<PAGE>
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED SEPTEMBER 27, 1996
$500,000,000
LOGO
PROVIDIAN CORPORATION
MEDIUM-TERM NOTES, SERIES E
DUE 9 MONTHS OR MORE FROM DATE OF ISSUE
---------------
The Company may offer from time to time its Medium-Term Notes, Series E, due
9 months or more from the date of issue, as selected by the purchaser and
agreed to by the Company, at an aggregate initial public offering price not to
exceed $500,000,000 or its equivalent in another currency or composite
currency.
The Notes may be denominated in U.S. dollars or in such foreign currencies or
composite currencies as the Company may designate at the time of offering. The
Company will set forth the specific currency or composite currency, interest
rate (if any), issue price, and maturity date of any Note in the applicable
Pricing Supplement to this Prospectus Supplement. Unless otherwise specified in
the applicable Pricing Supplement, Agents will not sell Notes denominated in
other than U.S. dollars or ECUs in, or to residents of, the country issuing the
Specified Currency. See "Description of Notes."
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each September 15 and March 15 and at
maturity. Interest on the Floating Rate Notes will be payable on the dates
specified therein and in the applicable Pricing Supplement. Floating Rate Notes
will bear interest at a rate determined by reference to the Commercial Paper
Rate, the Prime Rate, LIBOR, the Treasury Rate, the CD Rate or the Federal
Funds Rate, as adjusted by a Spread or Spread Multiplier, if any, applicable to
such Notes. Indexed Notes may be issued with the principal amount payable at
maturity, or the amount of interest payable on any Interest Payment Date, to be
determined by reference to a currency exchange rate, composite currency,
commodity price or other financial or non-financial Index to be set forth in
the applicable Pricing Supplement. Zero Coupon Notes will not bear interest.
See "Description of Notes."
Unless the Company specifies a Redemption Commencement Date or a Repayment
Date in the applicable Pricing Supplement, the Notes will not be redeemable or
repayable prior to their Stated Maturity. If a Redemption Commencement Date or
a Repayment Date is so specified, the Notes will be redeemable at the option of
the Company, or repayable at the option of the Holder as described herein and
in the applicable Pricing Supplement.
The Company will issue the Notes offered hereby in permanent global or
definitive certificated form, as specified in the applicable Pricing
Supplement. One or more permanent global Notes representing Book-Entry Notes
will be registered in the name of, or a nominee of, The Depository Trust
Company, which will act as Depositary. Beneficial interests in Book-Entry Notes
will be shown on, and transfers thereof will be effected only through, records
maintained by the Depositary (with respect to Participants' interests) and its
participants. Except as described herein under "Description of Notes--Book-
Entry Notes," owners of beneficial interests in a permanent global Note will
not be considered the Holders thereof and will not be entitled to receive
physical delivery of Notes in definitive form, and no global Note will be
exchangeable except for another global Note of like denomination and terms to
be registered in the name of the Depositary or its nominee. The Notes offered
hereby will be issued in registered form in a minimum denomination of $100,000
or the approximate equivalent in the Specified Currency. See "Description of
Notes."
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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 SUPPLEMENT,
ANY PRICING SUPPLEMENT HERETO OR THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) COMPANY(2)(3)
------------ ------------------- -------------------------
<S> <C> <C> <C>
Per Note............ 100% .125%-.750% 99.250%-99.875%
Total(4)............ $500,000,000 $625,000-$3,750,000 $496,250,000-$499,375,000
</TABLE>
- -------
(1) Notes will be issued at 100% of their principal amount, unless otherwise
specified in the applicable Pricing Supplement.
(2) The Company will pay the Agents a commission of from .125% to .750%,
depending on maturity, of the principal amount of any Notes sold through
them as agents (or sold to such Agents as principal in circumstances in
which no other discount is agreed). Unless otherwise specified 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 an agency
sale of a Note of identical maturity, and may be resold by such Agent to
investors at varying prices related to prevailing market prices at the time
of resale to be determined by such Agent. The Company has agreed to
indemnify the Agents against certain liabilities, including liabilities
under the Securities Act of 1933.
(3) Before deducting estimated expenses of U.S. $500,000 payable by the
Company, including expenses of the Agents to be reimbursed by the Company.
(4) Or its equivalent in any other currency or composite currency.
---------------
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Company reserves
the right to sell Notes directly on its own behalf. The Company also reserves
the right to withdraw, cancel, or modify the offering contemplated hereby
without notice. The Company has not established a termination date for the
offering of the Notes. The Company or the Agents may reject any order as a
whole or in part. See "Supplemental Plan of Distribution."
GOLDMAN, SACHS & CO. MERRILL LYNCH & CO.
---------------
The date of this Prospectus Supplement is September 27, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AND OTHER DEBT SECURITIES OF THE COMPANY AT A LEVEL ABOVE THAT WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED,
MAY BE DISCONTINUED AT ANY TIME.
DESCRIPTION OF NOTES
The following description of the particular terms of the Company's Medium-
Term Notes, Series E, due nine months or more from the date of issue (the
"Notes") offered hereby (referred to in the Prospectus as "Offered Debt
Securities") supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of Debt Securities set
forth in the Prospectus, to which description reference is hereby made.
Capitalized terms not defined herein have the meanings assigned to such terms
in the Prospectus. Unless different terms or additional terms are specified in
the applicable pricing supplement to this Prospectus Supplement (the "Pricing
Supplement"), the Notes will have the terms described below. References to
interest payments and interest-related information do not apply to Zero Coupon
Notes (as defined below).
GENERAL
The Notes will be issued pursuant to the Indenture, dated as of January 1,
1994 (the "Indenture"), between the Company and First Trust of New York,
National Association (as successor to Morgan Guaranty Trust Company of New
York) as trustee (the "Trustee"). The following summary of certain provisