed rate note will be the amount of interest accrued
from and including the last date in respect of which interest has been paid or
duly provided for, or from and including the date of issue if no interest has
been paid or provided for with respect to such note, to but excluding the
interest payment date or the date of maturity. Interest on fixed rate notes
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on fixed rate notes will be payable generally to the person in whose
name such a note is registered at the close of business on the regular record
date.
If the interest payment date or the maturity for any fixed rate note falls
on a day that is not a business day, the payment of principal, premium, if any,
and interest may be made on the next succeeding business day, and no interest on
such payment shall accrue for the period from and after such interest payment
date or maturity, as the case may be.
Floating Rate Notes
Unless we otherwise specify in the applicable pricing supplement, each
floating rate note will bear interest at a variable rate determined by reference
to an interest rate formula or formulas, which may be adjusted by adding or
subtracting the spread and/or multiplying by the spread multiplier, each as
described below. A floating rate note may also have either or both of the
following: (a) a maximum numerical interest rate limitation, or ceiling, on the
rate of interest which may accrue during any interest period; and (b) a minimum
numerical interest rate limitation, or floor, on the rate of interest which may
accrue during any interest period. The spread is the number of basis points
specified by us in the applicable pricing supplement as being applicable to the
interest rate for such note and the spread multiplier is the percentage
specified by us in the applicable pricing supplement as being applicable to the
interest rate for such note.
The applicable pricing supplement relating to a floating rate note will
designate an interest rate basis or bases for such floating rate note. Such
basis or bases may be:
* the CD Rate, in which case such note will be a CD Rate note,
* the CMT Rate, in which case such note will be a CMT Rate note,
* the Commercial Paper Rate, in which case such note will be a
Commercial Paper Rate note,
S-27
<PAGE>
* the Eleventh District Cost of Funds Rate, in which case such note
will be an Eleventh District Cost of Funds note,
* the Federal Funds Rate, in which case such note will be a Federal
Funds Rate note,
* LIBOR, in which case such note will be a LIBOR note,
* the Prime Rate, in which case such note will be a Prime Rate note,
* the Treasury Rate, in which case such note will be a Treasury Rate
note, or
* such other interest rate formula or formulas (which may include a
combination of more than one of the interest rate bases described
above) as may be described in the applicable pricing supplement.
We will also specify in the applicable pricing supplement for a floating
rate note the spread and/or spread multiplier, if any, and the ceiling or floor,
if any, applicable to each note. In addition, in such pricing supplement we
will define or particularize for each note the following terms, if applicable:
initial interest rate, interest payment dates, index maturity, LIBOR currency,
designated LIBOR page, designated CMT maturity index, designated CMT Telerate
page and interest reset date with respect to such note.
Index maturity means, with respect to a floating rate note, the period to
maturity of the instrument or obligation on which the interest rate formula is
based, as specified in the applicable pricing supplement.
Change of Interest Rate. Unless we otherwise specify in the applicable
------------------------
pricing supplement, the rate of interest on each floating rate note will be
reset daily, weekly, monthly, quarterly, semi-annually or annually (each an
interest reset date) as specified in the applicable pricing supplement. Unless
otherwise indicated in the applicable pricing supplement, the interest reset
date will be as follows:
* in the case of floating rate notes which reset daily, each business
day;
* in the case of floating rate notes, other than the Treasury Rate
notes, which reset weekly, the Wednesday of each week;
* in the case of Treasury Rate notes which reset weekly, the Tuesday of
each week;
* in the case of floating rate notes which reset monthly, the third
Wednesday of each month;
* in the case of floating rate notes which reset quarterly, the third
Wednesday of March, June, September and December;
* in the case of floating rate notes which reset semi-annually, the
third Wednesday of two months of each year, as specified in the
applicable pricing supplement; and
* in the case of floating rate notes which reset annually, the third
Wednesday of one month of each year, as specified in the applicable
pricing supplement.
In any event, the interest rate in effect from the date of issue to the
first interest reset date with respect to a floating rate note will be the
initial interest rate, as described in the applicable pricing supplement. If
any interest reset date for any floating rate note would otherwise be a day that
is not a business day for such floating rate note, the interest reset date for
such floating rate note shall be
S-28
<PAGE>
postponed to the next day that is a business day for such floating rate note.
However, in the case of LIBOR notes, if such business day is in the next
succeeding calendar month, such interest reset date shall be the immediately
preceding business day.
Date Interest Rate Is Determined. Unless we otherwise specify in the
--------------------------------
applicable pricing supplement, the interest determination date pertaining to an
interest reset date for a CD Rate note, a CMT Rate note, a Commercial Paper Rate
note, a Federal Funds Rate note, or a Prime Rate note will be the second
business day preceding the interest reset date with respect to such note.
Unless we otherwise specify in the applicable pricing supplement, the
interest determination date pertaining to an interest reset date for a LIBOR
note will be the second London business day preceding such interest reset date,
unless the LIBOR currency is British pounds sterling, in which case the LIBOR
interest determination date will be the applicable interest reset date.
Unless we otherwise specify in the applicable pricing supplement, the
interest determination date pertaining to an interest reset date for a Treasury
Rate note will be the day of the week in which such interest reset date falls on
which direct obligations of the United States, known as Treasury bills, would
normally be auctioned. Treasury bills are usually sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
usually held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as the result of a legal holiday, an auction is so
held on the preceding Friday, such Friday will be the Treasury Rate note
interest determination date pertaining to the interest reset date occurring in
the next succeeding week. If an auction date shall fall on any interest reset
date for a Treasury Rate note, then such interest reset date shall instead be
the first business day immediately following such auction date.
Unless we otherwise specify in the applicable pricing supplement, the
interest determination date pertaining to an interest reset date for an Eleventh
District Cost of Funds Rate note will be the last business day of the month
immediately preceding the applicable interest reset date in which the Federal
Home Loan Bank of San Francisco published the Index (as defined below).
Payment of Interest. Unless we otherwise indicate in the applicable
-------------------
pricing supplement and except as provided below, interest will be payable as
follows:
* in the case of floating rate notes which reset daily, weekly or
monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as
indicated in the applicable pricing supplement;
* in the case of floating rate notes which reset quarterly, on the
third Wednesday of March, June, September and December of each year;
* in the case of floating rate notes which reset semi-annually, on the
third Wednesday of the two months of each year specified in the
applicable pricing supplement;
* in the case of floating rate notes which reset annually, on the third
Wednesday of the month specified in the applicable pricing supplement
(each of the foregoing is an interest payment date); and
* in each case, at maturity.
If an interest payment date with respect to any floating rate note would
otherwise fall on a day that is not a business day with respect to such note,
such interest payment date will be postponed to the following day that is a
business day with respect to such note, except that in the case of a LIBOR note,
if
S-29
<PAGE>
such day falls in the next calendar month, such interest payment date will be
the preceding day that is a business day with respect to such LIBOR note. If the
maturity of any floating rate note falls on a day that is not a business day,
the payment of principal, premium, if any, and interest may be made on the next
succeeding business day, and no interest on such payment shall accrue for the
period from and after maturity.
Unless we otherwise specify in the applicable pricing supplement, interest
payments, if any, on a floating rate note will be the amount of interest accrued
from and including the last date in respect of which interest has been paid or
duly provided for, or from and including the date of issue if no interest has
been paid or provided for with respect to such note, to but excluding the
interest payment date or the date of maturity. With respect to a floating rate
note, accrued interest from the date of issue or from the last date to which
interest has been paid is calculated by multiplying the face amount of such
floating rate note by an accrued interest factor. Such accrued interest factor
is computed by adding the interest factor calculated for each day from the date
of issue, or from the last date to which interest has been paid, to the date for
which accrued interest is being calculated.
The interest factor, expressed as a decimal rounded, if necessary, to the
nearest one-hundred-thousandth of a percentage point, with five-millionths of a
percentage point rounded upwards (e.g., 9.876545% or .09876545 being rounded to
9.87655% or .0987655, respectively), for each such day is computed by dividing
the interest rate, expressed as a decimal rounded, if necessary, to the nearest
one-hundred-thousandth of a percentage point, with five-millionths of a
percentage point rounded upwards, applicable to such date by 360, in the case of
CD Rate notes, Commercial Paper Rate notes, Eleventh District Cost of Funds Rate
notes, Federal Funds Rate notes, LIBOR notes or Prime Rate notes, or by the
actual number of days in the year, in the case of CMT Rate Notes and Treasury
Rate notes.
In addition to any maximum interest rate which may be applicable to any
floating rate note pursuant to the above provisions, the interest rate on the
floating rate notes will in no event be higher than the maximum rate permitted
by New York law, as the same may be modified by United States law of general
application. Under present New York law the maximum rate of interest is 25% per
annum on a simple interest basis. The limit may not apply to floating rate
notes in which $2,500,000 or more has been invested.
Unless we otherwise specify in the applicable pricing supplement, the
calculation date pertaining to any interest determination date, other than with
respect to LIBOR notes, shall be the earlier of (i) the tenth day after such
interest determination date or, if any such day is not a business day, the next
succeeding business day or (ii) the business day preceding the applicable
interest payment date or maturity, as the case may be.
Upon the request of the holder of any floating rate note, the calculation
agent, as described below, will provide the interest rate then in effect and, if
different, the interest rate which will become effective as a result of a
determination made on the most recent interest determination date with respect
to such floating rate note. Unless otherwise provided in the applicable pricing
supplement, The First National Bank of Chicago will be the calculation agent
with respect to the floating rate notes issued under the senior indenture, and
Chase Manhattan Bank and Trust Company, National Association, will be the
calculation agent with respect to the floating rate notes issued under the
subordinated indenture.
The interest rate(s) on the floating rate notes that are CD Rate notes, CMT
Rate notes, Commercial Paper Rate notes, Eleventh District Cost of Funds Rate
notes, Federal Funds Rate notes, LIBOR notes, Prime Rate notes or Treasury Rate
notes will be determined as described under the following captions, as
applicable.
S-30
<PAGE>
CD Rate Notes
CD Rate notes will bear interest at the interest rates, calculated with
reference to the CD Rate and the spread and/or spread multiplier, if any, and
will be payable on the dates, that we specify on the face of the CD Rate note
and in the applicable pricing supplement.
Unless we otherwise indicate in the applicable pricing supplement, "CD
Rate" means, with respect to any interest determination date relating to a CD
Rate note (a CD interest determination date), the rate on such date for
negotiable U.S. dollar certificates of deposit having the index maturity
designated by us in the applicable pricing supplement as published in H.15(519)
(as defined below) under the heading "CDs (Secondary Market)."
The following procedures will be followed if the CD Rate cannot be
determined as described above:
* If the above rate is not published in H.15(519) by 3:00 p.m., New
York City time, on the calculation date pertaining to such CD
interest determination date, the CD Rate will be the rate on such CD
interest determination date described in H.15 Daily Update (as
defined below) for the day in respect of certificates of deposit
having the index maturity specified by us in the applicable pricing
supplement under the caption "CDs (Secondary Market)" or another
recognized electronic source used for the purpose of displaying the
applicable rate.
* If such rate is not yet published either in H.15(519) or in H.15
Daily Update or another recognized electronic source by 3:00 p.m.,
New York City time, on such calculation date, the calculation agent
will determine the CD Rate to be the arithmetic mean (rounded, if
necessary, to the nearest one-hundred-thousandth of a percentage
point, with five-millionths of a percentage point rounded upwards) of
the secondary market offered rates as of 10:00 a.m., New York City
time, on such CD interest determination date, of three leading
nonbank dealers in negotiable U.S. dollar certificates of deposit in
The City of New York (which may include the Agents or their
affiliates) selected by the calculation agent for negotiable
certificates of deposit of major United States money center banks in
the market for negotiable certificates of deposit with a remaining
maturity closest to the index maturity specified in the applicable
pricing supplement.
* If the dealers selected by the calculation agent are not quoting as
mentioned above, the CD Rate will be the CD Rate then in effect on
such CD interest determination date.
"H.15(519)" means the weekly statistical release designated as such, or any
successor publication, published by the Federal Reserve Board.
"H.15 Daily Update" means the daily update of H.15(519), available through
the world-wide-web site of the Federal Reserve Board at
http://www.bog.frb.fed.us/releases/h15/update, or any successor site or
publication.
CMT Rate Notes
CMT Rate notes will bear interest at the interest rates, calculated with
reference to the CMT Rate and the spread and/or spread multiplier, if any, and
will be payable on the dates, that we specify on the face of the CMT Rate note
and in the applicable pricing supplement.
Unless otherwise specified in the applicable pricing supplement, "CMT Rate"
means, with respect to any interest determination date relating to a CMT Rate
note (a CMT interest determination
S-31
<PAGE>
date), the rate displayed on the designated CMT Telerate page (as described
below) under the caption ". . . Treasury Constant Maturities . . . Federal
Reserve Board Release H.15 . . . Mondays Approximately 3:45 p.m.", under the
column for the designated CMT maturity index (as described below) for:
* If the designated CMT Telerate page is 7051, the rate on such CMT
interest determination date, and
* If the designated CMT Telerate page is 7052, the weekly or monthly
average specified in the applicable pricing supplement for the week or
the month, as applicable, ended immediately preceding the week or the
month, as applicable, in which the related CMT interest determination
date occurs.
Designated CMT Telerate page means the display on the Bridge Telerate, Inc.
(or any successor service) on the page designated in the applicable pricing
supplement (or any other page as may replace such page on that service for the
purpose of displaying Treasury Constant Maturities as reported in H.15(519)),
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519). If no such page is specified in the applicable pricing supplement,
the designated CMT Telerate page will be 7052.
Designated CMT maturity index means the original period to maturity of the
U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years) specified in
the applicable pricing supplement with respect to which the CMT Rate will be
calculated. If no such maturity is specified in the applicable pricing
supplement, the Designated CMT maturity index shall be 2 years.
The following procedures will be used if the CMT Rate cannot be determined
as described above:
* If such rate is no longer displayed on the relevant page, or is not
displayed by 3:00 p.m., New York City time, on the calculation date
pertaining to such CMT interest determination date, the CMT Rate will be
such Treasury Constant Maturity rate for the designated CMT maturity
index as published in the relevant H.15(519).
* If that rate is no longer published, or is not published by 3:00 p.m.,
New York City time, on the calculation date pertaining to such CMT
interest determination date, the CMT Rate will be such Treasury Constant
Maturity rate for the designated CMT maturity index (or other United
States Treasury rate for the designated CMT maturity index) for the CMT
interest determination date with respect to such interest reset date as
may then be published by either the Federal Reserve Board or the United
States Department of the Treasury that the calculation agent determines
to be comparable to the rate formerly displayed on the designated CMT
Telerate page and published in the relevant H.15(519).
* If such information is not provided by 3:00 p.m., New York City time, on
the calculation date pertaining to such CMT interest determination date,
the calculation agent will determine the CMT Rate to be a yield to
maturity based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT interest determination date reported, according to their written
records, by three leading primary United States government securities
dealers (each, a reference dealer) in The City of New York (which may
include the Agents or their affiliates) selected by the calculation
agent (as described in the following sentence) for the most recently
issued direct noncallable fixed rate obligations of the United States
(Treasury notes) with an original maturity of approximately the
designated CMT maturity index and a remaining term to maturity of not
less than such designated CMT maturity index minus one year.
S-32
<PAGE>
* The calculation agent will select five reference dealers and will
eliminate the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one
of the lowest). If three or four (and not five) of such reference
dealers are quoting as described above, the CMT Rate will be based on
the arithmetic mean of the offer prices obtained and neither the highest
nor the lowest of such quotes will be eliminated.
* If the calculation agent cannot obtain three such Treasury notes
quotations, the calculation agent will determine the CMT Rate to be a
yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 p.m., New York City time, on
the CMT interest determination date of three reference dealers in The
City of New York (selected using the same method described above), for
Treasury notes with an original maturity of the number of years that is
the next highest to the designated CMT maturity index and a remaining
term to maturity closest to the designated CMT maturity index and in an
amount of at least $100,000,000.
* If fewer than three reference dealers selected by the calculation agent
are quoting as described above, the CMT Rate will be the CMT Rate in
effect on such CMT interest determination date.
* If two Treasury notes with an original maturity as described in the
second preceding paragraph have remaining terms to maturity equally
close to the designated CMT maturity index, the quotes for the Treasury
note with the shorter remaining term to maturity will be used.
Commercial Paper Rate Notes
Commercial Paper Rate notes will bear interest at the interest rates,
calculated with reference to the Commercial Paper Rate and the spread and/or
spread multiplier, if any, and will be payable on the dates, that we specify on
the face of the Commercial Paper Rate note and in the applicable pricing
supplement.
Unless we otherwise indicate in the applicable pricing supplement,
"Commercial Paper Rate" means, with respect to any interest determination date
relating to a Commercial Paper Rate note (a commercial paper interest
determination date), the money market yield, calculated as described below, on
such date of the rate for commercial paper having the index maturity specified
by us in the applicable pricing supplement as published in H.15(519) under the
heading "Commercial Paper--Nonfinancial."
The following procedures will be followed if the Commercial Paper Rate
cannot be determined as described above:
* If the above rate is not published by 3:00 p.m., New York City time,
on the calculation date pertaining to such commercial paper interest
determination date, then the Commercial Paper Rate will be the money
market yield of the rate on such commercial paper interest
determination date for commercial paper having the index maturity
specified by us in the applicable pricing supplement as published in
H.15 Daily Update under the heading "Commercial Paper--Nonfinancial"
or another recognized electronic source used for the purpose of
displaying the applicable rate.
* If by 3:00 p.m., New York City time, on such calculation date such
rate is not yet published either in H.15(519) or H.15 Daily Update or
in another recognized electronic source, then the calculation agent
will determine the Commercial Paper Rate to be the money market yield
of the arithmetic mean (rounded, if necessary, to the nearest one-
hundred-thousandth of a percentage point, with five-
S-33
<PAGE>
millionths of a percentage point rounded upwards) of the offered
rates as of 11:00 a.m., New York City time, on such commercial paper
interest determination date of three leading dealers of U.S. dollar
commercial paper in The City of New York (which may include the
Agents or their affiliates) selected by the calculation agent for
commercial paper of the index maturity specified in the applicable
pricing supplement placed for an industrial issuer whose bond rating
is "Aa," or the equivalent, from a nationally recognized statistical
rating organization.
* If the dealers selected by the calculation agent are not quoting as
mentioned above, the Commercial Paper Rate will be the Commercial
Paper Rate then in effect on such commercial paper interest
determination date.
The money market yield shall be a yield, expressed as a percentage rounded,
if necessary, to the nearest one-hundred-thousandth of a percentage point, with
five-millionths of a percentage point rounded upwards, calculated in accordance
with the following formula:
D x 360
money market yield = ---------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal; and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Eleventh District Cost of Funds Rate Notes
Eleventh District Cost of Funds Rate notes will bear interest at the
interest rates, calculated with reference to the Eleventh District Cost of Funds
Rate and the spread and/or spread multiplier, if any, and will be payable on the
dates specified by us on the face of the Eleventh District Cost of Funds Rate
note and in the applicable pricing supplement.
Unless we otherwise indicate in the applicable pricing supplement,
``Eleventh District Cost of Funds Rate'' means, with respect to any interest
determination date relating to an Eleventh District Cost of Funds Rate note (an
Eleventh District Cost of Funds interest determination date), the rate equal to
the monthly weighted average cost of funds for the calendar month immediately
preceding the month in which such Eleventh District Cost of Funds interest
determination date falls, as such rate is displayed on Bridge Telerate, Inc., or
any successor service, on page 7058, or any other page as may replace such page
on such service, under the heading "Eleventh District" as of 11:00 a.m., San
Francisco time, on such Eleventh District Cost of Funds interest determination
date.
The following procedures will be followed if the Eleventh District Cost of
Funds Rate cannot be determined as described above:
* If the above rate is not published by 11:00 a.m., San Francisco time,
on the calculation date pertaining to the Eleventh District Cost of
Funds interest determination date, the Eleventh District Cost of
Funds Rate will be the monthly weighted average cost of funds paid by
member institutions of the Eleventh Federal Home Loan Bank District
that was most recently announced (the Index) by the Federal Home Loan
Bank of San Francisco as such cost of funds for the calendar month
immediately preceding such Eleventh District Cost of Funds interest
determination date.
* If the Federal Home Loan Bank of San Francisco fails to announce the
Index on or prior to such Eleventh District Cost of Funds interest
determination date for the calendar month immediately
S-34
<PAGE>
preceding such Eleventh District Cost of Funds interest determination
date, the Eleventh District Cost of Funds Rate will be the Eleventh
District Cost of Funds Rate then in effect on the Eleventh District
Cost of Funds interest determination date.
Federal Funds Rate Notes
Federal Funds Rate notes will bear interest at the interest rates,
calculated with reference to the Federal Funds Rate and the spread and/or spread
multiplier, if any, and will be payable on the dates that we specify on the face
of the Federal Funds Rate note and in the applicable pricing supplement.
Unless we otherwise indicate in the applicable pricing supplement, "Federal
Funds Rate" means, with respect to any interest determination date relating to a
Federal Funds Rate note (a federal funds interest determination date), the rate
on such date for U.S. dollar federal funds as published in H.15(519) under the
heading "Federal Funds (Effective)," as such rate is displayed on Bridge
Telerate, Inc., or any successor service, on page 120, or any other page as may
replace such page on such service.
The following procedures will be followed if the Federal Funds Rate cannot
be determined as described above:
* If the above rate is not published by 3:00 p.m., New York City time,
on the calculation date pertaining to the federal funds interest
determination date, the Federal Funds Rate will be the rate on such
federal funds interest determination date for U.S. dollar federal
funds as published in H.15 Daily Update under the heading "Federal
Funds/(Effective)" or another recognized electronic source used for
the purpose of displaying the applicable rate.
* If such rate is not yet published either in H.15(519) or H.15 Daily
Update or in another recognized electronic source by 3:00 p.m., New
York City time, on such calculation date, the calculation agent will
determine the Federal Funds Rate to be the arithmetic mean (rounded,
if necessary, to the nearest one-hundred-thousandth of a percentage
point, with five-millionths of a percentage point rounded upwards) of
the rates for the last transaction in overnight U.S. dollar federal
funds arranged by each of three leading brokers of U.S. dollar
federal funds transactions in The City of New York (which may include
the Agents or their affiliates) selected by the calculation agent
prior to 9:00 a.m., New York City time, on such federal funds
interest determination date.
* If the brokers selected by the calculation agent are not quoting as
mentioned above, the Federal Funds Rate will be the Federal Funds
Rate then in effect on such federal funds interest determination
date.
LIBOR Notes
LIBOR notes will bear interest at the interest rates, calculated with
reference to LIBOR and the spread and/or spread multiplier, if any, and will be
payable on the dates we specify on the face of the LIBOR note and in the
applicable pricing supplement.
Unless we otherwise indicate in the applicable pricing supplement, LIBOR
for each interest determination date relating to a LIBOR note (a LIBOR interest
determination date) will be determined by the calculation agent as follows:
* If we specify LIBOR Reuters in the applicable pricing supplement, the
arithmetic mean (rounded, if necessary, to the nearest one-hundred-
thousandth of a percentage point, with five-millionths of a
percentage point rounded upwards) of the offered rates (unless the
specified designated LIBOR page,
S-35
<PAGE>
as described below, by its terms provides only for a single rate, in
which case such single rate shall be used) for deposits in the LIBOR
currency, as described below, having the index maturity designated by
us in the applicable pricing supplement, commencing on the second
London business day immediately following such LIBOR interest
determination date, that appear on the designated LIBOR page as of
11:00 a.m., London time, on that LIBOR interest determination date,
if at least two such offered rates appear, unless, as mentioned, only
a single rate is required, on such designated LIBOR page.
* If we specify LIBOR Telerate in the applicable pricing supplement,
the rate for deposits in the LIBOR currency having the index maturity
designated in the applicable pricing supplement, commencing on the
second London business day immediately following such LIBOR interest
determination date, that appears on the designated LIBOR page as of
11:00 a.m., London time, on such LIBOR interest determination date.
If neither LIBOR Reuters nor LIBOR Telerate is specified by us in the
applicable pricing supplement, LIBOR for the applicable LIBOR currency will be
determined as if LIBOR Telerate had been specified.
If LIBOR Reuters is specified in the applicable pricing supplement and
fewer than two offered rates appear, or if LIBOR Telerate is specified in the
applicable pricing supplement and no rate appears, the calculation agent will
determine LIBOR in respect of the related LIBOR interest determination date as
follows:
* The calculation agent will request the principal London offices of
each of four major reference banks (which may include affiliates of
the Agents) in the London interbank market, as selected by the
calculation agent, to provide the calculation agent with its offered
quotation for deposits in the LIBOR currency for the period of the
index maturity designated in the applicable pricing supplement,
commencing on the second London business day immediately following
such LIBOR interest determination date, to prime banks in the London
interbank market at approximately 11:00 a.m., London time, on such
LIBOR interest determination date and in a principal amount that is
representative of a single transaction in such LIBOR currency in such
market at such time.
* If at least two such quotations are provided, LIBOR determined on
such LIBOR interest determination date will be the arithmetic mean
(rounded, if necessary, to the nearest one-hundred-thousandth of a
percentage point, with five-millionths of a percentage point rounded
upwards) of such quotations.
* If fewer than two quotations are provided, LIBOR determined on such
LIBOR interest determination date will be the arithmetic mean
(rounded, if necessary, to the nearest one-hundred-thousandth of a
percentage point, with five-millionths of a percentage point rounded
upwards) of the rates quoted at approximately 11:00 a.m., or such
other time specified in the applicable pricing supplement, in the
applicable financial center for the country of the LIBOR currency on
such LIBOR interest determination date, by three major banks (which
may include affiliates of the Agents) in such financial center
selected by the calculation agent for loans in the LIBOR currency to
leading European banks, having the index maturity designated in the
applicable pricing supplement and in a principal amount that is
representative for a single transaction in such LIBOR currency in
such market at such time.
* If the banks so selected by the calculation agent are not quoting as
mentioned above, LIBOR will be LIBOR in effect on such LIBOR interest
determination date.
S-36
<PAGE>
The LIBOR currency is the currency specified by us in the applicable
pricing supplement as the currency for which LIBOR shall be calculated. If we
do not specify any such currency in the applicable pricing supplement, the LIBOR
currency shall be U.S. dollars.
The designated LIBOR page means either (a) if we designate LIBOR Reuters in
the applicable pricing supplement, the display on the Reuter Monitor Money Rates
Service, or any successor service on the page specified in such pricing
supplement (or any other page as may replace such page on such service), for the
purpose of displaying the London interbank rates of major banks for the
applicable LIBOR currency, or (b) if we designate LIBOR Telerate in the
applicable pricing supplement or neither LIBOR Reuters nor LIBOR Telerate is
specified in the applicable pricing supplement as the method for calculating
LIBOR, the display on Bridge Telerate, Inc., or any successor service on the
page specified in such pricing supplement (or any other page as may replace such
page on such service), for the purpose of displaying the London interbank rates
of major banks for the applicable LIBOR currency.
Prime Rate Notes
Prime Rate notes will bear interest at the interest rates, calculated with
reference to the Prime Rate and the spread and/or spread multiplier, if any, and
will be payable on the dates, specified on the face of the Prime Rate note and
in the applicable pricing supplement.
Unless we otherwise indicate in the applicable pricing supplement, "Prime
Rate" means, with respect to any interest determination date relating to a Prime
Rate note (a prime rate interest determination date), the rate for the relevant
prime rate interest determination date as published in H.15(519) under the
heading "Bank Prime Loan."
The following procedures will be followed if the Prime Rate cannot be
determined as described above:
* If the rate is not published prior to 3:00 p.m., New York City time,
on the calculation date pertaining to the prime rate interest
determination date, then the Prime Rate will be the rate on such
prime rate interest determination date as published in H.15 Daily
Update opposite the caption "Bank Prime Loan" or another recognized
electronic source used for the purpose of displaying the applicable
rate.
* If the rate is not published prior to 3:00 p.m., New York City time,
on such calculation date, either in H.15(519) or H.15 Daily Update or
in another recognized electronic source, then the calculation agent
will determine the Prime Rate to be the arithmetic mean (rounded, if
necessary, to the nearest one-hundred-thousandth of a percentage
point, with five-millionths of a percentage point rounded upwards) of
the rates of interest publicly announced by each bank that appears on
the Reuters Screen US PRIME 1 Page, as defined below, as such bank's
prime rate or base lending rate as of 11:00 a.m., New York City time,
on such prime rate interest determination date.
* If fewer than four such rates appear on the Reuters Screen US PRIME 1
Page for the prime rate interest determination date, the calculation
agent will determine the Prime Rate to be the arithmetic mean
(rounded, if necessary, to the nearest one-hundred-thousandth of a
percentage point, with five-millionths of a percentage point rounded
upwards) of the prime rates or base lending rates quoted on the basis
of the actual number of days in the year divided by a 360-day year as
of the close of business on such prime rate interest determination
date by at least three major banks (which may include affiliates of
the Agents) in The City of New York selected by the calculation
agent.
* If the banks or trust companies selected are not quoting as mentioned
above, the Prime Rate will be the Prime Rate in effect on such prime
rate interest determination date.
S-37
<PAGE>
The Reuters Screen US PRIME 1 Page is the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "US PRIME 1" page, or such
other page as may replace the US PRIME 1 page on that service, for the purpose
of displaying prime rates or base lending rates of major United States banks.
Treasury Rate Notes
Treasury Rate notes will bear interest at the interest rates, calculated
with reference to the Treasury Rate and the spread and/or spread multiplier, if
any, and will be payable on the dates specified by us on the face of the
Treasury Rate note and in the applicable pricing supplement.
Unless we otherwise indicate in the pricing supplement, "Treasury Rate"
means, with respect to any interest determination date relating to a Treasury
Rate note (a Treasury interest determination date), the rate for the auction
held on such Treasury interest determination date of Treasury bills having the
index maturity specified in the applicable pricing supplement as such rate
appears on either page 56 or page 57 on the display on Bridge Telerate, Inc., or
such other page or pages as may replace page 56 or page 57 on that service or
such other successor service, under the heading "INVESTMENT RATE."
The following procedures will be followed if the Treasury Rate cannot be
determined as described above:
* If the above rate is not published by 3:00 p.m., New York City time,
on the calculation date pertaining to the Treasury interest
determination date, the Treasury Rate will be the bond equivalent
yield, calculated as described below, rounded, if necessary, to the
nearest one-hundred-thousandth of a percentage point, with five-
millionths of a percentage point rounded upwards, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis
of the rate for such Treasury bills as published in H.15 Daily
Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Auction High" or, if not so published by
3:00 p.m., New York City time, on the related calculation date, the
bond equivalent yield of the auction rate of such Treasury bills as
announced by the United States Department of the Treasury.
* In the event that the results of the auction of Treasury bills having
the index maturity specified in the applicable pricing supplement are
not published or reported as provided above by 3:00 p.m., New York
City time, on such calculation date, or if no such auction is held on
such Treasury interest determination date, then the Treasury Rate
will be the rate (expressed as a bond equivalent yield, rounded, if
necessary, to the nearest one-hundred-thousandth of a percentage
point, with five-millionths of a percentage point rounded upwards, on
the basis of a year of 365 or 366 days, as applicable, and applied on
a daily basis) on such Treasury interest determination date of
Treasury bills having the index maturity specified by us in the
applicable pricing supplement as published in H.15(519) under the
caption "U.S. Government Securities/Treasury Bills/Secondary Market"
or, if not yet published by 3:00 p.m., New York City time, on such
calculation date, the rate (expressed as a bond equivalent yield,
rounded, if necessary, to the nearest one-hundred-thousandth of a
percentage point, with five-millionths of a percentage point rounded
upwards, on the basis of a year of 365 or 366 days, as applicable,
and applied on a daily basis) on such Treasury interest determination
date of Treasury bills having the index maturity specified by us in
the applicable pricing supplement as published in H.15 Daily Update
under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market" or another recognized electronic source used
for the purpose of displaying the applicable rate.
S-38
<PAGE>
* If such rate is not yet published either in H.15(519) or H.15 Daily
Update or in another recognized electronic source, the calculation
agent will determine the Treasury Rate to be a yield to maturity
(expressed as a bond equivalent yield, rounded, if necessary, to the
nearest one-hundred-thousandth of a percentage point, with five-
millionths of a percentage point rounded upwards, on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis)
of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on such Treasury
interest determination date, of three leading primary United States
government securities dealers (which may include the Agents or their
affiliates) selected by the calculation agent, for the issue of
Treasury bills with a remaining maturity closest to the index
maturity specified in the applicable pricing supplement.
* If the dealers selected by the calculation agent are not quoting as
mentioned above, the Treasury Rate will be the Treasury Rate then in
effect on such Treasury interest determination date.
The bond equivalent yield shall be a yield, expressed as a percentage,
calculated in accordance with the following formula:
D x N
Bond equivalent yield = ---------------- x 100
360 - (D x M)
where "D" refers to the applicable per annum rate for Treasury bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.
Other Provisions Applicable to Notes
Any provisions with respect to the notes, including the determination
and/or specification of an interest rate basis or the calculation of the
interest rate applicable to a floating rate note, the interest payment dates,
the maturity or any other matter relating to such note, may be modified by the
terms specified under "Other Terms" on the face of the note or in an addendum
relating to such note, if so specified on the face of the note and in the
applicable pricing supplement.
Currency Indexed Notes
We may from time to time offer currency indexed notes, the principal amount
payable at maturity and/or the interest rate of which is determined by reference
to the rate of exchange between the specified currency and the other currency we
specify as the indexed currency in the applicable pricing supplement, or as
determined in such other manner as we may specify in the applicable pricing
supplement.
Unless we specify otherwise in the applicable pricing supplement, holders
of currency indexed notes will be entitled to receive (i) an amount of principal
exceeding the stated face amount of the principal of, and/or an amount of
interest at an interest rate exceeding the stated rate of interest on, their
currency indexed notes if, at maturity or upon the relevant interest payment
date, as the case may be, the rate at which the specified currency can be
exchanged for the indexed currency exceeds the rate of such exchange designated
as the base exchange rate, expressed in units of the indexed currency per one
unit of the specified currency, in the applicable pricing supplement or (ii) an
amount of principal less than such stated face amount and/or an amount of
interest at an interest rate less than such stated interest rate if, at maturity
or upon the relevant interest payment date, as the case may be, the rate at
which the specified
S-39
<PAGE>
currency can be exchanged for the indexed currency is less than such base
exchange rate, in each case determined as described above under "Payment of
Principal and Interest."
Information as to the payment of principal and interest, the relative
historical value, which information is not necessarily indicative of relative
future value, of the applicable specified currency against the applicable
indexed currency, any exchange controls applicable to such specified currency or
indexed currency and certain tax consequences to holders of currency indexed
notes will be described in the applicable pricing supplement. See "Risk
Factors--Exchange Rates and Exchange Controls."
Other Indexed Notes
In addition to currency indexed notes, notes may be issued where the
principal amount payable at maturity and/or the interest rate or premium to be
paid on such notes are to be determined by reference to the relationship between
two or more currencies, to the price of one or more specified securities or
commodities, to one or more securities or commodities exchange indices or other
indices or by other similar methods or formulas. Such notes are called indexed
notes. In the pricing supplement relating to such an indexed note, we will
describe, as applicable, the method by which the amount of interest payable on
any interest payment date and the amount of principal payable at maturity in
respect of such indexed note will be determined, certain special tax
consequences of the purchase, ownership or disposition of such indexed notes,
certain risks associated with an investment in such indexed notes and other
information relating to such indexed notes.
Dual Currency Notes
We may from time to time offer notes, called dual currency notes, as to
which we have a one-time option, exercisable on any one of the option election
dates specified in the applicable pricing supplement in whole, but not in part,
with respect to all dual currency notes issued on the same day and having the
same terms (known as a tranche), of thereafter making all payments of principal,
premium, if any, and interest, which payments would otherwise be made in the
specified currency of such notes, in the optional payment currency we specify in
the applicable pricing supplement. Information concerning additional terms and
conditions of any issue of dual currency notes, including the relative value of
the specified currency compared to the optional payment currency, will be
described in the applicable pricing supplement. See "Risk Factors--Exchange
Rates and Exchange Controls."
Amortizing Notes
We may from time to time offer amortizing notes. Unless we otherwise
specify in the applicable pricing supplement, interest on each amortizing note
will be computed on the basis of a 360-day year of twelve 30-day months.
Payments with respect to amortizing notes will be applied first to interest due
and payable on such notes and then to the reduction of the unpaid principal
amount of such notes. Further information concerning additional terms and
conditions of any issue of amortizing notes will be provided in the applicable
pricing supplement. A table setting forth repayment information in respect of
each amortizing note will be included in the applicable pricing supplement and
described on such notes.
S-40
<PAGE>
Interest Rate Reset
If we have the option under any note to reset the interest rate, in the
case of a fixed rate note, or to reset the spread and/or spread multiplier, in
the case of a floating rate note, we will indicate such option in the pricing
supplement relating to such note, and, if so, (i) the date or dates on which
such interest rate or such spread and/or spread multiplier, as the case may be,
may be reset (each an optional reset date) and (ii) the basis or formula, if
any, for such resetting.
We may exercise such option with respect to a note by notifying the trustee
of such exercise at least 45 but not more than 60 days prior to an optional
reset date for such note. Not later than 40 days prior to such optional reset
date, the trustee will mail to the holder of such note a notice, called the
reset notice, first class, postage prepaid, setting forth:
* our election to reset the interest rate, in the case of a fixed rate
note, or the spread and/or spread multiplier, in the case of a
floating rate note,
* such new interest rate or such new spread and/or spread multiplier,
and
* the provisions, if any, for redemption during the period from such
optional reset date to the next optional reset date or, if there is
no such next optional reset date, to the stated maturity of such note
(each such period is called a subsequent interest period) including
the date or dates on which or the period or periods during which and
the price or prices at which such redemption may occur during such
subsequent interest period.
Notwithstanding the foregoing, not later than 20 days prior to an optional
reset date for a note, we may, at our option, revoke the interest rate, in the
case of a fixed rate note, or the spread and/or spread multiplier, in the case
of a floating rate note, in either case provided for in the reset notice and
establish a higher interest rate, in the case of a fixed rate note, or a higher
spread and/or spread multiplier, in the case of a floating rate note, for the
subsequent interest period commencing on such optional reset date by mailing or
causing the trustee to mail notice of such higher interest rate or higher spread
and/or spread multiplier, as the case may be, first class, postage prepaid, to
the direct holder of such note. Such notice shall be irrevocable. All notes
with respect to which the interest rate or spread and/or spread multiplier is
reset on an optional reset date will bear such higher interest rate, in the case
of a fixed rate note, or higher spread and/or spread multiplier, in the case of
a floating rate note.
If we elect to reset the interest rate or the spread and/or spread
multiplier of a note, the holder of such note will have the option to elect
repayment of such note by us on any optional reset date at a price equal to the
principal amount of such note plus any accrued interest to such optional reset
date. In order for a note to be so repaid on an optional reset date, the holder
must follow the procedures described below under "Repayment at Option of Holder"
for optional repayment, except that the period for delivery of such note or
notification to the trustee shall be at least 25 but not more than 35 days prior
to such optional reset date and except that a holder who has tendered a note for
repayment pursuant to a reset notice may, by written notice to the trustee,
revoke any such tender for repayment until the close of business on the tenth
day prior to such optional reset date.
Extension of Maturity
If we have provided in any note the option for us to extend the stated
maturity for one or more periods (each an extension period) up to but not beyond
the final maturity date described in the pricing supplement relating to such
note, such pricing supplement will indicate such option and the basis or
S-41
<PAGE>
formula, if any, for setting the interest rate, in the case of a fixed rate
note, or the spread and/or spread multiplier, in the case of a floating rate
note, applicable to any such extension period, and such pricing supplement will
describe any special tax consequences to holders of such notes.
We may exercise such option with respect to a note by notifying the trustee
of such exercise at least 45 but not more than 60 days prior to the original
stated maturity of such note in effect prior to the exercise of such option. No
later than 40 days prior to the original stated maturity, the trustee will mail
to the holder of such note an extension notice relating to such extension
period, first class, postage prepaid, setting forth:
* our election to extend the stated maturity of such note,
* the new stated maturity,
* in the case of a fixed rate note, the interest rate applicable to the
extension period or, in the case of a floating rate note, the spread
and/or spread multiplier applicable to the extension period, and
* the provisions, if any, for redemption during the extension period,
including the date or dates on which or the period or periods during
which and the price or prices at which such redemption may occur
during the extension period.
When the trustee has mailed an extension notice to the holder of a note,
the stated maturity of such note shall be extended automatically as described in
the extension notice, and, except as modified by the extension notice and as
described in the next paragraph, such note will have the same terms as prior to
the mailing of such extension notice.
Notwithstanding the foregoing, not later than 20 days prior to the original
stated maturity for a note, we may, at our option, revoke the interest rate, in
the case of a fixed rate note, or the spread and/or spread multiplier, in the
case of a floating rate note, provided for in the extension notice and establish
a higher interest rate, in the case of a fixed rate note, or a higher spread
and/or spread multiplier, in the case of a floating rate note, for the extension
period by mailing or causing the trustee to mail notice of such higher interest
rate or higher spread and/or spread multiplier, as the case may be, first class,
postage prepaid, to the holder of such note. Such notice shall be irrevocable.
All notes with respect to which the stated maturity is extended will bear such
higher interest rate, in the case of a fixed rate note, or higher spread and/or
spread multiplier, in the case of a floating rate note, for the extension
period.
If we elect to extend the stated maturity of a note, the direct holder of
such note will have the option to elect repayment of such note by us at the
original stated maturity at a price equal to the principal amount of such note
plus any accrued interest to such date. In order for a note to be so repaid on
the original stated maturity, the direct holder must follow the procedures
described below under "Repayment at Option of Holder" for optional repayment,
except that the period for delivery of such note or notification to the trustee
shall be at least 25 but not more than 35 days prior to the original stated
maturity and except that a direct holder who has tendered a note for repayment
pursuant to an extension notice may, by written notice to the trustee, revoke
any such tender for repayment until the close of business on the tenth day prior
to the original stated maturity.
Renewable Notes
If we have provided in any note for the conditional automatic extension of
the stated maturity for one or more periods (each a renewal period) up to but
not beyond the final maturity date described in the
S-42
<PAGE>
pricing supplement relating to such note (a renewable note), such pricing
supplement will indicate such renewal provisions and the basis or formula, if
any, for setting the interest rate, in the case of a fixed rate note, or the
spread and/or spread multiplier, in the case of a floating rate note, applicable
to any such renewal period, and such pricing supplement will describe any
special tax consequences to holders of such notes.
The renewable notes will mature on an initial maturity date specified in
the applicable pricing supplement, unless the maturity of all or any portion of
the principal amount thereof is extended in accordance with the procedures
described below. On the interest payment dates specified in the applicable
pricing supplement (each such interest payment date, an election date), the
maturity of the renewable notes will be extended to the interest payment date
occurring twelve months after such election date, unless the holder elects to
terminate the automatic extension of the maturity of the renewable notes by
delivering a notice to such effect to the trustee not less than nor more than a
number of days to be specified in the applicable pricing supplement prior to
such election date. Such option may be exercised with respect to less than the
entire principal amount of the renewable notes; provided that the principal
amount for which such option is not exercised is at least $1,000 or any larger
amount that is an integral multiple of $1,000. Notwithstanding the foregoing,
the maturity of the renewable notes may not be extended beyond the final
maturity date, as specified in the applicable pricing supplement. If the holder
elects to terminate the automatic extension of the maturity of any portion of
the principal amount of the renewable notes and such election is not revoked as
described below, such portion will become due and payable on the interest
payment date falling six months (unless another period is specified in the
applicable pricing supplement) after the election date prior to which the holder
made such election.
An election to terminate the automatic extension of maturity may be revoked
by delivering a notice to such effect to the trustee on any day following the
effective date of the election to terminate the automatic extension of maturity
and prior to the date 15 days before the date on which such portion would
otherwise mature. Such a revocation may be made for less than the entire
principal amount of the renewable notes for which the automatic extension of
maturity has been terminated; provided that the principal amount of the
renewable notes for which the automatic extension of maturity has been
terminated and for which such a revocation has not been made is at least $1,000
or any larger amount that is an integral multiple of $1,000. Notwithstanding
the foregoing, a revocation may not be made during the period from and including
a record date to but excluding the immediately succeeding interest payment date.
An election to terminate the automatic extension of the maturity of the
renewable notes, if not revoked as described above by the holder making the
election or any subsequent holder, will be binding upon such subsequent holder.
The renewable notes may be redeemed in whole or in part at the option of
the Company on or commencing with the date or dates specified in the applicable
pricing supplement. The renewable notes will be redeemed at the redemption
price stated in the applicable pricing supplement, together with accrued and
unpaid interest to the date of redemption.
Book-Entry System
Upon issuance, all fixed rate notes, except foreign currency notes issued
as certificated notes, having the same original issuance date, interest rate,
specified currency and stated maturity and other terms, if any, will be
represented by a single global note. In addition, upon issuance, all floating
rate notes, except foreign currency notes issued as certificated notes, having
the same following original terms will be represented by a single global note:
S-43
<PAGE>
* issuance date,
* interest rate basis,
* initial interest rate,
* interest reset dates,
* interest payment dates,
* index maturity,
* maximum interest rate (if any),
* minimum interest rate (if any),
* spread (if any),
* spread multiplier (if any),
* specified currency,
* LIBOR currency (if any),
* stated maturity, and
* other terms (if any).
Each global note will be deposited with, or on behalf of, the depositary,
The Depository Trust Company, New York, New York, and registered in the name of
the depositary's nominee. Except as described below, global notes may be
transferred, in whole and not in part, only by the depositary to a nominee of
the depositary or by a nominee of the depositary to the depositary or another
nominee of the depositary.
The depositary has advised the agents and us as follows: the depositary is
a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Securities Exchange Act of
1934, as amended. The depositary holds securities that its participants deposit
with the depositary. The depositary also facilitates the settlement among
participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
participants' accounts, eliminating the need for physical movement of securities
certificates. "Direct participants" include securities brokers and dealers,
banks, trust companies, clearing corporations and certain other organizations.
The depositary is owned by a number of its direct participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the depositary's system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a direct
participant, either directly or indirectly (indirect participants). The Rules
applicable to the depositary and its participants are on file with the
Securities and Exchange Commission.
S-44
<PAGE>
Purchases of interests in the global notes under the depositary's system
must be made by or through direct participants, which will receive a credit for
such interests on the depositary's records. The ownership interest of each
actual purchaser of interests in the global notes, each called a beneficial
owner, is in turn to be recorded on the direct and indirect participants'
records. Beneficial owners will not receive written confirmation from the
depositary of their purchase, but beneficial owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participant through
which the beneficial owner entered into the transaction. Transfers of ownership
interests in the global notes are to be accomplished by entries made on the
books of participants acting on behalf of beneficial owners. Beneficial owners
will not receive certificates representing their ownership interests in the
global notes, except as described below.
To facilitate subsequent transfers, all global notes deposited by
participants with the depositary are registered in the name of the depositary's
partnership nominee, Cede & Co. The deposit of global notes with the depositary
and their registration in the name of Cede & Co. effect no change in beneficial
ownership. The depositary has no knowledge of the actual beneficial owners of
the interests in the global notes; the depositary's records reflect only the
identity of the direct participants to whose accounts interests in the global
notes are credited, which may or may not be the beneficial owners. The
participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by the depositary to direct
participants, by direct participants to indirect participants, and by direct
participants and indirect participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
interests in a global note are being redeemed, the depositary's practice is to
determine by lot the amount of the interest of each direct participant in such
global note to be redeemed.
Neither the depositary nor Cede & Co. will consent or vote with respect to
the global notes. Under its usual procedures, the depositary mails an omnibus
proxy to the issuer as soon as possible after the record date. The omnibus
proxy assigns Cede & Co.'s consenting or voting rights to those direct
participants to whose accounts interests in the global notes are credited on the
record date (identified in a listing attached to the omnibus proxy).
Principal and interest payments on the global notes will be made to the
depositary. The depositary's practice is to credit direct participants'
accounts on the payment date in accordance with their respective holdings shown
on the depositary's records unless the depositary has reason to believe that it
will not receive payment on the payment date. Payments by participants to
beneficial owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such participant and not of the depositary, the trustee or us, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of principal and interest to the depositary is the responsibility of us
or the trustee, disbursement of such payments to direct participants shall be
the responsibility of the depositary, and disbursement of such payments to the
beneficial owners shall be the responsibility of direct and indirect
participants.
All payments of principal and any interest on foreign currency notes which
are global notes will be made in U.S. dollars unless the depositary has received
notice in accordance with its procedures from any participants of their election
to receive all or a specified portion of such payments in the specified
currency, in which case payments in the specified currency will be made directly
to such participants.
S-45
<PAGE>
The depositary's management is aware that some computer applications,
systems and the like for processing data (systems) that are dependent upon
calendar dates, including dates before, on or after January 1, 2000, may
encounter "Year 2000 problems." The depositary has informed participants and
other members of the financial community (the industry) that it has developed
and is implementing a program so that its systems, as the same relate to the
timely payment of distributions (including principal and income payments) to
security holders, book-entry deliveries and settlement of trades within the
depositary, continue to function appropriately. This program includes a
technical assessment and a remediation plan, each of which is complete.
Additionally, the depositary's plan includes a testing phase, which is expected
to be completed within appropriate time frames. However, the depositary's
ability to perform properly its services is also dependent upon other parties,
including but not limited to issuers and their agents, as well as third party
vendors from whom the depositary licenses software and hardware, and third party
vendors on whom the depositary relies for information or the provision of
services, including telecommunication and electrical utility service providers,
among others.
The depositary has informed the industry that it is contacting (and will
continue to contact) third party vendors from whom the depositary acquires
services to: (i) impress upon them the importance of such services being Year
2000 compliant; and (ii) determine the extent of their efforts for Year 2000
remediation (and, as appropriate, testing) of their services. In addition, the
depositary is in the process of developing such contingency plans as it deems
appropriate. According to the depositary, the information in this paragraph and
the preceding paragraph with respect to the depositary has been provided to the
industry for informational purposes only and is not intended to serve as a
representation, warranty or contract modification of any kind.
The notes represented by one or more global notes are exchangeable for
certificated notes of like tenor as such notes if:
* the depositary for such global notes notifies us that it is unwilling
or unable to continue as depositary for such global notes or if at
any time such depositary ceases to be a clearing agency registered
under the Securities Exchange Act of 1934, as amended,
* we in our discretion at any time determine not to have all of the
notes of such series represented by one or more global note or notes
and notify the trustee of such determination, or
* an event of default has occurred and is continuing with respect to
the notes of such series.
Any note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated notes issuable in authorized denominations and
registered in such names as the depositary holding such global notes shall
direct. The authorized denominations of the notes denominated in U.S. dollars
will be $1,000 or any greater amount that is an integral multiple of $1,000.
The authorized denominations of notes denominated in a specified currency other
than U.S. dollars will be described in the applicable pricing supplement.
Subject to the foregoing, a global note is not exchangeable, except for a global
note or global notes of the same aggregate denominations to be registered in the
name of such depositary or its nominee.
The information in this section concerning the depositary and the
depositary's book-entry system has been obtained from sources that we believe to
be reliable, but we take no responsibility for the accuracy of such information.
S-46
<PAGE>
Redemption and Repurchase
If we indicate in the pricing supplement relating to a note, such note will
be redeemable at our option on a date or dates specified prior to the stated
maturity at a price or prices described in the applicable pricing supplement,
together with accrued interest to the date of redemption. The notes will not be
subject to any sinking fund. We may redeem any of the notes which are
redeemable and remain outstanding either in whole or from time to time in part,
upon not less than 30 nor more than 60 days' notice.
We may at any time purchase notes at any price in the open market or
otherwise. Notes we purchase in this manner may, at our discretion, be held,
resold or surrendered to the trustee for cancellation.
Repayment at Option of Holder
If we indicate in the pricing supplement relating to a note, such note will
be repayable at the option of the holder on a date or dates specified prior to
the stated maturity at a price or prices described in the applicable pricing
supplement, together with accrued interest to the date of repayment.
In order for a note to be repaid, the trustee must receive at the principal
office of the Corporate Trust Department of the trustee in Chicago, Illinois in
the case of the senior trustee and New York, New York in the case of the
subordinated trustee at least 30 days, but not more than 45 days, prior to the
specified repayment date, the note and notice of the holder's exercise of its
repayment option as specified in the note. Exercise of the repayment option by
the holder of a note shall be irrevocable, except as otherwise described under
"Interest Rate Reset," "Extension of Maturity" and "Renewable Notes." The
repayment option may be exercised by the holder of a note for less than the
entire principal amount of the note provided that the principal amount of the
note remaining outstanding after repayment, if any, is an authorized
denomination.
The depositary or its nominee will be the holder of global notes and
therefore will be the only entity that can exercise a right to repayment with
respect to such notes. In order to ensure that the depositary or its nominee
will timely exercise a right to repayment with respect to a particular global
note, the beneficial owner of such note must instruct the broker or other direct
or indirect participant through which it holds an interest in such note to
notify the depositary of its desire to exercise a right to repayment. Different
firms have different cut-off times for accepting instructions from their
customers and, accordingly, each beneficial owner should consult the broker or
other direct or indirect participant through which it holds an interest in a
note in order to ascertain the cut-off time by which such an instruction must be
given in order for timely notice to be delivered to the depositary.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
Foreign currency notes will not be sold in, or to residents of, the country
issuing the specified currency in which particular notes are denominated. The
information described in this prospectus supplement is directed to prospective
purchasers who are United States residents, and we disclaim any responsibility
to advise prospective purchasers who are residents of countries other than the
United States with respect to any matters that may affect the purchase, holding
or receipt of payments of principal of and interest on the notes. Such persons
should consult their own counsel with regard to such matters. See "Risk
Factors--Exchange Rates and Exchange Controls."
S-47
<PAGE>
The pricing supplement relating to notes that are denominated in, or the
payment of which is determined with reference to, a specified currency other
than U.S. dollars or relating to currency indexed notes will contain information
concerning historical exchange rates for such specified currency against the
U.S. dollar or other relevant currency (including, in the case of currency
indexed notes, the applicable indexed currency), a description of such currency
or currencies and any exchange controls affecting such currency or currencies.
Information concerning exchange rates is furnished as a matter of information
only and should not be regarded as indicative of the range of or trend in
fluctuations in currency exchange rates that may occur in the future.
Payment Currency
Except as described in the applicable pricing supplement, if payment on a
note is required to be made in a specified currency other than U.S. dollars and
such currency is unavailable in our good faith judgment due to the imposition of
exchange controls or other circumstances beyond our control, or is no longer
used by the government of the country issuing such currency or for the
settlement of transactions by public institutions of or within the international
banking community, then all payments with respect to such note shall be made in
U.S. dollars until such currency is again available or so used. The amount so
payable on any date in such foreign currency shall be converted into U.S.
dollars at a rate determined by the exchange rate agent on the basis of the
market exchange rate on the second business day prior to such payment, or, if
the market exchange rate is not then available, the most recently available
market exchange rate or as otherwise determined by us in good faith if the
foregoing is impracticable. Any payment in respect of such note made under such
circumstances in U.S. dollars will not constitute an event of default or default
under the indentures.
The notes that are denominated in, or the payment of which is determined by
reference to, a specified currency other than U.S. dollars, will provide that,
in the event of an official redenomination of a foreign currency, our
obligations with respect of payments on notes denominated in such currency
shall, in all cases, be regarded immediately following such redenomination as
providing for the payment of that amount of redenominated currency representing
the amount of such obligations immediately before such redenomination. Such
notes will not provide for any adjustment to any amount payable under the notes
as a result of any change in the value of a foreign currency relative to any
other currency due solely to fluctuations in exchange rates.
All determinations referred to above made by the exchange rate agent shall
be at its sole discretion, except to the extent expressly provided herein that
any determination is subject to our approval. In the absence of manifest error,
such determinations shall be conclusive for all purposes and binding on holders
of the notes and the exchange rate agent shall have no liability therefor.
Governing Law and Judgments
The notes will be governed by and construed in accordance with the laws of
the State of New York. Courts in the United States have not customarily
rendered judgments for money damages denominated in any currency other than the
U.S. dollar. New York statutory law provides, however, that a court shall
render a judgment or decree in the foreign currency of the underlying obligation
and that the judgment or decree shall be converted into U.S. dollars at the rate
of exchange prevailing on the date of the entry of the judgment or decree.
S-48
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Orrick, Herrington & Sutcliffe LLP, our counsel, the
following summary correctly describes certain United States federal income tax
consequences of the ownership of notes as of the date of this prospectus
supplement. This summary is based on the Internal Revenue Code of 1986, as well
as final, temporary and proposed Treasury regulations and administrative and
judicial decisions. Legislative, judicial and administrative changes may occur,
possibly with retroactive effect, that could affect the accuracy of the
statements described in this prospectus supplement. This summary generally is
addressed only to original purchasers of the notes, deals only with notes held
as capital assets and does not purport to address all United States federal
income tax matters that may be relevant to investors in special tax situations,
such as:
* life insurance companies,
* tax-exempt organizations,
* dealers in securities or currencies, or traders in securities that
elect to mark to market,
* notes held as a hedge or as part of a hedging, straddle or conversion
transaction, or
* holders whose functional currency is not the U.S. dollar (called a
nonfunctional currency).
This summary deals only with notes that are due to mature 30 years or less
from the date on which they are issued. The United States federal income tax
consequences of the ownership of notes that are due to mature more than 30 years
from the date of issue will be discussed in the applicable pricing supplement.
Persons considering the purchase of notes should consult their own tax advisors
concerning the application of United States federal income tax laws, as well as
the laws of any state, local or foreign taxing jurisdictions, to their
particular situations. The applicable pricing supplement may contain a
discussion of the special United States federal income tax consequences
applicable to particular notes, including currency or other indexed notes, dual
currency notes, amortizing notes and notes as to which the stated maturity may
be extended automatically or at our option.
United States Holders
This section describes the tax consequences to a United States holder. A
United States holder is a beneficial owner of a note that is:
* a citizen or resident of the United States,
* a domestic corporation,
* an estate whose income is subject to United States federal income tax
regardless of its source, or
* a trust if a United States court can exercise primary supervision
over the trust's administration and one or more United States persons
are authorized to control all substantial decisions of the trust.
If you are not a United States holder, this section does not apply to you.
See "Non-United States Holders" below.
S-49
<PAGE>
Payment of Interest
Except as described below, interest on a note will be taxable to a United
States holder as ordinary interest income at the time it accrues or is received,
in accordance with the United States holder's method of accounting for tax
purposes. Special rules governing the treatment of notes issued at an original
issue discount are described under "Original Issue Discount" below.
Original Issue Discount
General Treatment. The following is a summary of the principal United
-----------------
States federal income tax consequences of the ownership of notes issued with
original issue discount. If a note has an issue price that is less than its
stated redemption price at maturity (and the difference between the note's
stated redemption price at maturity and the note's issue price exceeds a
specified de minimis amount), the note generally will be issued with original
issue discount for federal income tax purposes in the amount of such difference.
The issue price of a note generally is the first price at which a substantial
amount of the issue of notes is sold to the public (excluding bond houses,
brokers or similar persons acting in the capacity of underwriters or
wholesalers). The stated redemption price at maturity is the total amount of
all payments provided by the note other than qualified stated interest payments;
qualified stated interest generally is stated interest that is unconditionally
payable at least annually either at a single fixed rate, or, to the extent
described below, at a qualifying variable rate. Qualified stated interest will
be taxable to a United States holder when accrued or received in accordance with
the United States holder's method of tax accounting.
A note will be considered to have de minimis original issue discount if the
excess of its stated redemption price at maturity over its issue price is less
than the product of .25 percent of the stated redemption price at maturity and
the number of complete years to maturity (or the weighted average maturity in
the case of a note that provides for payment of an amount other than qualified
stated interest before maturity). United States holders of notes having de
minimis original issue discount generally must include a proportionate amount of
each payment of stated principal in income as a payment received in retirement
of the note.
United States holders of notes issued with original issue discount that is
not de minimis original issue discount and that mature more than one year from
the date of issuance will be required to include such original issue discount in
gross income for federal income tax purposes as it accrues (regardless of such
holder's method of accounting), in advance of receipt of the cash attributable
to such income. Original issue discount accrues based on a compounded, constant
yield to maturity; accordingly, United States holders of notes issued at an
original issue discount will generally be required to include in income
increasingly greater amounts of original issue discount in successive accrual
periods.
The annual amount of original issue discount includable in income by the
initial United States holder of a note issued at an original issue discount will
equal the sum of the daily portions of the original issue discount with respect
to the note for each day on which such holder held the note during the taxable
year. Generally, the daily portions of the original issue discount are
determined by allocating to each day in an accrual period the ratable portion of
the original issue discount allocable to such accrual period. The term accrual
period means an interval of time with respect to which the accrual of original
issue discount is measured, and which may vary in length over the term of the
note provided that each accrual period is no longer than one year and each
scheduled payment of principal or interest occurs on either the first or final
day of an accrual period.
The amount of original issue discount allocable to an accrual period will
be the excess of (i) the product of the adjusted issue price of the note at the
commencement of such accrual period and its yield to
S-50
<PAGE>
maturity over (ii) the amount of any qualified stated interest payments
allocable to the accrual period. The adjusted issue price of the note at the
beginning of the first accrual period is its issue price, and, on any day
thereafter, it is the sum of the issue price and the amount of the original
issue discount previously includable in the gross income of any holder (without
regard to any acquisition premium), reduced by the amount of any payment other
than a payment of qualified stated interest previously made with respect to the
note. There is a special rule for determining the original issue discount
allocable to an accrual period if an interval between payments of qualified
stated interest contains more than one accrual period. The yield to maturity of
the note is the yield to maturity computed on the basis of a constant interest
rate, compounding at the end of each accrual period; such constant yield,
however, must take into account the length of the particular accrual period. If
all accrual periods are of equal length except for an initial or an initial and
final shorter accrual period(s), the amount of original issue discount allocable
to the initial period may be computed using any reasonable method; the original
issue discount allocable to the final accrual period is in any event the
difference between the amount payable at maturity (other than a payment of
qualified stated interest) and the adjusted issue price at the beginning of the
final accrual period.
If a portion of the initial purchase price of a note is attributable to
pre-issuance accrued interest, the first stated interest payment on the note is
to be made within one year of the note's issue date, and the payment will equal
or exceed the amount of pre-issuance accrued interest, then the United States
holder may elect to decrease the issue price of the note by the amount of pre-
issuance accrued interest. In that event, a portion of the first stated
interest payment will be treated as a return of the excluded pre-issuance
accrued interest and not as an amount payable on the note.
If a note provides for an alternative payment schedule or schedules
applicable upon the occurrence of a contingency or contingencies (other than a
remote or incidental contingency), whether such contingency relates to payments
of interest or of principal, if the timing and amount of the payments that
comprise each payment schedule are known as of the issue date and if one of such
schedules is significantly more likely than not to occur, the yield and maturity
of the note are determined by assuming that the payments will be made according
to that payment schedule. If there is no single payment schedule that is
significantly more likely than not to occur (other than because of a mandatory
sinking fund), the note will be subject to the general rules that govern
contingent payment obligations. These rules will be discussed in the applicable
pricing supplement.
For purposes of calculating the yield and maturity of a note subject to an
issuer or holder right to accelerate principal repayment (respectively, a call
option or put option), such call option or put option is presumed exercised if
the yield on the note would be less or more, respectively, than it would be if
the option were not exercised. The effect of this rule generally may be to
accelerate or defer the inclusion of original issue discount in the income of a
United States holder whose note is subject to a put option or a call option, as
compared to a note that does not have such an option. If any such option
presumed to be exercised is not in fact exercised, the note is treated as
reissued on the date of presumed exercise for an amount equal to its adjusted
issue price on that date for purposes of redetermining such note's yield and
maturity and any related subsequent accruals of original issue discount.
Variable Rate Debt Instruments. Certain notes that provide for a variable
------------------------------
rate of interest may be treated as variable rate debt instruments. A note will
be treated as a variable rate debt instrument if:
* the debt instrument does not provide for contingent principal
payments,
* the issue price of the debt instrument does not exceed the total
noncontingent principal payments by more than the product of such
principal payments and the lesser of (i) 15 percent or (ii) the
product of
S-51
<PAGE>
1.5 percent and the number of complete years in the debt instrument's
term (or its weighted average maturity in the case of an installment
obligation), and
* the debt instrument does not provide for any stated interest other
than stated interest paid or compounded at least annually at a
qualifying variable rate which is (i) one or more qualified floating
rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate or (iv) a single fixed rate and
a single objective rate that is a qualified inverse floating rate.
A qualified floating rate or objective rate must be set at a current value
of that rate; a current value is the value of the variable rate on any day that
is no earlier than three months prior to the first day on which that value is in
effect and no later than one year following that day. A qualified floating rate
is a variable rate whose variations can reasonably be expected to measure
contemporaneous variations in the cost of newly borrowed funds in the currency
in which the debt instrument is denominated. A qualified floating rate may be
multiplied by a fixed, positive multiple that is greater than .65 but not more
than 1.35, and may be increased or decreased by a fixed rate. Certain
combinations of rates constitute a single qualified floating rate, including (i)
interest stated at a fixed rate for an initial period of one year or less
followed by a qualified floating rate if the value of the floating rate at the
issue date is intended to approximate the fixed rate, and (ii) two or more
qualified floating rates that can reasonably be expected to have approximately
the same values throughout the term of the debt instrument. A combination of
such rates is conclusively presumed to be a single qualified floating rate if
the values of all rates on the issue date are within .25 percentage points of
each other. A variable rate that is subject to an interest rate cap, floor,
governor or similar restriction on rate adjustment may be a qualified floating
rate only if such restriction is fixed throughout the term of the debt
instrument, or is not reasonably expected as of the issue date to cause the
yield on the debt instrument to differ significantly from its expected yield
absent the restriction.
An objective rate is defined as a rate (other than a qualified floating
rate) that is determined using a single fixed formula and that is based on
objective financial or economic information (other than a rate based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party)). The
Internal Revenue Service (IRS) may designate other variable rates that will be
treated as objective rates. However, a variable rate is not an objective rate
if it is reasonably expected that the average value of the rate during the first
half of the debt instrument's term will differ significantly from the average
value of such rate during the final half of its term. A combination of interest
stated at a fixed rate for an initial period of one year or less followed by an
objective rate is treated as a single objective rate if the value of the
objective rate at the issue date is intended to approximate the fixed rate; such
a combination of rates is conclusively presumed to be a single objective rate if
the objective rate on the issue date does not differ from the fixed rate by more
than .25 percentage points. An objective rate is a qualified inverse floating
rate if it is equal to a fixed rate reduced by a qualified floating rate, the
variations in which can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate (disregarding
permissible rate caps, floors, governors and similar restrictions such as are
discussed above).
Under these rules, CD Rate notes, CMT Rate notes, Commercial Paper Rate
notes, Eleventh District Cost of Funds Rate notes, Federal Funds Rate notes,
LIBOR notes, Prime Rate notes, and Treasury Rate notes generally will be treated
as bearing interest at a qualifying variable rate.
If a note is a variable rate debt instrument, special rules apply to
determine the amount of qualified stated interest and the amount and accrual of
any original issue discount. If the note bears interest that is unconditionally
payable at least annually at a single qualified floating rate or objective rate,
all stated interest is treated as qualified stated interest. The accrual of any
original issue discount is determined by assuming the note bears interest at a
fixed interest rate equal to the issue date value of the
S-52
<PAGE>
qualified floating rate or qualified inverse floating rate, or equal to the
reasonably expected yield for the note in the case of any other objective rate.
The qualified stated interest allocable to an accrual period is increased (or
decreased) if the interest actually paid during an accrual period exceeds (or is
less than) the interest assumed to be paid during the accrual period.
If the note bears interest at a qualifying variable rate other than a
single qualified floating rate or objective rate, the amount and accrual of
original issue discount generally are determined by (i) determining a fixed rate
substitute for each variable rate as described in the preceding sentence, (ii)
determining the amount of qualified stated interest and original issue discount
by assuming the note bears interest at such substitute fixed rates and (iii)
making appropriate adjustments to the qualified stated interest and original
issue discount so determined for actual interest rates under the note. However,
if such qualifying variable rate includes a fixed rate, the note first is
treated for purposes of applying clause (i) of the preceding sentence as if it
provided for an assumed qualified floating rate (or qualified inverse floating
rate if the actual variable rate is such) in lieu of the fixed rate; the assumed
variable rate would be a rate that would cause the note to have approximately
the same fair market value.
Variable rate notes that do not bear interest at a qualifying variable rate
or that have contingent principal payments or an issue price that exceeds the
noncontingent principal payments by more than the allowable amount will be
treated as contingent payment debt instruments. The pricing supplement
applicable to any such debt instrument will describe the material federal income
tax consequences of the ownership of such instrument.
Short-Term Notes. A note that matures one year or less from the date of
----------------
its issuance is called a short-term note. In general, an individual or other
cash method United States holder of a short-term note is not required to accrue
original issue discount for federal income tax purposes unless it elects to do
so. United States holders who report income for United States federal income
tax purposes on the accrual method and certain other holders, including banks,
common trust funds, certain pass-through entities, holders who holds the note as
part of certain identified hedging transactions, regulated investment companies
and dealers in securities, are required to include original issue discount on
such notes on a straight-line basis, unless an election is made to accrue the
original issue discount according to a constant interest method based on daily
compounding.
In the case of a United States holder who is not required and does not
elect to include original issue discount in income currently, any gain realized
on the sale, exchange or retirement of such a note will be ordinary income to
the extent of the original issue discount accrued on a straight-line basis (or,
if elected, according to a constant interest method based on daily compounding)
through the date of sale, exchange or retirement. In addition, such non-
electing holders who are not subject to the current inclusion requirement
described in this paragraph will be required to defer deductions for any
interest paid on indebtedness incurred or continued to purchase or carry such
notes in an amount not exceeding the deferred interest income, until such
deferred interest income is realized.
For purposes of determining the amount of original issue discount subject
to these rules, all interest payments on a short-term note, including stated
interest, are included in the short-term note's stated redemption price at
maturity.
Premium and Market Discount
If a United States holder purchases a note, other than a short-term note,
for an amount that is less than the note's stated redemption price at maturity,
or, in the case of a note issued at an original issue discount, less than its
revised issue price (which is the sum of the issue price of the note and the
aggregate amount of the original issue discount previously includable in the
gross income of any holder (without
S-53
<PAGE>
regard to any acquisition premium)) as of the date of purchase, the amount of
the difference generally will be treated as market discount for United States
federal income tax purposes; however, a note acquired at its original issue will
not have market discount unless the note is purchased at less than its issue
price. Market discount generally will be de minimis and hence disregarded,
however, if it is less than the product of .25 percent of the stated redemption
price at maturity of the note and the number of remaining complete years to
maturity (or weighted average maturity in the case of notes paying any amount
other than qualified stated interest prior to maturity).
Under the market discount rules, a United States holder is required to
treat any principal payment on, or any gain on the sale, exchange, retirement or
other disposition of, a note as ordinary income to the extent of any accrued
market discount which has not previously been included in income. If such note
is disposed of in a nontaxable transaction (other than certain specified
nonrecognition transactions), accrued market discount will be includable as
ordinary income to the United States holder as if such holder had sold the note
at its then fair market value. In addition, the United States holder may be
required to defer, until the maturity of the note or its earlier disposition in
a taxable transaction, the deduction of all or a portion of the interest expense
on any indebtedness incurred or continued to purchase or carry such note.
Market discount is considered to accrue ratably during the period from the
date of acquisition to the maturity of a note, unless the United States holder
elects to accrue on a constant yield basis. A United States holder of a note
may elect to include market discount in income currently as it accrues (on
either a ratable or constant yield basis), in which case the rule described
above regarding deferral of interest deductions will not apply. This election
to include market discount currently applies to all market discount obligations
acquired during or after the first taxable year to which the election applies,
and may not be revoked without the consent of the IRS.
A United States holder who purchases a note issued at an original issue
discount for an amount exceeding its adjusted issue price (as defined above) and
less than or equal to the sum of all amounts payable on the note after the
purchase date other than payments of qualified stated interest will be
considered to have purchased such note with acquisition premium. The amount of
original issue discount which such holder must include in gross income with
respect to such note will be reduced in the proportion that such excess bears to
the original issue discount remaining to be accrued as of the note's
acquisition.
A United States holder who acquires a note for an amount that is greater
than the sum of all amounts payable on the note after the purchase date other
than payments of qualified stated interest will be considered to have purchased
such note at a premium, and will not be required to include any original issue
discount in income. A United States holder generally may elect to amortize such
premium using a constant yield method over the remaining term of the note. The
amortized premium will be treated as a reduction of the interest income from the
note. Any such election shall apply to all debt instruments (other than debt
instruments the interest on which is excludable from gross income) held at the
beginning of the first taxable year to which the election applies or thereafter
acquired, and is irrevocable without the consent of the IRS. Special rules may
apply if a note is subject to call prior to maturity at a price in excess of its
stated redemption price at maturity.
Constant Yield Election
A United States holder of a note may elect to include in income all
interest and discount, as adjusted by any premium with respect to such note
based on a constant yield method, as described above. The election is made for
the taxable year in which the United States holder acquired the note, and it may
not be revoked without the consent of the IRS. If such election is made with
respect to a note having market discount, such holder will be deemed to have
elected currently to include market discount on a
S-54
<PAGE>
constant interest basis with respect to all debt instruments having market
discount acquired during the year of election or thereafter. If made with
respect to a note having amortizable bond premium, such holder will be deemed to
have made an election to amortize premium generally with respect to all debt
instruments having amortizable bond premium held by the taxpayer during the year
of election or thereafter.
Sale and Retirement of the Notes
Upon the sale, exchange or retirement of a note, a United States holder
will recognize taxable gain or loss equal to the difference between the amount
realized from the sale, exchange or retirement and the United States holder's
adjusted tax basis in the note. Such gain or loss generally will be capital
gain or loss, except to the extent of any accrued market discount (see "Premium
and Market Discount" above) and accrued but unpaid interest. Such capital gain
or loss will be long-term capital gain or loss if the note has been held for
more than one year. A United States holder's adjusted tax basis in a note will
equal the cost of the note, increased by any original issue discount or market
discount previously included in taxable income by the United States holder with
respect to such note, and reduced by any amortizable bond premium applied to
reduce interest on a note, any principal payments received by the United States
holder and in the case of notes issued at an original issue discount, any other
payments not constituting qualified stated interest (as defined above).
Special rules regarding the treatment of gain realized with respect to
short-term notes issued at an original issue discount are described under
"Original Issue Discount" above.
Nonfunctional Currency Notes
The following is a summary of the principal United States federal income
tax consequences to a United States holder of the ownership of a foreign
currency note or a note determined by reference to a specified currency other
than the U.S. dollar, which are collectively referred to as nonfunctional
currency notes. Persons considering the purchase of nonfunctional currency
notes should consult their own tax advisors with regard to the application of
the United States federal income tax laws to their particular situations, as
well as any consequences arising under the laws of any other taxing
jurisdictions.
In general, if a payment of interest with respect to a note is made in (or
determined by reference to the value of) nonfunctional currency, the amount
includable in the income of the United States holder will be, in the case of a
cash basis United States holder, the U.S. dollar value of the nonfunctional
currency payment based on the exchange rate in effect on the date of receipt or,
in the case of an accrual basis United States holder, based on the average
exchange rate in effect during the interest accrual period (or, with respect to
an accrual period that spans two taxable years, the partial period within the
taxable year), in either case regardless of whether the payment is in fact
converted into U.S. dollars. Upon receipt of an interest payment (including a
payment attributable to accrued but unpaid interest upon the sale or retirement
of the nonfunctional currency note) in (or determined by reference to the value
of) nonfunctional currency, an accrual basis United States holder will recognize
ordinary income or loss measured by the difference between such average exchange
rate and the exchange rate in effect on the date of receipt. Accrual basis
United States holders may determine the U.S. dollar value of any interest income
accrued in a nonfunctional currency under an alternative method, described below
as the spot accrual convention.
A United States holder will have a tax basis in any nonfunctional currency
received as payment of interest on, or on the sale, exchange or retirement of,
the nonfunctional currency note equal to the U.S. dollar value of such
nonfunctional currency, determined at the time of payment, or the disposition of
the nonfunctional currency note. Any gain or loss realized by a United States
holder on a sale or other
S-55
<PAGE>
disposition of nonfunctional currency (including its exchange for U.S. dollars
or its use to purchase nonfunctional currency notes) will be ordinary income or
loss.
A United States holder's tax basis in a nonfunctional currency note, and
the amount of any subsequent adjustments to such holder's tax basis, will be the
U.S. dollar value of the nonfunctional currency amount paid for such
nonfunctional currency note, or the nonfunctional currency amount of the
adjustment, determined using the spot rate on the date of such purchase or
adjustment and increased by the amount of any original issue discount included
in the United States holder's income (and accrued market discount, in the case
of a United States holder who has elected to currently include market discount,
as described above) with respect to the nonfunctional currency note and reduced
by the amount of any payments on the nonfunctional currency note that are not
qualified stated interest payments and by the amount of any amortizable bond
premium applied to reduce interest on the nonfunctional currency note.
A United States holder who converts U.S. dollars to a nonfunctional
currency and immediately uses that currency to purchase a nonfunctional currency
note denominated in the same currency normally will not recognize gain or loss
in connection with such conversion and purchase. However, a United States
holder who purchases a nonfunctional currency note with previously owned
nonfunctional currency will recognize gain or loss in an amount equal to the
difference, if any, between such holder's tax basis in the nonfunctional
currency and the U.S. dollar value of the nonfunctional currency on the date of
purchase.
For purposes of determining the amount of any gain or loss recognized by a
United States holder on the sale, exchange or retirement of a nonfunctional
currency note (as described above in the section "Sale and Retirement of the
Notes"), the amount realized upon such sale, exchange or retirement will be the
U.S. dollar value of the nonfunctional currency received (or that was payable,
in the case the payment was made in U.S. dollars), determined using the spot
rate on the date of the sale, exchange or retirement.
Gain or loss realized upon the sale, exchange or retirement of a
nonfunctional currency note that is attributable to fluctuations in currency
exchange rates will be treated as ordinary income or loss. Gain or loss
attributable to fluctuations in exchange rates will be calculated by multiplying
the original purchase price paid by the United States holder (expressed in the
relevant nonfunctional currency) by the change in the relevant exchange rate
(expressed in dollars per unit of relevant nonfunctional currency) between the
date on which the United States holder acquired the nonfunctional currency note
and the date on which the United States holder received payment in respect of
the sale, exchange or retirement of the nonfunctional currency note. Such
nonfunctional currency gain or loss will be recognized only to the extent of the
total gain or loss realized by a United States holder on the sale, exchange or
retirement of the nonfunctional currency note.
Original issue discount on a note which is also a nonfunctional currency
note is to be determined for any accrual period in the relevant nonfunctional
currency and then translated into the United States holder's functional currency
on the basis of the average exchange rate in effect during such accrual period.
If the interest accrual period spans two taxable years, the original issue
discount accruing within each year's portion of the accrual period is to be
translated into U.S. dollars on the basis of the average exchange rate for the
partial period within the taxable year.
A United States holder may elect to translate original issue discount (and,
in the case of an accrual basis United States holder, accrued interest) into
U.S. dollars at the exchange rate in effect on the last day of an accrual period
for the original issue discount or interest, or in the case of an accrual period
that spans two taxable years, at the exchange rate in effect on the last day of
the partial period within the taxable year (the spot accrual convention).
Additionally, if a payment of original issue discount or
S-56
<PAGE>
interest is actually received within five business days of the last day of the
accrual period or taxable year, an electing United States holder may instead
translate such original issue discount or accrued interest into U.S. dollars at
the exchange rate in effect on the day of actual receipt. Any such election will
apply to all debt instruments held by the United States holder at the beginning
of the first taxable year to which the election applies or thereafter acquired
by the United States holder, and will be irrevocable without the consent of the
IRS.
Because exchange rates may fluctuate, a United States holder of a note with
original issue discount denominated in a nonfunctional currency may recognize a
different amount of original issue discount income in each accrual period than
would the United States holder of a similar note with original issue discount
denominated in U.S. dollars. Also, as described above, exchange gain or loss
will be recognized when the original issue discount is paid or the United States
holder disposes of the note.
If the United States holder of a nonfunctional currency note has not
elected to include market discount in income currently as it accrues, the amount
of accrued market discount must be determined in the nonfunctional currency and
translated into U.S. dollars using the spot exchange rate in effect on the date
principal is paid or the nonfunctional currency note is sold, exchanged, retired
or otherwise disposed of. No part of such accrued market discount is treated as
exchange gain or loss. If the United States holder has elected to include
market discount in income currently as it accrues, the amount of market discount
which accrues during any accrual period will be required to be determined in
units of nonfunctional currency and translated into U.S. dollars on the basis of
the average exchange rate in effect during such accrual period. Such an
electing United States holder will recognize exchange gain or loss with respect
to accrued market discount under the same rules that apply to the accrual of
interest payments on a nonfunctional currency note by a United States holder on
the accrual basis.
Backup Withholding and Information Reporting
A 31 percent backup withholding tax and certain information reporting
requirements may apply to payments of principal, premium and interest (including
any original issue discount) made to, and the proceeds of disposition of a note
by, certain United States holders. Backup withholding will apply only if (i)
the United States holder fails to furnish its Taxpayer Identification Number to
the payor, (ii) the IRS notifies the payor that the United States holder has
furnished an incorrect Taxpayer Identification Number, (iii) the IRS notifies
the payor that the United States holder has failed to report properly payments
of interest and dividends or (iv) under certain circumstances, the United States
holder fails to certify, under penalty of perjury, that it has both furnished a
correct Taxpayer Identification Number and not been notified by the IRS that it
is subject to backup withholding for failure to report interest and dividend
payments. Backup withholding will not apply with respect to payments made to
certain exempt recipients, such as corporations and financial institutions.
United States holders should consult their tax advisors regarding their
qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
The amount of any backup withholding from a payment to a United States
holder will be allowed as a credit against the holder's federal income tax
liability and may entitle the holder to a refund, provided that the required
information is furnished to the IRS.
Non-United States Holders
This section describes the tax consequences to a non-United States holder.
You are a non-United States holder if you are the beneficial owner of a note and
are, for United States federal income tax purposes:
S-57
<PAGE>
* a nonresident alien individual,
* a foreign corporation,
* a foreign partnership, or
* an estate or trust that in either case is not subject to United
States federal income tax on a net income basis on income or gain in
respect of a note.
A non-United States holder generally will not be subject to United States
federal withholding tax with respect to payments of principal, premium (if any)
and interest (including original issue discount) on notes, provided that (i) the
holder does not actually or constructively own 10 percent or more of the total
combined voting power of all classes of our stock entitled to vote, (ii) the
holder is not for United States federal income tax purposes a controlled foreign
corporation related to us through stock ownership, (iii) the beneficial owner of
the note certifies to us or our agent under penalties of perjury as to its
status as a non-United States holder and complies with applicable identification
procedures and (iv) the payment is not a payment of contingent interest
(generally a payment based on or determined by reference to income, profits,
cash flow, sales, dividends or other comparable attributes of the obligor or a
party related to the obligor). The applicable pricing supplement will indicate
if a note pays this contingent interest.
In certain circumstances, the above-described certification can be provided
by a bank or other financial institution. Recently finalized Treasury
regulations, that are generally effective with respect to payments made after
December 31, 2000, would provide alternative methods for satisfying the above-
described certification requirements. These recently finalized Treasury
regulations also generally would require, in the case of notes held by a foreign
partnership, that (i) the certification described above be provided by the
partners rather than by the foreign partnership and (ii) the partnership provide
certain information, including a United States taxpayer identification number.
A look-through rule generally would apply in the case of tiered partnerships.
In addition, a non-United States holder of a note generally will not be
subject to United States federal income tax on any gain realized upon the sale,
retirement or other disposition of a note, unless the holder is an individual
who is present in the United States for 183 days or more during the taxable year
of sale, retirement or other disposition and certain other conditions are met.
If a non-United States holder of a note is engaged in a trade or business in the
United States and income or gain from the note is effectively connected with the
conduct of such trade or business, the non-United States holder will be exempt
from withholding tax if appropriate certification has been provided, but will
generally be subject to regular United States income tax on such income and gain
in the same manner as if it were a United States holder. In addition, if such
non-United States holder is a foreign corporation, it may be subject to a branch
profits tax equal to 30 percent of its effectively connected earnings and
profits for the taxable year, subject to adjustments.
A note held by an individual who is a non-United States holder at the time
of death will not be subject to United States federal estate tax upon such
individual's death if at the time of death (i) such holder does not actually or
constructively own 10 percent or more of the total combined voting power of all
classes of our stock entitled to vote, (ii) payments with respect to the note
would not have been effectively connected with a United States trade or business
of such individual and (iii) payments with respect to the note would not be
considered to be a payment of contingent interest as described above.
Backup withholding and information reporting will not apply to payments of
principal, premium, if any, and interest made to a non-United States holder by
us on a note with respect to which the holder has provided the required
certification under penalties of perjury of its non-United States holder status
or
S-58
<PAGE>
has otherwise established an exemption, provided in each case that we or our
trustee, as the case may be, do not have actual knowledge that the payee is a
United States person. Payments on the sale, exchange or other disposition of a
note by a non-United States holder effected outside the United States to or
through a foreign office of a broker will not be subject to backup withholding.
However, if such broker is a United States person, a controlled foreign
corporation for United States tax purposes or a foreign person 50 percent or
more of whose gross income is derived from its conduct of a United States trade
or business for a specified three-year period (or, in addition, for payments
made after December 31, 2000, a foreign partnership engaged in a United States
trade or business or in which United States persons hold more than 50 percent of
the income or capital interests, or certain United States branches of foreign
banks or insurance companies), information reporting will be required unless the
beneficial owner has provided certain required information or documentation to
the broker to establish its non-United States status or otherwise establishes an
exemption. Payments to or through the United States office of a broker will be
subject to backup withholding and information reporting unless the holder
certifies under penalties of perjury to its non-United States holder status or
otherwise establishes an exemption.
Non-United States holders should consult their tax advisors regarding the
application of United States federal income tax laws, including information
reporting and backup withholding, to their particular situations.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The notes are being offered from time to time by us through Chase
Securities Inc., Credit Suisse First Boston Corporation, Goldman, Sachs & Co.
and Lehman Brothers Inc., as agents, who have severally agreed to use their
reasonable best efforts to solicit offers to purchase the notes. We may also
sell notes to any agent, as principal, and such agent may resell such notes as
further described below. We will have the sole right to accept offers to
purchase notes and may reject any proposed purchase of notes as a whole or in
part. The agents shall have the right, in their discretion reasonably
exercised, to reject any proposed purchase of notes as a whole or in part.
Unless otherwise specified in the applicable pricing supplement, we will pay
each agent a commission (or grant a discount) ranging from .125% to 1.050%,
depending upon the maturity, of the principal amount of notes sold through such
agent. Commissions and discounts with respect to notes with maturities in
excess of 30 years will be negotiated between us and such agent at the time of
sale.
No termination date for the offering of the notes has been established. We
reserve the right to withdraw, cancel or modify this offer without notice.
Unless otherwise indicated in the applicable pricing supplement, any note
sold to an agent as principal will be purchased by such agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a note of identical maturity. Such
notes may be resold by the agent to investors and other purchasers from time to
time in one or more transactions, including negotiated transactions, or at
varying prices relating to prevailing market prices determined at the time of
sale or, if so agreed, at a fixed public offering price. After the initial
public offering of notes to be resold to investors and other purchasers, the
public offering price (in the case of notes to be resold at a fixed public
offering price) and any concession or discount, may be changed. In addition,
the agents may resell notes they have purchased as principal to other dealers.
Such resales may be at a discount and, unless otherwise specified in the
applicable pricing supplement, such discount allowed to any dealer will not
exceed the discount to be received by such agent from us. Such dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended.
S-59
<PAGE>
Unless otherwise specified in the applicable pricing supplement, the notes
will not be listed on any securities exchange. No note will have an established
trading market when issued. The agents have informed us that they intend to
make a market in the notes. However, the agents are not obligated to make such
a market and may discontinue any market making at any time without notice. No
assurance can be given as to the liquidity of the trading market for any notes.
In connection with certain offerings of the notes, the agents may engage in
overallotment, stabilizing and syndicate covering transactions in accordance
with Regulation M under the Securities Exchange Act of 1934. Overallotment
involves sales in excess of the offering size, which creates a short position
for the agents. Stabilizing transactions involve bids for the purchase of notes
in the open market for the purpose of pegging, fixing or maintaining the price
of the notes. Syndicate covering transactions involve purchases of the notes in
the open market after the distribution has been completed in order to cover
short positions. Stabilizing transactions and syndicate covering transactions
may cause the price of the notes to be higher than it would otherwise be in the
absence of those transactions. Those activities, if begun, may be discontinued
at any time.
The agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933, as amended. We have agreed to
indemnify the agents against certain liabilities, including liabilities under
the Securities Act of 1933, as amended.
We reserve the right to sell notes directly to investors on our own behalf,
in which case no discount will be allowed or commission paid.
In the ordinary course of their respective businesses, certain of the
agents or their affiliates have engaged and may in the future engage in general
financing and banking and investment banking transactions with us or our
affiliates. The subordinated trustee, Chase Manhattan Bank and Trust Company,
National Association, is an affiliate of Chase Securities Inc., one of the
agents.
S-60
<PAGE>
PROSPECTUS
$2,000,000,000
PROVIDIAN FINANCIAL CORPORATION
COMMON STOCK, PREFERRED STOCK, DEPOSITARY SHARES, DEBT SECURITIES,
COMMON STOCK WARRANTS,
PREFERRED STOCK WARRANTS, THIRD PARTY WARRANTS, DEBT WARRANTS, STOCK PURCHASE
CONTRACTS, STOCK PURCHASE UNITS AND OTHER UNITS
PROVIDIAN FINANCING I
PROVIDIAN FINANCING II
PROVIDIAN FINANCING III
PROVIDIAN FINANCING IV
PREFERRED SECURITIES, GUARANTEED TO THE EXTENT SET FORTH
HEREIN BY PROVIDIAN FINANCIAL CORPORATION
Providian Financial Corporation (the "Company" or "Providian"), a Delaware
corporation, directly or through agents, dealers or underwriters designated from
time to time, or by third parties ("Third Parties") who have acquired securities
of the Company in private transactions or otherwise, or counterparties with whom
the Company may enter into hedging transactions (the "Counterparties"), may sell
from time to time up to $2,000,000,000 (or, if applicable, the equivalent
thereof in other currencies) in the aggregate, subject to the limitations set
forth below, of (a) shares of common stock, $0.01 par value per share, of the
Company ("Common Stock"), (b) shares of preferred stock, $0.01 par value per
share, of the Company ("Preferred Stock"), in one or more series, (c) depositary
shares of the Company ("Depositary Shares"), (d) unsecured senior or
subordinated debt securities of the Company ("Debt Securities"), (e) options,
warrants and other rights to purchase shares of Common Stock ("Common Stock
Warrants") or shares of Preferred Stock ("Preferred Stock Warrants"), (f)
options, warrants and other rights to purchase shares of capital stock or debt
of another corporation or other entity ("Third Party Warrants"), (g) options,
warrants and other rights to purchase Debt Securities ("Debt Warrants"), (h)
stock purchase contracts ("Stock Purchase Contracts") to purchase Common Stock
or Preferred Stock (i) stock purchase units ("Stock Purchase Units") each
representing ownership of a Stock Purchase Contract and Preferred Stock, Debt
Securities, debt obligations of third parties, including the United States of
America or agencies or instrumentalities thereof ("U.S. Obligations") or
Preferred Securities (as defined below), securing the holder's obligation to
purchase Common Stock or Preferred Stock under the Stock Purchase Contract or
(j) other units ("Other Units"), each of which may represent any combination of
the following: Common Stock, Preferred Stock, Depositary Shares, Debt
Securities, Common Stock Warrants, Preferred Stock Warrants, Third Party
Warrants, Debt Warrants, Stock Purchase Contracts, Stock Purchase Units,
Preferred Securities or Guarantees.
Providian Financing I, Providian Financing II, Providian Financing III and
Providian Financing IV, each of which is a statutory business trust formed under
the laws of the State of Delaware (each a "Financing Trust"), the Common
Securities (as defined herein) of which will be wholly owned by the Company at
the time of issuance of Preferred Securities, may offer preferred securities
representing undivided beneficial interests in the assets of the respective
Financing Trust ("Preferred Securities"). The payment of periodic cash
distributions with respect to Preferred Securities of each of the Financing
Trusts out of moneys held by each of the Financing Trusts, and payments on
liquidation, redemption or otherwise with respect to such Preferred Securities,
will be guaranteed by the Company to the extent described herein (each a
"Guarantee"). See "Description of the Guarantees." The Company's obligations
under the Guarantees are subordinate and junior in right of payment to all
senior liabilities of the Company and rank pari passu with the obligations of
the Company under any similar guarantee agreements issued by the Company on
behalf of holders of Subordinated Debt Securities. In the event a Financing
Trust issues Preferred Securities or Common Securities, the proceeds to such
Financing Trust from such offering will be invested in subordinated Debt
Securities, which will be issued and sold in one or more series by the Company
to such Financing Trust or the trustee of such trust. The subordinated Debt
Securities purchased by a Financing Trust may be subsequently distributed pro
rata to holders of Preferred Securities or Common Securities in connection with
the dissolution of such Financing Trust upon the occurrence of certain events as
may be described in an accompanying Prospectus Supplement.
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
ADDITIONAL INFORMATION REGARDING THE SECURITIES IS SET FORTH ON THE INSIDE
FRONT COVER. FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN INVESTMENT IN
THE SECURITIES, SEE "GENERAL DESCRIPTION OF SECURITIES AND RISK FACTORS" ON PAGE
10.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is May 14, 1999
The Common Stock, Preferred Stock, Depositary Shares, Debt Securities,
Common Stock Warrants, Preferred Stock Warrants, Third Party Warrants, Debt
Warrants, Stock Purchase Contracts, Stock Purchase Units, Preferred Securities,
Guarantees and Other Units are collectively referred to herein as the
"Securities."
The Company, each Financing Trust, Third Parties or Counterparties may sell
the Securities to or through underwriters, dealers or agents or directly to
purchasers. See "Plan of Distribution." The Company and each Financing Trust
reserve the sole right to accept and, together with their respective agents from
time to time, to reject in whole or in part any proposed purchase of Securities
to be made directly or through agents. The accompanying Prospectus Supplement
sets forth, among other things, the names of any underwriters, dealers or agents
involved in the sale of the Securities in respect of which this Prospectus is
being delivered, and any applicable fee, commission or discount arrangements
with them.
______________________________
All specific terms of the offering and sale of Securities, including the
initial public offering price, aggregate amount, listing on any securities
exchange or quotation system, risk factors and the agents, dealers or
underwriters, if any, to be utilized in connection with the sale of the
Securities, will be set forth in an accompanying Prospectus Supplement
("Prospectus Supplement"). With respect to the Preferred Stock, the related
Prospectus Supplement will set forth, among other things, the specific
designation, rights, preferences, privileges and restrictions thereof, including
dividend rate or rates (or method of ascertaining the same), dividend payment
dates, voting rights, liquidation preference, and any conversion, exchange,
redemption or sinking fund provisions. With respect to the Debt Securities, the
related Prospectus Supplement will set forth, among other things, the specific
designation, rights and restrictions, including whether they are senior or
subordinated, the currencies or currency units in which they are denominated,
the aggregate principal amount, the maturity, rate or rates of interest (or
method of ascertaining the same) and time of payment thereof, and any
conversion, exchange, redemption or sinking fund provisions. With respect to the
Common Stock Warrants, Preferred Stock Warrants, Third Party Warrants and Debt
Warrants, the related Prospectus Supplement will contain, among other things, a
description of the Common Stock, Preferred Stock, capital stock or debt of such
third party and Debt Securities, respectively, for which each warrant will be
exercisable and the exercise price, duration, detachability, call provisions and
other principal terms of such Warrants. With respect to the Stock Purchase
Contracts, the related Prospectus Supplement will set forth, among other things,
the designation and number of shares of Common Stock or Preferred Stock issuable
thereunder, the purchase price of the Common Stock or Preferred Stock, the date
or dates on which the Common Stock or Preferred Stock is required to be
purchased by the holders of the Stock Purchase Contracts, any periodic payments
required to be made by the Company to the holders of the Stock Purchase
Contracts or vice versa, and the terms of the offering and sale thereof. In the
case of Stock Purchase Units, the related Prospectus Supplement will set forth,
among other things, the specific terms of the Stock Purchase Contracts and any
Preferred Stock, Debt Securities or debt obligations of third parties or
Preferred Securities securing the holder's obligation to purchase the Preferred
Stock or Common Stock under the Stock Purchase Contracts, and the terms of the
offering and sale thereof. With respect to the Preferred Securities, the related
Prospectus Supplement will set forth, among other things, the specific
designation, rights, preferences, privileges and restrictions thereof, including
dividend rate or rates (or method of ascertaining the same), dividend payment
dates, voting rights, liquidation preference, and any conversion, exchange,
2
<PAGE>
redemption or sinking fund provisions, the terms upon which the proceeds of the
sale of the Preferred Securities will be used to purchase a specific series of
subordinated Debt Securities of the Company and the terms upon which the
obligations of the relevant Financing Trust to make periodic cash distributions
on the Preferred Securities or make payments upon liquidation or dissolution of
such Financing Trust or upon redemption of the Preferred Securities, to the
extent funds are available therefor, shall be unconditionally guaranteed by
Providian. With respect to the Other Units, the related Prospectus Supplement
will set forth, among other things, the specific terms of any Common Stock,
Preferred Stock, Common Stock Warrants, Preferred Stock Warrants, Third Party
Warrants, Debt Warrants, Stock Purchase Contracts, Stock Purchase Units,
Preferred Securities and Guarantees, and the terms of the offering and sale
thereof.
______________________________
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES AND
THE COMMON STOCK OF THE COMPANY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING
TRANSACTIONS, THE PURCHASE OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"PLAN OF DISTRIBUTION."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
SECURITIES ON NASDAQ IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "PLAN OF
DISTRIBUTION."
3
<PAGE>
TABLE OF CONTENTS
NO DEALER, SALES REPRESENTATIVE, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS OR ANY ACCOMPANYING
PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PROVIDIAN FINANCIAL
CORPORATION, PROVIDIAN FINANCING I, PROVIDIAN FINANCING II, PROVIDIAN FINANCING
III OR PROVIDIAN FINANCING IV OR BY ANY AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO, OR A
SOLICITATION OF, ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR
SOLICITATION WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS, ANY
ACCOMPANYING PROSPECTUS SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF PROVIDIAN FINANCIAL CORPORATION, PROVIDIAN FINANCING I,
PROVIDIAN FINANCING II, PROVIDIAN FINANCING III OR PROVIDIAN FINANCING IV OR
THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEX OF TERMS................................................................................................................ 6
AVAILABLE INFORMATION......................................................................................................... 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................................... 7
PROVIDIAN FINANCIAL CORPORATION............................................................................................... 8
THE FINANCING TRUSTS.......................................................................................................... 8
USE OF PROCEEDS............................................................................................................... 9
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS.. 9
GENERAL DESCRIPTION OF SECURITIES AND RISK FACTORS............................................................................ 10
DESCRIPTION OF THE COMMON STOCK............................................................................................... 10
GENERAL.................................................................................................................. 10
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS.......................................................................... 10
RIGHTS AGREEMENT......................................................................................................... 10
LISTING.................................................................................................................. 11
DESCRIPTION OF THE PREFERRED STOCK............................................................................................ 11
DESCRIPTION OF THE DEPOSITARY SHARES.......................................................................................... 12
GENERAL.................................................................................................................. 12
DIVIDENDS AND OTHER DISTRIBUTIONS........................................................................................ 13
REDEMPTION OF DEPOSITARY SHARES.......................................................................................... 13
VOTING THE PREFERRED STOCK............................................................................................... 14
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT....................................................................... 14
CHARGES OF DEPOSITARY.................................................................................................... 14
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
MISCELLANEOUS............................................................................................................ 14
RESIGNATION AND REMOVAL OF DEPOSITARY.................................................................................... 14
DESCRIPTION OF THE DEBT SECURITIES............................................................................................ 15
GENERAL.................................................................................................................. 15
SENIOR DEBT SECURITIES................................................................................................... 16
SUBORDINATED DEBT SECURITIES............................................................................................. 16
DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON STOCK OR PREFERRED STOCK....................................................... 17
GENERAL.................................................................................................................. 17
EXERCISE OF THE STOCK WARRANTS........................................................................................... 17
ANTIDILUTION PROVISIONS.................................................................................................. 17
NO RIGHTS AS STOCKHOLDERS................................................................................................ 18
DESCRIPTION OF THE THIRD PARTY WARRANTS....................................................................................... 18
GENERAL.................................................................................................................. 18
EXERCISE OF THIRD PARTY WARRANTS......................................................................................... 19
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES....................................................................... 19
GENERAL.................................................................................................................. 19
EXERCISE OF DEBT WARRANTS................................................................................................ 20
DESCRIPTION OF THE STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS.......................................................... 20
DESCRIPTION OF THE PREFERRED SECURITIES....................................................................................... 21
DESCRIPTION OF THE GUARANTEES................................................................................................. 21
GENERAL.................................................................................................................. 22
CERTAIN COVENANTS OF THE COMPANY......................................................................................... 22
MODIFICATION OF THE GUARANTEES; ASSIGNMENT............................................................................... 23
EVENTS OF DEFAULT........................................................................................................ 23
TERMINATION OF THE GUARANTEES............................................................................................ 23
STATUS OF THE GUARANTEES................................................................................................. 23
DESCRIPTION OF THE OTHER UNITS................................................................................................ 24
PLAN OF DISTRIBUTION.......................................................................................................... 24
ERISA AND TAX CONSIDERATIONS.................................................................................................. 26
LEGAL MATTERS................................................................................................................. 26
EXPERTS....................................................................................................................... 26
</TABLE>
5
<PAGE>
INDEX OF TERMS
<TABLE>
<CAPTION>
<S> <C>
Acquiring Party.......................................................... 11
Administrators........................................................... 9
Certificate of Incorporation............................................. 10
Code..................................................................... 26
Commission............................................................... 7
Common Securities........................................................ 8
Common Securities Guarantees............................................. 22
Common Stock............................................................. 1
Common Stock Warrants.................................................... 1
Company.................................................................. 1
Counterparties........................................................... 1
Debt Depositary.......................................................... 15
Debt Securities.......................................................... 1
Debt Warrant Agent....................................................... 19
Debt Warrant Agreement................................................... 19
Debt Warrants............................................................ 1
Declaration.............................................................. 8
Delaware Trustee......................................................... 9
Deposit Agreement........................................................ 13
Depositary............................................................... 13
Depositary Receipts...................................................... 12
Depositary Shares........................................................ 1
ERISA.................................................................... 26
Exchange Act............................................................. 7
Financing Trust.......................................................... 1
Financing Trustees....................................................... 9
Global Debt Securities................................................... 15
Guarantee................................................................ 1
Junior Preferred Shares.................................................. 10
Mandatory Debt Securities................................................ 16
Other Units.............................................................. 1
Preferred Securities..................................................... 1
Preferred Stock.......................................................... 1
Preferred Stock Warrants................................................. 1
Property Trustee......................................................... 9
Prospectus Supplement.................................................... 2
Providian................................................................ 1
Redemption Price......................................................... 11
Registration Statement................................................... 7
Rights................................................................... 10
Rights Plan.............................................................. 10
Securities Act........................................................... 7
Senior Debt Securities................................................... 15
Senior Indenture......................................................... 15
Sponsor.................................................................. 8
Stock Purchase Contracts................................................. 1
Stock Purchase Units..................................................... 1
Stock Warrant Agent...................................................... 17
Stock Warrant Agreement.................................................. 17
Stock Warrant Provisions................................................. 17
Stock Warrants........................................................... 17
Subordinated Debt Securities............................................. 15
Subordinated Indenture................................................... 15
Third Parties............................................................ 1
Third Party Company...................................................... 16
Third Party Registration Statement....................................... 16
Third Party Securities................................................... 15
Third Party Warrant Agent................................................ 18
Third Party Warrants..................................................... 1
Trust Indenture Act...................................................... 9
Trust Securities......................................................... 8
U.S. Dollar, Dollar, U.S. $, $........................................... 7
U.S. Obligations......................................................... 1
Voluntary Debt Securities................................................ 16
</TABLE>
6
<PAGE>
______________________________
References herein to "U.S. Dollar," "Dollar," "U.S. $" or "$" are to the
lawful currency of the United States of America.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
concerning Providian Financial Corporation can be inspected and copied at the
public reference facilities maintained by the Commission at its offices at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, as
well as the Regional Offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. In addition, such reports, proxy statements and other
information may be accessed electronically at the Commission's site on the World
Wide Web at http://www.sec.gov. Such reports, proxy statements and other
information can also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005 and at the offices of the
Pacific Exchange, 301 Pine Street, San Francisco, California 94104.
The Company and the Financing Trusts have filed with the Commission a
registration statement on Form S-3 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Securities. This Prospectus does not contain all of the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, the Financing
Trusts and the securities being offered hereby, reference is made to the
Registration Statement, which can be inspected at the public reference
facilities at the offices of the Commission set forth above. Any statements
contained herein concerning the provision of any document filed as an exhibit to
the Registration Statement or otherwise filed with the Commission and
incorporated by reference herein are not necessarily complete, and, in each
instance, reference is made to the copy of such document so filed for a more
complete description of the matter involved. Each such reference is qualified in
its entirety by such referenced documents.
No separate financial statements of the Financing Trusts have been included
herein. The Company does not consider that such financial statements would be
material to holders of the Securities because: (i) the Company, a reporting
company under the Exchange Act, owns, directly or indirectly, all of the voting
securities of each Financing Trust, (ii) neither Financing Trust has any
independent operations but exists for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of such Financing
Trust and investing the proceeds thereof in subordinated Debt Securities, and
(iii) the obligations of each Financing Trust to make periodic cash payments on
Preferred Securities and payments upon liquidation or dissolution of such
Financing Trust or upon redemption of the Preferred Securities, to the extent
funds are available therefor, are unconditionally guaranteed by the Company. See
"Description of the Guarantees," "Description of the Preferred Securities" and
"Description of the Debt Securities--Subordinated Debt Securities."
______________________________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company pursuant
to the Exchange Act are incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
7
<PAGE>
(b) the Company's Current Report on Form 8-K dated March 26, 1999;
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1999; and
(d) the description of the Company's Common Stock which is contained
in the Registration Statements on Form 10 and Form 8-A filed on April 17,
1997, and September 2, 1997 respectively, by the Company to register such
securities under Section 12 of the Exchange Act, including an amendment on
Form 8-A/A filed on March 26, 1999, and any other amendment or report filed
for the purpose of updating such description.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus has been delivered, and who makes a written or oral request, a
copy of any and all of the information that has been incorporated by reference
in this Prospectus or any Prospectus Supplement, excluding exhibits. Requests
should be directed to: Investor Relations, Providian Financial Corporation, 201
Mission Street, San Francisco, California 94105, telephone number: (415) 278-
6170.
PROVIDIAN FINANCIAL CORPORATION
Providian Financial Corporation is a diversified consumer lender, offering
a range of lending products, including unsecured credit cards, revolving lines
of credit, home loans, secured and partially secured credit cards, and fee-based
products. Through these products and services, the Company seeks to achieve
diversified earnings sources, with both spread-based and fee-based income from
loans and related products and services. The Company also offers deposit
products to customers nationwide.
The Company's executive offices are located at 201 Mission Street, San
Francisco, California 94105, telephone number: (415) 543-0404.
THE FINANCING TRUSTS
Each of Providian Financing I, Providian Financing II, Providian Financing
III and Providian Financing IV is a statutory business trust formed under
Delaware law pursuant to (i) a separate declaration of trust executed by the
Company, as sponsor for such trust (the "Sponsor"), the Financing Trustees (as
defined herein) and the Administrators (as defined herein) of such trust and
(ii) the filing of a certificate of trust with the Secretary of State of the
State of Delaware on May 29, 1998. The declarations will be amended and restated
in their entirety (each, as so amended and restated, a "Declaration")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus is a part and will be qualified as Indentures under the
Trust Indenture Act of 1939. Each Financing Trust exists for the exclusive
purposes of (i) issuing the Preferred Securities and common securities
representing undivided beneficial interests in the assets of the Trust (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities"), (ii) investing the proceeds received by such Financing Trust from
the sale of the Trust Securities in subordinated Debt Securities and (iii)
engaging in only those other activities necessary or incidental thereto. All of
the Common Securities will be directly or indirectly owned by the Company. The
Common Securities will rank pari passu, and payments will be made thereon pro
rata, with the Preferred Securities, except that, upon an event of default under
a Declaration, the rights of the holders of the Common Securities to payment in
respect of distributions and payments upon liquidation, redemption and otherwise
will be subordinated to the rights of the holders of the Preferred Securities.
Unless otherwise provided in the applicable Prospectus
8
<PAGE>
Supplement, the Company will directly or indirectly acquire Common Securities in
an aggregate liquidation amount equal to 3% of the total capital of each
Financing Trust. Each Financing Trust has a term of approximately 55 years but
may terminate earlier, as provided in the relevant Declaration. Each Financing
Trust's business and affairs will be conducted by the trustees (the "Financing
Trustees") and persons who are employees or officers of or who are affiliated
with the Company (the "Administrators") appointed by the Company as the direct
or indirect holder of all the Common Securities. The holder of the Common
Securities of a Financing Trust will be entitled to appoint, remove or replace
any of, or increase or reduce the number of, the Financing Trustees and the
administrators therefor. The duties and obligations of the Financing Trustees
shall be governed by the Declaration of such Financing Trust. A financial
institution that is not affiliated with the Company and has combined capital and
surplus of not less than $100,000,000 shall act as property trustee and as
indenture trustee for each Financing Trust for the purposes of the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), pursuant to the
terms set forth in a Prospectus Supplement (the "Property Trustee"). In
addition, unless the Property Trustee maintains a principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
each Financing Trust will have a trustee which has a principal place of business
or reside in the State of Delaware (the "Delaware Trustee"). The Company will
pay all fees and expenses related to the Financing Trusts and the offering of
the Trust Securities.
The office of the Delaware Trustee for each Financing Trust is The Bank of
New York (Delaware), White Clay Center, Route 273, Newark, Delaware. The address
for each Financing Trust is c/o the Company, the Sponsor of each Trust, at 201
Mission Street, San Francisco, California 94105.
USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the net
proceeds from the sale of Securities offered hereby will be used for general
corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
The following table sets forth the ratio of earnings to fixed charges and
ratio of earnings to combined fixed charges and preferred stock dividend
requirements for the Company for each of the years in the five-year period ended
December 31, 1998. The ratio of earnings to fixed charges is computed by
dividing (i) income before income taxes and fixed charges by (ii) fixed charges.
The ratio of earnings to combined fixed charges and preferred stock dividend
requirements is computed by dividing (i) income before income taxes and fixed
charges by (ii) fixed charges and preferred stock dividend requirements. Fixed
charges consist of interest expense on borrowings (including or excluding
deposits, as the case may be), and the portion of rental expense which is deemed
representative of interest. The preferred stock dividend requirements represent
the pretax earnings which would be required to cover such dividend requirements
on the Company's preferred stock outstanding. In February 1997, the Company
redeemed its outstanding preferred stock and accordingly there are no preferred
stock dividend requirements for the periods following such redemption.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
EARNINGS TO FIXED CHARGES:
Excluding interest on deposits 10.88 14.20 5.93 4.90 5.17
Including interest on deposits 2.93 2.66 2.34 2.34 2.69
EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDEND REQUIREMENTS (a)
Excluding interest on deposits 10.88 13.28 5.19 4.32 4.40
Including interest on deposits 2.93 2.63 2.25 2.24 2.51
</TABLE>
________________
(a) Preferred Stock dividend requirements are adjusted to represent a pretax
earnings equivalent.
9
<PAGE>
GENERAL DESCRIPTION OF SECURITIES AND RISK FACTORS
The Company may offer under this Prospectus shares of Common Stock or
Preferred Stock, Depositary Shares, Debt Securities, Common Stock Warrants,
Preferred Stock Warrants, Third Party Warrants, Debt Warrants, Stock Purchase
Contracts, Stock Purchase Units or Other Units or any combination of the
foregoing, either individually or as units consisting of one or more Securities.
Each Financing Trust may offer Preferred Securities under this Prospectus. The
aggregate offering price of Securities offered by the Company or any Financing
Trust under this Prospectus will not exceed $2,000,000,000 (or the equivalent
thereof in other currencies). CERTAIN OF THE SECURITIES TO BE OFFERED HEREBY
THEMSELVES INVOLVE A HIGH DEGREE OF RISK. SUCH RISKS WILL BE SET FORTH IN THE
PROSPECTUS SUPPLEMENT RELATING TO SUCH SECURITY. IN ADDITION, CERTAIN RISK
FACTORS RELATING TO THE COMPANY'S BUSINESS ARE SET FORTH IN THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, BEGINNING ON
PAGE 13 UNDER THE HEADING "CAUTIONARY STATEMENTS."
DESCRIPTION OF THE COMMON STOCK
GENERAL
Under the Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation"), the Company is authorized to issue up to 800
million shares of Common Stock. The Common Stock is not redeemable, does not
have any conversion rights and is not subject to call. Holders of shares of
Common Stock have no preemptive rights to maintain their percentage of ownership
in future offerings or sales of stock of the Company. Holders of shares of
Common Stock have one vote per share in all elections of directors and on all
other matters submitted to a vote of stockholders of the Company. Holders of
Common Stock are entitled to receive dividends, if any, as and when declared
from time to time by the Board of Directors of the Company out of funds legally
available therefor. Upon liquidation, dissolution or winding up of the affairs
of the Company, the holders of Common Stock will be entitled to participate
equally and ratably, in proportion to the number of shares held, in the net
assets of the Company available for distribution to holders of Common Stock. The
shares of Common Stock currently outstanding are fully paid and nonassessable.
CERTAIN CERTIFICATE OF INCORPORATION PROVISIONS
Certain provisions in the Company's Certificate of Incorporation and Bylaws
may have the effect of delaying, deferring or preventing a change in control of
the Company. These provisions require that the Company's Board of Directors be
divided into three classes that are elected for staggered three-year terms;
provide that stockholders may act only at annual or special meetings and may not
act by written consent; do not provide for cumulative voting in the election of
directors; authorize the directors of the Company to determine the size of the
Board of Directors; require a vote of 80% of the shares outstanding for the
amendment of any of the foregoing provisions; require that stockholder
nominations for directors be made pursuant to timely notice; provide that
special meetings of stockholders may be called only by the Chairman of the Board
or by the Board of Directors; and authorize the Board of Directors to establish
one or more series of Preferred Stock, without any further stockholder approval,
having rights, preferences, privileges and limitations that could impede or
discourage the acquisition of control of the Company.
RIGHTS AGREEMENT
The Company's Board of Directors has adopted a share purchase rights plan
(the "Rights Plan") that provides for the distribution of rights ("Rights") to
holders of outstanding shares of Common Stock. Except as set forth below, each
Right, when exercisable, entitles the holder thereof to purchase from the
Company one one-hundred and fiftieth of a share of Series A Junior Participating
Preferred Stock, par value $.01 per share, of the Company (the "Junior Preferred
Shares") at a price of $600 per one one-hundred and fiftieth share, subject to
adjustment. Holders of the Rights, as such, are not stockholders of the Company
and do not have voting rights or the right to receive dividends.
10
<PAGE>
Initially, the Rights are attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights certificates will
be distributed. The Rights will not separate from the Common Stock and will not
be exercisable until the earlier of either (i) 10 days following a public
announcement that a person or group of affiliated or associated persons has
acquired, or obtained the right to acquire, beneficial ownership of securities
representing 15% or more of the outstanding shares of Common Stock (an
"Acquiring Party") or (ii) 10 business days (or such later date as may be
determined by the Company's Board of Directors) following the commencement of
(or a public announcement of an intention to make) a tender offer or exchange
offer which would result in any person or group of affiliated or associated
persons becoming an Acquiring Party. The Rights will expire on the earlier of
(x) June 30, 2007 unless such expiration date is extended or (y) redemption or
exchange by the Company, as described below.
In the event that the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring Party, proper
provision will be made so that each holder of a Right will thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction will have a market value of two times the
exercise price of the Right. In the event that any person or group of affiliated
or associated persons becomes an Acquiring Party, proper provision will be made
so that each holder of a Right, other than Rights beneficially owned by the
Acquiring Party (which will thereafter be void), will thereafter have the right
to receive upon exercise that number of shares of Common Stock having a market
value of two times the exercise price of the Right.
At any time after any person or group of affiliated or associated persons
becomes an Acquiring Party and prior to the acquisition by such person or group
of 50% or more of the outstanding Common Stock, the Board of Directors of the
Company may, at its option, exchange the Rights (other than Rights owned by such
person or group which will have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, or one one-hundred and fiftieth of
a Junior Preferred Share, per Right (subject to adjustment).
At any time prior to a person or group of affiliated or associated persons
becoming an Acquiring Party, the Board of Directors of the Company may, at its
option, redeem the Rights in whole, but not in part, at a price of $.01 per
Right (the "Redemption Price"). The redemption of the Rights may be made
effective at such time on such basis with such conditions as the Board of
Directors in its sole discretion may establish. Immediately upon any such action
by the Board of Directors ordering the redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the holders of Rights
will be to receive the Redemption Price.
The Rights Plan may have the effect of delaying, deferring or preventing a
change in control of the Company without further action of the stockholders and
therefore could have a depressive effect on the price of the Common Stock.
LISTING
The Common Stock is listed on the New York Stock Exchange and the Pacific
Exchange under the symbol "PVN."
DESCRIPTION OF THE PREFERRED STOCK
Under the Certificate of Incorporation, the Board of Directors of the
Company may direct the issuance of up to 50 million shares of Preferred Stock in
one or more series and with rights, preferences, privileges and restrictions,
including dividend rights, voting rights, conversion rights, terms of redemption
and liquidation preferences, that may be fixed or designated by the Board of
Directors from time to time pursuant to a certificate of designation without any
further vote or action by the Company's stockholders. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company. Preferred Stock, upon issuance against full payment of
the purchase price therefor, will be fully paid and nonassessable. The specific
terms of a particular series of Preferred Stock will be described in the
Prospectus Supplement relating to that series. The description of Preferred
Stock set forth below and the description of the terms of a particular series of
Preferred Stock set forth in the related Prospectus Supplement do not purport to
be complete and are qualified in their entirety by reference to the certificate
of designation relating to that series. The related Prospectus Supplement will
contain a
11
<PAGE>
description of certain United States Federal income tax consequences relating to
the purchase and ownership of the series of Preferred Stock described in such
Prospectus Supplement.
The rights, preferences, privileges and restrictions of the Preferred Stock
of each series will be fixed by the certificate of designation relating to such
series. A Prospectus Supplement relating to each series will specify the terms
of the Preferred Stock as follows:
(a) The maximum number of shares to constitute the series and the
distinctive designation thereof;
(b) The annual dividend rate, if any, on shares of the series, whether
such rate is fixed or variable or both, the date or dates from which
dividends will begin to accrue or accumulate, the conditions for payment of
dividends, and whether dividends will be cumulative;
(c) The price at and the terms and conditions on which the shares of
the series may be redeemed, including the time during which shares of the
series may be redeemed and any accumulated dividends thereon that the
holders of shares of the series shall be entitled to receive upon the
redemption thereof;
(d) The liquidation preference, if any, and any accumulated dividends
thereon, that the holders of shares of the series shall be entitled to
receive upon the liquidation, dissolution or winding up of the affairs of
the Company;
(e) Whether or not the shares of the series will be subject to
operation of a retirement or sinking fund, and, if so, the extent and
manner in which any such fund shall be applied to the purchase or
redemption of the shares of the series, and the terms and provisions
relating to the operation of such fund;
(f) The terms and conditions, if any, on which the shares of the
series shall be convertible into or exchangeable for shares of any other
class or classes of capital stock of the Company or a third party or any
series of any other class or classes, or of any other series of the same
class, including the price or prices or the rate or rates of conversion or
exchange and the method, if any, of adjusting the same;
(g) The voting rights, if any, on the shares of the series; and
(h) Any or all other preferences and relative, participating, optional
or other special rights or qualifications, limitations or restrictions
thereof.
As described under "Description of the Depositary Shares," the Company may,
at its option, elect to offer Depositary Shares evidenced by depositary receipts
("Depositary Receipts"), each representing a fractional interest (to be
specified in the Prospectus Supplement relating to the particular series of the
Preferred Stock) in a share of the particular series of the Preferred Stock, and
issued and deposited with a Depositary (as defined below).
DESCRIPTION OF THE DEPOSITARY SHARES
The description set forth below and in the related Prospectus Supplement of
certain provisions of the Deposit Agreement (as defined below) and of the
Depositary Shares and Depositary Receipts does not purport to be complete and is
subject to and qualified in its entirety by reference to the forms of Deposit
Agreement and Depositary Receipts relating to each series of the Preferred Stock
which have been or will be filed with the Commission in connection with the
offering of fractional interests in such series of the Preferred Stock.
GENERAL
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Stock, rather than shares of Preferred Stock. In the event
such option is exercised, the Company will provide for the issuance by a
12
<PAGE>
Depositary to the public of receipts for Depositary Shares, each of which will
represent a fractional interest as set forth in the Prospectus Supplement
relating to a particular series of the Preferred Stock.
The shares of any series of the Preferred Stock underlying the Depositary
Shares will be deposited under a separate Deposit Agreement (the "Deposit
Agreement") between the Company and a bank or trust company selected by the
Company having its principal office in the United States and having a combined
capital and surplus of at least $100,000,000 (the "Depositary"). The Prospectus
Supplement relating to a series of Depositary Shares will set forth the name and
address of the Depositary. Subject to the terms of the Deposit Agreement, each
owner of a Depositary Share will be entitled, in proportion to the applicable
fractional interest in a share of the Preferred Stock underlying such Depositary
Shares, to all the rights and preferences of the Preferred Stock underlying such
Depositary Shares (including dividend, voting, redemption, conversion and
liquidation rights). The Depositary Shares relating to any series of Preferred
Stock will be evidenced by Depositary Receipts issued pursuant to the related
Deposit Agreement. Pending the preparation of definitive Depositary Receipts,
the Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive Depositary Receipts but
not in definitive form. Definitive Depositary Receipts will be prepared
thereafter without unreasonable delay, and temporary Depositary Receipts will be
exchangeable for definitive Depositary Receipts at the Company's expense.
Upon surrender of Depositary Receipts at the office of the Depositary and
upon payment of the charges provided in the related Deposit Agreement and
subject to the terms thereof, a holder of Depositary Shares is entitled to have
the Depositary deliver to such holder the whole shares of Preferred Stock
underlying the Depositary Shares evidenced by the surrendered Depositary
Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends and other cash
distributions received in respect of the Preferred Stock to the record holders
of the Depositary Shares relating to such Preferred Stock in proportion to the
number of such Depositary Shares owned by such holders on the relevant record
date. The Depositary shall distribute only such amount, however, as can be
distributed without attributing to any holder of Depositary Shares a fraction of
one cent, and any balance not so distributed shall be added to and treated as
part of the next sum received by the Depositary for distribution to record
holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
REDEMPTION OF DEPOSITARY SHARES
If a series of the Preferred Stock underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary Shares
to be so redeemed at their respective addresses appearing in the Depositary's
books. The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such series
of the Preferred Stock. Whenever the Company redeems shares of Preferred Stock
held by the Depositary, the Depositary will redeem as of the same redemption
date the number of Depositary Shares relating to shares of Preferred Stock so
redeemed. If less than all of the Depositary Shares are to be redeemed, the
Depositary Shares to be redeemed will be selected by lot or pro rata as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares will cease, except the right to receive the
payments or other property to which the holders of such Depositary Shares are
entitled upon such redemption upon surrender to the Depositary of the Depositary
Receipts evidencing such Depositary Shares.
13
<PAGE>
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock underlying the Depositary Shares are entitled to vote, the Depositary will
mail the information contained in such notice of meeting to the record holders
of such Depositary Shares. Each record holder of such Depositary Shares on the
record date (which will be the same date as the record date for the Preferred
Stock) will be entitled to instruct the Depositary as to the exercise of the
voting rights pertaining to the number of shares of Preferred Stock underlying
such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the number of shares of Preferred Stock underlying such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary will abstain from voting
shares of Preferred Stock to the extent it does not receive specific
instructions from the holders of Depositary Shares relating to such Preferred
Stock.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares relating to
any series of Preferred Stock and any provision of the related Deposit Agreement
may at any time be amended by agreement between the Company and the Depositary
named therein. However, any amendment which materially and adversely alters the
rights of the existing holders of Depositary Shares relating to any series of
Preferred Stock will not be effective unless such amendment has been approved by
the record holders of at least a majority of such Depositary Shares then
outstanding. A Deposit Agreement may be terminated by the Company or the
Depositary named therein only if (i) all outstanding Depositary Shares relating
thereto have been redeemed or (ii) there has been a final distribution in
respect of the Preferred Stock underlying the Depositary Shares relating thereto
in connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of the related Depositary
Shares.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and any redemption of the Preferred Stock. Holders of Depositary
Shares will pay transfer and other taxes and governmental charges and such other
charges as are expressly provided in the related Deposit Agreement to be for
their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of Depositary Shares all reports
and communications from the Company which are delivered to the Depositary and
which the Company is required to furnish to the holders of the underlying
Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control from performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or underlying
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, on information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Shares or other
persons believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary under a Deposit Agreement may resign at any time by
delivering to the Company notice of its election to do so, and the Company may
at any time with notice remove such Depositary, any such resignation or removal
to take effect upon the appointment of a successor Depositary and its acceptance
of such appointment. Such successor Depositary must be appointed within 90 days
after delivery of the notice of resignation or removal and
14
<PAGE>
must be a bank or trust company having its principal office in the United States
and having a combined capital and surplus of at least $100,000,000.
DESCRIPTION OF THE DEBT SECURITIES
GENERAL
The Company may offer under this Prospectus Senior Debt Securities (as
defined below) or Subordinated Debt Securities (as defined below) or any
combination of the foregoing. The Debt Securities will represent unsecured
general obligations of the Company, and will either (i) rank prior to all
subordinated indebtedness of the Company and pari passu with all other unsecured
indebtedness of the Company (the "Senior Debt Securities") or (ii) be
subordinate in right of payment to certain other debt obligations of the Company
(the "Subordinated Debt Securities"). The Senior Debt Securities and the
Subordinated Debt Securities may be issued under indentures substantially in the
forms filed as exhibits to the Registration Statement. In this Prospectus, the
indenture relating to Senior Debt Securities is referred to as the "Senior
Indenture," the indenture relating to Subordinated Debt Securities is referred
to as the "Subordinated Indenture," and the Senior Indenture and the
Subordinated Indenture are collectively referred to as "Indentures." Neither of
the Indentures will limit the amount of Debt Securities that may be issued
thereunder, and each Indenture will provide that Debt Securities may be issued
thereunder up to an aggregate principal amount authorized from time to time by
the Company and may be payable in any currency or currency unit designated by
the Company or in amounts determined by reference to an index. The following
summaries of certain provisions in the Indentures pursuant to which Debt
Securities are issued and of the Debt Securities, as the case may be, do not
purport to be complete. Such summaries make use of certain terms defined in the
Indentures and are qualified in their entirety by reference to the applicable
form of Indenture or Debt Security, respectively, filed as an exhibit to the
Registration Statement.
Reference is made to the applicable Prospectus Supplement for any series of
Debt Securities for the following terms: (i) the designation of such series of
Debt Securities; (ii) the aggregate principal amount of such series of Debt
Securities; (iii) the stated maturity or maturities for payment of principal of
such series of Debt Securities and any sinking fund or analogous provisions;
(iv) the rate or rates at which such series of Debt Securities shall bear
interest or the method of calculating such rate or rates of interest and the
interest payment dates for such series of Debt Securities; (v) the currencies,
currency unit or index in or according to which principal of and interest and
any premium on such series of Debt Securities shall be payable (if other than
U.S. Dollars); (vi) the redemption date or dates, if any, and the redemption
price or prices and other applicable redemption provisions for such series of
Debt Securities; (vii) whether such series of Debt Securities shall be issued as
one or more global debt securities ("Global Debt Securities"), and, if so, the
identity of the depositary (the "Debt Depositary") for such Global Debt Security
or Debt Securities; (viii) if not issued as one or more Global Debt Securities,
the denominations in which such series of Debt Securities shall be issuable (if
other than denominations of $1,000 and any integral multiple thereof); (ix) the
date from which interest on such series of Debt Securities shall accrue; (x) the
basis upon which interest on such series of Debt Securities shall be computed
(if other than on the basis of a 360-day year of twelve 30-day months); (xi) if
other than the principal amount thereof, the portion of the principal amount of
such series of Debt Securities which shall be payable upon declaration of
acceleration of the maturity thereof pursuant to the Indenture; (xii) if other
than the trustee (the "Trustee"), the person or persons who shall be registrar
for such series of Debt Securities; (xiii) the Record Date; (xiv) the identity
of the Trustee; (xv) any covenants of the Company with respect to a series of
Debt Securities; (xvi) whether the Debt Securities are convertible into or
exchangeable for Securities, or other securities of the Company or Third Party
Securities (as herein defined), and the terms of such conversion or exchange;
(xvii) whether the Debt Securities will be issued at an original issue discount
and a description of such discount; and (xviii) any other term or provision
relating to such series of Debt Securities which is not inconsistent with the
provisions of the Indenture.
Except as described in this Prospectus or the accompanying Prospectus
Supplement, the Indentures do not contain any covenants specifically designed to
protect holders of the Debt Securities against a reduction in the
creditworthiness of the Company in the event of a highly leveraged transaction
or to prohibit other transactions which may adversely affect holders of the Debt
Securities.
In the event Debt Securities of any series are to be offered that are
convertible into or exchangeable for securities of third parties ("Third Party
Securities"), the Prospectus Supplement will identify the Third Party
15
<PAGE>
Securities, the issuer of such Third Party Securities (the "Third Party
Company"), all documents filed by the Third Party Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act since the end of such Third Party
Company's last completed fiscal year for which a Form 10-K annual report has
been filed and the document or documents filed under the Securities Act or the
Exchange Act which contain a description of the Third Party Securities being
sold or, if no such document or documents exist, the Prospectus Supplement will
include a description of the Third Party Securities being sold. Third Party
Securities will only be securities of third parties that are eligible to use
Form S-3 (or any successor form) for primary offerings under the rules and
regulations of the Commission or securities that are registered under Section 12
of the Exchange Act. To the extent the Securities Act requires registration of
the Third Party Securities by the Third Party Company, such as where the Third
Party Company is an affiliate of the Company, in connection with the issuance,
conversion and/or exchange of such Debt Securities, the Company will cause the
Third Party Company to file a third party registration statement ("Third Party
Registration Statement") under the Securities Act. Where the conversion and/or
exchange of the Debt Securities would require an effective Third Party
Registration Statement at the time of such exchange or conversion, the exchange
or conversion will be subject to the effectiveness of such registration
statement. For example, Debt Securities that are convertible into or
exchangeable for Third Party Securities may be convertible or exchangeable by
their terms at the election of the Company or mandatorily at the expiration of a
specified period or at other times under specified circumstances ("Mandatory
Debt Securities") or may be convertible or exchangeable by their terms at the
election of the Debt Holder at any time during a specified period or periods or
on a specified date or dates ("Voluntary Debt Securities"). In the case of both
Mandatory Debt Securities and Voluntary Debt Securities, if the Company is an
affiliate of the Third Party Company, the Third Party Securities into which they
may be converted or for which they may be exchanged will be the subject of a
registration statement filed under the Securities Act by the Third Party Company
prior to any offer of such Mandatory or Voluntary Debt Securities, and a Third
Party Registration Statement with respect to such Third Party Securities will
have been declared effective prior to any sale of such Mandatory or Voluntary
Debt securities, except in the case of Voluntary Debt Securities that are not
immediately exercisable or convertible, in which case such a Third Party
Registration Statement would have to be effective, absent an exemption, when the
Debt Holder elects to convert such Voluntary Debt Securities into or exchange
them for Third Party Securities.
SENIOR DEBT SECURITIES
The Senior Debt Securities will be unsecured and will rank equally with all
other unsecured and unsubordinated indebtedness for borrowed money of the
Company.
SUBORDINATED DEBT SECURITIES
Subordinated Debt Securities may be issued from time to time in one or more
series under the Subordinated Debt Indenture. The Subordinated Debt Securities
will be subordinated and junior in right of payment to certain other
indebtedness of the Company to the extent set forth in the applicable Prospectus
Supplement.
In the event the Subordinated Debt Securities are issued to a Financing
Trust or a trustee of such trust in connection with the issuance of Trust
Securities by such Financing Trust, such Subordinated Debt Securities
subsequently may be distributed pro rata to the Holders of such Trust Securities
in connection with the dissolution of such Financing Trust upon the occurrence
of certain events described in the Prospectus Supplement relating to such Trust
Securities. Only one series of Subordinated Debt Securities will be issued to a
Financing Trust or a trustee of such trust in connection with the issuance of
Trust Securities by such Financing Trust.
Unless otherwise provided in the applicable Prospectus Supplement, if
Subordinated Debt Securities are issued to a Financing Trust or a trustee of
such trust in connection with the issuance of Trust Securities by such Financing
Trust and (i) there shall have occurred an event that would constitute an Event
of Default with respect to such Subordinated Debt Securities; (ii) the Company
shall be in default with respect to its payment of any obligations under the
related Preferred Securities Guarantee or Common Securities Guarantee; or (iii)
the Company shall have given notice of its election to defer payments of
interest on such Subordinated Debt Securities by extending the interest payment
period as provided in the Indenture and such period, or any extension thereof,
shall be continuing, then (a) the Company shall not declare or pay any dividend
on, make any distributions with respect to, or redeem, purchase or make a
liquidation payment with respect to, any of its capital stock, and (b) the
Company shall not make any payment of interest, principal or premium, if any,
on or repay, repurchase or redeem any Debt
16
<PAGE>
Securities which rank junior to or pari passu with such Subordinated Debt
Securities; provided that the foregoing restriction does not apply to: (w) any
stock dividends paid by the Company where the dividend stock is of the same
class as that of the stock held by the Holders receiving the dividend, (x) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (y)
payments under a Guarantee, and (z) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's or its
subsidiaries' benefit plans for their directors, officers or employees.
DESCRIPTION OF THE WARRANTS TO PURCHASE COMMON
STOCK OR PREFERRED STOCK
The following statements with respect to the Common Stock Warrants and
Preferred Stock Warrants (collectively, the "Stock Warrants") are summaries of,
and subject to, the detailed provisions of a warrant agreement ("Stock Warrant
Agreement") to be entered into by the Company and a warrant agent to be selected
at the time of issue (the "Stock Warrant Agent"), which Stock Warrant Agreement
may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Stock Warrant Provisions (the "Stock
Warrant Provisions") filed as an exhibit to the Registration Statement or other
provisions set forth in the Stock Warrant Agreement which will be filed as an
exhibit to or incorporated by reference in the Registration Statement.
GENERAL
The Stock Warrants may be issued under the Stock Warrant Agreement
independently or together with any other Securities offered by any Prospectus
Supplement and may be attached to or separate from such other Securities. If
Stock Warrants are offered, the related Prospectus Supplement will describe the
terms of the Stock Warrants, including without limitation the following: (i) the
offering price, if any; (ii) the designation and terms of the Common Stock or
Preferred Stock purchasable upon exercise of the Stock Warrants; (iii) the
number of shares of Common Stock or Preferred Stock purchasable upon exercise of
one Stock Warrant and the initial price at which such shares may be purchased
upon exercise; (iv) the date on which the right to exercise the Stock Warrants
shall commence, the date on which such right shall expire and whether the
Company has the ability to extend the exercise period; (v) federal income tax
consequences; (vi) call provisions, if any; (vii) the currency, currencies or
currency units in which the offering price, if any, and exercise price are
payable; (viii) the antidilution provisions of the Stock Warrants; and (ix) any
other terms of the Stock Warrants. The shares of Common Stock or Preferred Stock
issuable upon exercise of the Stock Warrants will, when issued in accordance
with the Stock Warrant Agreement, be fully paid and nonassessable. If the
Company maintains the ability to reduce the exercise price of any Stock Warrant
and such right is triggered, the Company will comply with the federal securities
laws, including Rule 13e-4 under the Exchange Act, to the extent applicable.
EXERCISE OF THE STOCK WARRANTS
Stock Warrants may be exercised in the manner set forth in the applicable
Prospectus Supplement. Duly exercised Stock Warrants will be delivered by the
Stock Warrant Agent to the transfer agent for the Common Stock or the Preferred
Stock, as the case may be. Upon receipt thereof, the transfer agent shall
deliver or cause to be delivered, to or upon the written order of the exercising
warrantholder, the number of shares of Common Stock or Preferred Stock
purchased. If fewer than all of the Stock Warrants held by a warrantholder are
exercised, the Stock Warrant Agent shall deliver to the exercising warrantholder
a new Stock Warrant representing the unexercised Stock Warrants.
ANTIDILUTION PROVISIONS
The exercise price payable and the number of shares of Common Stock or
Preferred Stock, as the case may be, purchasable upon the exercise of each Stock
Warrant will be subject to adjustment in certain events, including the issuance
of a stock dividend to holders of Common Stock or Preferred Stock, respectively,
or a combination, subdivision or reclassification of Common Stock or Preferred
Stock, respectively. In lieu of adjusting the number of shares of Common Stock
or Preferred Stock purchasable upon exercise of each Stock Warrant, the Company
may elect to adjust the number of Stock Warrants. No adjustment in the number of
shares purchasable upon exercise of the Stock Warrants will be required until
cumulative adjustments require an adjustment of at least 1% thereof. The
17
<PAGE>
Company may, at its option, reduce the exercise price at any time. No fractional
shares will be issued upon exercise of Stock Warrants, but the Company will pay
the cash value of any fractional shares otherwise issuable. Notwithstanding the
foregoing, in case of any consolidation, merger, or sale or conveyance of the
property of the Company as an entirety or substantially as an entirety, the
holder of each outstanding Stock Warrant shall have the right upon the exercise
thereof to the kind and number of shares of stock and other securities and
property (including cash) receivable by a holder of the number of shares of
Common Stock or Preferred Stock into which such Stock Warrants were exercisable
immediately prior thereto.
NO RIGHTS AS STOCKHOLDERS
Holders of Stock Warrants will not be entitled, by virtue of being such
holders, to vote, to consent, to receive dividends, to receive notice as
stockholders with respect to any meeting of stockholders for the election of
directors of the Company or any other matter, or to exercise any rights
whatsoever as stockholders of the Company.
DESCRIPTION OF THE THIRD PARTY WARRANTS
The following statements with respect to the Third Party Warrants are
summaries of, and subject to, the detailed provisions of a warrant agreement
(the "Third Party Warrant Agreement") to be entered into by the Company and a
warrant agent to be selected at the time of issue (the "Third Party Warrant
Agent"), which Third Party Warrant Agreement may include or incorporate by
reference standard warrant provisions substantially in the form of the Stock
Warrant Provisions or the provisions set forth in the form of Debt Securities
Warrant Agreement filed as an exhibit to the Registration Statement or other
provisions set forth in the Third Party Warrant Agreement which will be filed as
an exhibit to or incorporated by reference in the Registration Statement.
GENERAL
The Third Party Warrants may be issued under the Third Party Warrant
Agreement independently or together with any other Securities offered by any
Prospectus Supplement and may be attached to or separate from such other
Securities. If Third Party Warrants are offered, the related Prospectus
Supplement will describe the terms of the warrants, including without limitation
the following: (i) the offering price, if any; (ii) the designation, aggregate
principal amount and terms of the Third Party Securities purchasable upon
exercise of the warrants; (iii) if applicable, the designation and terms of the
Third Party Securities with which the Third Party Warrants are issued and the
number of Third Party Warrants issued with each such Third Party Security; (iv)
if applicable, the date on and after which the Third Party Warrants and the
related Third Party Securities will be separately transferable; (v) the number
or principal amount of Third Party Securities purchasable upon exercise of one
Third Party Warrant and the price at which such number or principal amount of
Third Party Securities may be purchased upon exercise; (vi) the date on which
the right to exercise the Third Party Warrants shall commence, the date on which
such right shall expire and whether the Company has the ability to extend the
exercise period; (vii) federal income tax consequences; (viii) whether the Third
Party Warrants will be issued in registered or bearer form; (ix) the currency,
currencies or currency units in which the offering price, if any, and exercise
price are payable; (x) the antidilution provisions of the Third Party Warrants;
and (xi) any other terms of the Third Party Warrants. If the Company maintains
the ability to reduce the exercise price of any Third Party Warrant and such
right is triggered, the Company will comply with the federal securities laws,
including Rule 13e-4 under the Exchange Act, to the extent applicable.
The Prospectus Supplement will identify the Third Party Securities, the
Third Party Company, all documents filed by the Third Party Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act since the end of such
Third Party Company's last completed fiscal year for which a Form 10-K annual
report has been filed and the document or documents filed under the Exchange Act
which contain a description of the Third Party Securities being sold or, if no
such document or documents exist, the Prospectus Supplement will include a
description of the Third Party Securities being sold. Third Party Warrants may
be offered only with respect to Third Party Securities of Third Party Companies
that are eligible to use Form S-3 (or any successor form) for primary offerings
under the rules and regulations of the Commission and Third Party Securities
that are registered under Section 12 of the Exchange Act. To the extent the
Securities Act requires registration of the Third Party Securities by the Third
Party Company, such as where the Third Party is an affiliate of the Company, in
connection with the issuance and/or exercise of Third Party Warrants, the
Company will cause the Third Party Company to file a Third
18
<PAGE>
Party Registration Statement under the Securities Act. Where the exercise of
Third Party Warrants would require the Third Party to have an effective Third
Party Registration Statement at the time of exercise, the exercise will be
subject to the effectiveness of such registration statement.
For example, if the Company is an affiliate of the Third Party Company, the
Third Party Securities that can be acquired upon exercise of the Third Party
Warrants will be the subject of a registration statement filed under the
Securities Act by the Third Party Company prior to any offer of such Third Party
Warrants, and a Third Party Registration Statement will have been declared
effective prior to any sale of Third Party Warrants, except in the case of Third
Party Warrants which are not immediately exercisable, in which case such a
registration statement would have to be effective, absent an exemption, when the
holder of any Third Party Warrants elects to exercise them to acquire Third
Party Securities.
Third Party Warrants may be exchanged for new Third Party Warrants of
different denominations and may (if in registered form) be presented for
registration of transfer at the corporate trust office of the Third Party
Warrant Agent, which will be listed in the related Prospectus Supplement, or at
such other office as may be set forth therein. Warrantholders do not have any of
the rights of holders of Third Party Securities (except as may be otherwise set
forth in the Prospectus Supplement).
EXERCISE OF THIRD PARTY WARRANTS
Third Party Warrants may be exercised in the manner set forth in the
applicable Prospectus Supplement. Upon the exercise of Third Party Warrants, the
Third Party Warrant Agent will, as soon as practicable, deliver the Third Party
Securities in authorized denominations in accordance with the instructions of
the exercising warrantholder and at the sole cost and risk of such holder. If
less than all of the Third Party Warrants held by a warrantholder are exercised,
a new Third Party Warrant will be issued for the remaining amount of Third Party
Warrants.
DESCRIPTION OF THE WARRANTS TO PURCHASE DEBT SECURITIES
The following statements with respect to the Debt Warrants are summaries
of, and subject to, the detailed provisions of a warrant agreement (the "Debt
Warrant Agreement") to be entered into by the Company and a warrant agent to be
selected at the time of issue (the "Debt Warrant Agent"), which Debt Warrant
Agreement may include or incorporate by reference standard warrant provisions
substantially in the form of the Standard Debt Securities Warrant Provisions
filed as an exhibit to the Registration Statement or other provisions set forth
in the Debt Warrant Agreement which will be filed as an exhibit to or
incorporated by reference in the Registration Statement.
GENERAL
The Debt Warrants may be issued under the Debt Warrant Agreement
independently or together with any Debt Securities offered by any Prospectus
Supplement and may be attached to or separate from such Debt Securities.
If Debt Warrants are offered, the related Prospectus Supplement will
describe the terms of the Debt Warrants, including without limitation the
following: (i) the offering price, if any; (ii) the designation, aggregate
principal amount and terms of the Debt Securities purchasable upon exercise of
the Debt Warrants; (iii) the principal amount of Debt Securities purchasable
upon exercise of the Debt Warrants and the price at which such principal amount
of Debt Securities may be purchased upon exercise; (iv) the date or dates on
which the right to exercise the Debt Warrants shall commence, the date on which
such right shall expire and whether the Company has the ability to extend the
exercise period; (v) federal income tax consequences, if any; (vi) the currency,
currencies or currency units in which the offering price, if any, and exercise
price are payable; and (vii) any other terms of the Debt Warrants.
Debt Warrants may be exchanged for new Debt Warrants of different
denominations and may be presented for registration of transfer at the corporate
trust office of the Debt Warrant Agent, which will be listed in the related
19
<PAGE>
Prospectus Supplement, or at such other office as may be set forth therein.
Warrantholders do not have any of the rights of holders of Debt Securities and
are not entitled to payments of principal of and interest, if any, on the Debt
Securities.
EXERCISE OF DEBT WARRANTS
Debt Warrants may be exercised in the manner set forth in the applicable
Prospectus Supplement. Upon the exercise of Debt Warrants, the Debt Warrant
Agent will, as soon as practicable, deliver the Debt Securities in authorized
denominations in accordance with the instructions of the exercising
warrantholder and at the sole cost and risk of such warrantholder.
DESCRIPTION OF THE STOCK PURCHASE
CONTRACTS AND STOCK PURCHASE UNITS
The Company may issue Stock Purchase Contracts, which are contracts
obligating holders to purchase from the Company, and the Company to sell to the
holders, a specified number of shares of Common Stock or Preferred Stock at a
future date or dates. The price per share of Common Stock or Preferred Stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. Any such formula may include antidilution provisions to adjust the
number of shares issuable pursuant to Stock Purchase Contracts upon certain
events. The Stock Purchase Contracts may be issued separately or as a part of
Stock Purchase Units each representing ownership of a Stock Purchase Contract
and Debt Securities, Preferred Securities or debt obligations of a Third Party
Company, including U.S. Obligations, securing the holders' obligations to
purchase the Common Stock or the Preferred Stock under the Purchase Contracts.
In the case of Stock Purchase Units that include debt obligations of a
Third Party Company, unless a holder of Stock Purchase Units settles its
obligations under the Stock Purchase Contracts early through the delivery of
consideration to the Company or its agent in the manner discussed below, the
principal of such debt obligations, when paid at maturity, will automatically be
applied to satisfy the holder's obligation to purchase Common Stock or Preferred
Stock under the Stock Purchase Contracts.
In the case of Stock Purchase Units that include Debt Securities or
Preferred Securities, in the absence of any such early settlement or the
election by a holder to pay the consideration specified in the Stock Purchase
Contracts prior to the stated settlement date, the Debt Securities or Preferred
Securities will automatically be presented to the applicable Financing Trust for
redemption at 100% of face or liquidation value and such Financing Trust will
present Subordinated Debt Securities in an equal principal amount to the Company
for redemption at 100% of principal amount. Amounts received in respect of such
redemption will automatically be transferred to the Company and applied to
satisfy in full the holder's obligation to purchase Common Stock or Preferred
Stock under the Stock Purchase Contracts. The Stock Purchase Contracts may
require the Company to make periodic payments to the holders of the Stock
Purchase Units or vice versa, and such payments may be unsecured or prefunded on
some basis. The Stock Purchase Contracts may require holders to secure their
obligations thereunder in a specified manner.
Holders of Stock Purchase Units may be entitled to settle the underlying
Stock Purchase Contracts prior to the stated settlement date by surrendering the
certificate evidencing the Stock Purchase Units, accompanied by the payment due,
in such form and calculated pursuant to such formula as may be prescribed in the
Stock Purchase Contracts and described in the applicable Prospectus Supplement.
Upon early settlement, the holder will receive the number of shares of Common
Stock or Preferred Stock deliverable under such Stock Purchase Contracts,
subject to adjustment in certain cases. Holders of Stock Purchase Units may be
entitled to exchange their Stock Purchase Units, together with appropriate
collateral, for separate Stock Purchase Contracts and Preferred Securities, Debt
Securities or debt obligations. In the event of such early settlement or
exchange, the Preferred Securities, Debt Securities or debt obligations that
were pledged as security for the obligation of the holder to perform under the
Stock Purchase Contracts will be transferred to the holder free and clear of the
Company's security interest therein.
The applicable Prospectus Supplement will describe the terms of any Stock
Purchase Contracts or Stock Purchase Units.
20
<PAGE>
DESCRIPTION OF THE PREFERRED SECURITIES
Each Financing Trust may issue only one series of Preferred Securities
having terms described in the Prospectus Supplement relating thereto. The
Declaration of each Financing Trust authorizes the Administrators of each
Financing Trust to issue on behalf of such Financing Trust one series of
Preferred Securities. Each Declaration will be qualified as an indenture under
the Trust Indenture Act. The Preferred Securities will have such terms,
including distributions redemption, voting, liquidation rights and such other
preferred, deferred or other special rights or such restrictions, as shall be
set forth in the Declaration or made part of the Declaration by the Trust
Indenture Act. Reference is made to the Prospectus Supplement relating to the
Preferred Securities for specific terms including: (i) the distinctive
designation of such Preferred Securities; (ii) the number of Preferred
Securities issued; (iii) the annual distribution rate (or method of determining
such rate) for such Preferred Securities and the date or dates upon which such
distributions shall be payable (provided, however, that distributions on such
Preferred Securities shall be payable on a quarterly basis to holders of such
Preferred Securities as of a record date in each quarter during which such
Preferred Securities are outstanding); (iv) whether distributions on Preferred
Securities shall be cumulative, and, in the case of Preferred Securities having
such cumulative distribution rights, the date or dates or method of determining
the date or dates from which distributions on Preferred Securities shall be
cumulative; (v) the amount or amounts which shall be paid out of the assets of
such Financing Trust to the holders of Preferred Securities upon voluntary or
involuntary dissolution of such Financing Trust; (vi) the obligation, if any, of
such Financing Trust to purchase or redeem Preferred Securities and the price or
prices at which, the period or periods within which and the terms and conditions
upon which Preferred Securities issued by such Financing Trust shall be
purchased or redeemed, in whole or in part, pursuant to such obligation; (vii)
the voting rights, if any, of Preferred Securities issued by such Financing
Trust in addition to those required by law, including the number of votes per
Preferred Security and any requirement for the approval by the holders of
Preferred Securities, or of Preferred Securities issued by both Financing Trusts
as a condition to specified action or amendments to the Declaration of such
Financing Trust; (viii) whether the Preferred Securities will be issued in the
form of one or more global securities; and (ix) any other relevant rights,
preferences, privileges, limitations or restrictions of Preferred Securities
issued by such Financing Trust consistent with the Declaration of such trust or
with applicable law. All Preferred Securities offered hereby will be guaranteed
by the Company to the extent set forth below under "Description of the
Guarantees." Certain United States federal income tax considerations applicable
to any offering of Preferred Securities will be described in the Prospectus
Supplement relating thereto.
In connection with the issuance of Preferred Securities, each Financing
Trust will issue one series of Common Securities. The Declaration of each
Financing Trust authorizes the Administrators to issue on behalf of such
Financing Trust one series of Common Securities having such terms including
distributions, redemption, voting, liquidation rights or such restrictions as
shall be set forth therein. The terms of the Common Securities issued by a
Financing Trust will be substantially identical to the terms of the Preferred
Securities issued by such trust and the Common Securities will rank pari passu,
and payments will be made thereon pro rata, with the Preferred Securities except
that, upon the occurrence and during the continuation of an event of default
under the Declaration, the rights of the holders of the Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the Preferred
Securities. Except in certain limited circumstances the Common Securities will
also carry the right to vote and to appoint, remove or replace any of the
Financing Trustees or the Administrators. All of the Common Securities will be
directly or indirectly owned by the Company.
DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by the Company for the benefit of the Holders,
from time to time, of Preferred Securities. Each Preferred Securities Guarantee
Agreement under which Guarantees are issued will be qualified as an indenture
under the Trust Indenture Act. The trustee under each Guarantee (the "Guarantee
Trustee") will be identified in the relevant Prospectus Supplement, and will be
a financial institution not affiliated with the Company that has a combined
capital and surplus of at least $100,000,000. The terms of each Guarantee will
be those set forth in such Guarantee and those made part of such Guarantee by
the Trust Indenture Act. The summary does not purport to be complete. Such
summary makes use of certain terms defined in the Guarantee and is subject in
all respects to the provisions of, and is qualified in its entirety by reference
to, the form of Guarantee, which is filed as an exhibit to the Registration
21
<PAGE>
Statement of which this Prospectus forms a part, and the Trust Indenture
Act. Each Guarantee will be held by the Guarantee Trustee for the benefit of the
holders of the Preferred Securities of the applicable Financing Trust.
GENERAL
Pursuant to each Guarantee, the Company will unconditionally agree, to the
extent set forth therein, to pay in full to the holders of the Preferred
Securities issued by each Financing Trust, the Guarantee Payments (as defined
herein) (except to the extent paid by such Financing Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which such Financing
Trust may have or assert other than the defense of payment. The following
payments with respect to Preferred Securities issued by each Financing Trust
(the "Guarantee Payments"), to the extent not paid by or on behalf of such
Financing Trust, will be subject to the Guarantee (without duplication): (i) any
accrued and unpaid distributions that are required to be paid on such Preferred
Securities, but if and only to the extent that in each case the Company has made
a payment to the related Property Trustee of interest or principal on the
Subordinated Debt Securities held in such Financing Trust as trust assets; (ii)
the redemption price, including all accrued and unpaid distributions (the
"Redemption Price"), but if and only to the extent that in each case the Company
has made a payment to the related Property Trustee of interest or principal on
the Subordinated Debt Securities held in such Financing Trust as trust assets
with respect to any Preferred Securities called for redemption by such Financing
Trust; and (iii) upon a voluntary or involuntary dissolution, winding up or
termination of such Financing Trust (other than in connection with the
distribution of Subordinated Debt Securities to the holders of Preferred
Securities or the redemption of all of the Preferred Securities), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
distributions on such Preferred Securities to the date of payment to the extent
such Financing Trust has funds available therefor or (b) the amount of assets of
such Financing Trust remaining available for distribution to holders of such
Preferred Securities on liquidation of such Financing Trust. The Company's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Company to the holders of Preferred Securities or by
causing the applicable Financing Trust to pay such amounts to such holders.
Each Guarantee will be a guarantee with respect to the Preferred Securities
issued by the applicable Financing Trust from the time of issuance of such
Preferred Securities but will not apply to any payment of distributions except
to the extent the Company has made a payment to the related Property Trustee of
interest or principal on the Subordinated Debt Securities held in such Financing
Trust as trust assets. If the Company does not make interest payments on the
Subordinated Debt Securities purchased by a Financing Trust, such Financing
Trust will not pay distributions on the Preferred Securities issued by such
Financing Trust and will not have funds available therefor and such payment
obligation will therefore not be guaranteed by the Company under the applicable
Guarantee. See "Description of the Preferred Securities" and "Description of the
Debt Securities--Subordinated Debt Securities."
The Company's obligations under the Declaration for each Financing Trust,
the Preferred Securities Guarantee issued with respect to Preferred Securities
issued by such Financing Trust, the Subordinated Debt Securities purchased by
such Financing Trust and the related Subordinated Indenture in the aggregate
will provide a full and unconditional guarantee on a subordinated basis by the
Company of payments due on the Preferred Securities issued by such Financing
Trust.
The Company has also agreed to unconditionally guarantee the obligations of
the Financing Trusts with respect to the Common Securities (the "Common
Securities Guarantees") to the same extent as the Guarantees, except that, upon
an event of default under the Subordinated Indenture, holders of Preferred
Securities under the Guarantees shall have priority over holders of Common
Securities under the Common Securities Guarantee with respect to distributions
and payments on liquidation, redemption or otherwise.
CERTAIN COVENANTS OF THE COMPANY
In each Guarantee, the Company will covenant that, so long as any Preferred
Securities issued by the applicable Financing Trust remain outstanding, if there
shall have occurred any event that would constitute an event of default under
such Guarantee or the Declaration of such Financing Trust, then (a) the Company
shall not declare or pay any dividend on, or make any distribution with respect
to, or redeem, purchase, acquire or make a liquidation payment with respect to,
any of its capital stock and (b) the Company shall not make any payment of
interest,
22
<PAGE>
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Company which rank junior to or pari passu with such
Subordinated Debt Securities. However, each Guarantee will except from the
foregoing any stock dividends paid by the Company or any of its subsidiaries,
where the dividend stock is of the same class as that on which the dividend is
being paid.
MODIFICATION OF THE GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights
of holders of Preferred Securities (in which case no vote will be required),
each Guarantee may be amended only with the prior approval of the holders of not
less than a majority in liquidation amount of the outstanding Preferred
Securities issued by the applicable Financing Trust. The manner of obtaining any
such approval of holders of such Preferred Securities will be set forth in an
accompanying Prospectus Supplement. All guarantees and agreements contained in a
Guarantee shall bind the successors, assignees, receivers, trustees and
representatives of the Company and shall inure to the benefit of the holders of
the Preferred Securities of the applicable Financing Trust then outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of the
Company to perform any of its payments or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities to which
a Guarantee relates have the right to (a) waive any past Events of Default and
its consequences, whereupon such event of default shall cease to exist and any
event of default under the Guarantee arising therefrom shall be deemed to have
been cured and (b) direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee in respect of the
Guarantee or to direct the exercise of any trust or power conferred upon the
Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce such Guarantee, any holder of
Preferred Securities relating to such Guarantee may, after a period of 30 days
has elapsed from such holder's written request to the Guarantee Trustee to
enforce the Guarantee, institute a legal proceeding directly against the Company
to enforce its rights under such Guarantee without first instituting a legal
proceeding against the applicable Financing Trust, the Guarantee Trustee or any
other person or entity.
The Company will be required to provide annually to the Guarantee Trustee a
statement as to the performance by the Company of certain of its obligations
under each of the Guarantees and as to any default in such performance.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate as to the Preferred Securities issued by the
applicable Financing Trust upon full payment of all distributions relating to
the Preferred Securities or the Redemption Price of all Preferred Securities of
such Trust, upon distribution of the Subordinated Debt Securities held by such
Financing Trust to the holders of the Preferred Securities of such Financing
Trust or upon full payment of the amounts payable in accordance with the
Declaration of such Financing Trust upon liquidation of such Financing Trust.
Each Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of Preferred Securities issued by the
applicable Financing Trust must restore payment of any sums paid under such
Preferred Securities or such Guarantee.
STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of the Company and
will rank (i) subordinate and junior in right of payment to all senior
liabilities of the Company; (ii) pari passu with the obligations of the Company
under any similar guarantee agreements issued by the Company on behalf of
holders of Subordinated Debt Securities; and (iii) senior to the Company's
Common Stock. The terms of the Preferred Securities provide that each holder of
Preferred Securities issued by such Financing Trust by acceptance thereof agrees
to the subordination provisions and other terms of the applicable Guarantee. The
Guarantee Trustee shall enforce the Guarantee on behalf of the holders of the
Preferred Securities issued by the applicable Financing Trust. The holders of
not less than a
23
<PAGE>
majority in aggregate liquidation amount of the Preferred Securities issued by
the applicable Financing Trust have the right to direct the time, method and
place of conducting any proceeding for any remedy available in respect of the
related Guarantee, including the giving of directions of the Guarantee Trustee.
If the Guarantee Trustee fails to enforce such Guarantee, any holder of
Preferred Securities relating to such Guarantee may, after a period of 30 days
has elapsed from such holder's written request to the Guarantee Trustee to
enforce the Guarantee, institute a legal proceeding directly against the
Company, as Guarantor, to enforce its rights under such Guarantee without first
instituting a legal proceeding against the applicable Financing Trust, the
Guarantee Trustee or any other person or entity.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly against
the guarantor to enforce its rights under a Guarantee without instituting a
legal proceeding against any other person or entity).
DESCRIPTION OF THE OTHER UNITS
The Company may issue Other Units, which may include Common Stock,
Preferred Stock, Depositary Shares, Debt Securities, Common Stock Warrants,
Preferred Stock Warrants, Third Party Warrants, Debt Warrants, Stock Purchase
Contracts, Stock Purchase Units, Preferred Securities or Guarantees, or any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each on terms to be determined at the time of sale.
The related Prospectus Supplement will describe the terms of any Other
Units and the Securities which comprise such Other Units. See "Description of
the Common Stock," "Description of the Preferred Stock," "Description of the
Depositary Shares," "Description of the Debt Securities," "Description of the
Warrants to Purchase Common or Preferred Stock," "Description of the Third Party
Warrants," "Description of the Warrants to Purchase Debt Securities,"
"Description of Stock Purchase Contracts and Stock Purchase Units," "Description
of the Preferred Securities," and "Description of the Guarantees."
PLAN OF DISTRIBUTION
The Company or any Financing Trust may, from time to time, sell Securities
(1) through underwriters or dealers, (2) directly to one or more purchasers, (3)
through agents or (4) through a combination of any such methods of sale. A
Prospectus Supplement will set forth the terms of the offering of the Securities
offered thereby, including the name or names of any underwriters, the purchase
price of the Securities, and the proceeds to the Company or any Financing Trust
from the sale, any underwriting discounts and other items constituting
underwriters' compensation, any initial public offering price, any discounts or
concessions allowed or reallowed or paid to dealers, and any securities exchange
or market on which the Securities may be listed. Only underwriters so named in
such Prospectus Supplement are deemed to be underwriters in connection with the
Securities offered thereby.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
obligations of the underwriters to purchase the Securities will be subject to
certain conditions precedent, and the underwriters will be obligated to purchase
all the Securities of the series offered by the Prospectus Supplement if any of
the Securities are purchased. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
In connection with underwritten offerings of Securities, certain
underwriters and selling group members and their respective affiliates may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Securities. Such transactions may include stabilization
transactions effected in accordance with Rule 104 of Regulation M under the
Exchange Act, pursuant to which such persons may bid for or purchase Securities
for the purposes of stabilizing their market price. The underwriters also may
create a short position for their respective accounts by selling more Securities
in connection with this offering than they are committed to purchase from the
Company, and in such case may purchase Securities in the open market following
completion of the offering to cover all or a portion of such short position.
The underwriters may also cover all or a portion of such short position, up to a
specified aggregate principal amount or number of Securities, by exercising any
underwriters' over-allotment
24
<PAGE>
option that may be applicable with respect to the particular underwritten
offering. In addition, the managing underwriter for the particular offering, on
behalf of the underwriters, may impose "penalty bids" under contractual
arrangements between the underwriters whereby it may reclaim from an underwriter
(or dealer participating in this offering) for the account of the underwriters,
the selling concession with respect to Securities that are distributed in the
relevant offering but subsequently purchased for the account of the underwriters
in the open market. Any of the transactions described in this paragraph may
result in the maintenance of the price of the Securities at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and, if any are undertaken, they may be
discounted at any time.
Securities may also be sold directly by the Company or a Financing Trust or
through agents designated by the Company or any Financing Trust from time to
time. Any agent involved in the offering and sale of Securities in respect of
which this Prospectus is delivered will be named, and any commissions payable by
the Company or a Financing Trust to such agent will be set forth in the
Prospectus Supplement. Unless otherwise indicated in the related Prospectus
Supplement, any such agent will be acting on a best-efforts basis for the period
of its appointment.
Securities offered other than Common Stock may be a new issue of securities
with no established trading market. Any underwriters to whom such Securities are
sold by the Company or a Financing Trust for public offering and sale may make a
market in such Securities, but such underwriters will not be obligated to do so
and may discontinue any market making at any time without notice. No assurance
can be given as to the liquidity of or the trading markets for any such
Securities.
Agents and underwriters may be entitled under agreements entered into with
the Company or a Financing Trust to indemnification by the Company or such
Financing Trust against certain civil liabilities, including liabilities under
the Securities Act or to contribution with respect to payments which the agents
or underwriters may be required to make in respect thereof. Agents and
underwriters may engage in transactions with, or perform services for, the
Company or any Financing Trust in the ordinary course of business.
Sales of the Securities may be effected by or for the account of one or
more of the Third Parties from time to time in transactions (which may include
block transactions) on any exchange or market on which such Securities are
listed or quoted, as applicable, in negotiated transactions, through a
combination of such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, at prices related to
prevailing market prices, or at negotiated prices. The Third Parties may effect
such transactions by selling the Securities directly to purchasers, acting as
principals for their own accounts, or by selling their Securities to or through
broker-dealers acting as agents for the Third Parties, or to broker-dealers who
may purchase Securities as principals and thereafter sell such Securities from
time to time in transactions on any exchange or market on which such Securities
are listed or quoted, as applicable, in negotiated transactions, through a
combination of such methods of sale, or otherwise. In effecting sales, broker-
dealers engaged by Third Parties may arrange for other broker-dealers to
participate. Such broker-dealers, if any, may receive compensation in the form
of discounts, concessions or commissions from the Third Parties and/or the
purchasers of the Securities for whom such broker-dealers may act as agents or
to whom they may sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
In connection with distributions of shares of Common Stock or otherwise,
the Company may enter into hedging transactions with Counterparties in
connection with which such Counterparties may sell shares of Common Stock
registered hereunder in the course of hedging the positions they assume with the
Company. Such Counterparties may offer Common Stock through underwriters or
dealers, directly to one or more purchasers, or through agents, and may effect
sales in one or more transactions on the New York Stock Exchange or in
negotiated transactions or a combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at other negotiated prices. The Company will not receive any of
the proceeds from the sale of Common Stock by Counterparties. A Counterparty may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
any commission received by it and any profit on the resale of the Common Stock
purchased by it may be deemed to be underwriting commissions or discounts under
the Securities Act. The Company may agree to bear all expenses of registration
of any Common Stock offered by Counterparties and may indemnify such
Counterparties against certain civil liabilities, including certain liabilities
under the Securities Act.
25
<PAGE>
ERISA AND TAX CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
imposes certain restrictions on investments by employee benefit plans that are
subject to ERISA. The Internal Revenue Code of 1986, as amended (the "Code"),
imposes additional restrictions on investments by tax-exempt retirement plans,
individual retirement accounts, and similar entities. The Code also provides
that certain types of income received by organizations that generally are exempt
from federal income tax will nevertheless be subject to taxation. Retirement
plans, tax-exempt organizations and similar entities should consult their tax
and legal advisors and the applicable Prospectus Supplement before acquiring
Securities.
LEGAL MATTERS
The legality of the Securities (other than the Preferred Securities)
offered hereby will be passed upon by Orrick, Herrington & Sutcliffe LLP, San
Francisco, California, counsel for the Company. Certain matters of Delaware law
regarding the legality of the Preferred Securities will be passed upon by
Morris, Nichols, Arsht & Tunnell, Delaware, special Delaware counsel for the
Financing Trusts. Certain legal matters will be passed upon for the underwriters
by Brown & Wood LLP, New York, New York, except as otherwise set forth in a
Prospectus Supplement.
EXPERTS
The consolidated financial statements incorporated by reference in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon incorporated by reference therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
26
<PAGE>
[LOGO]
PROVIDIAN FINANCIAL
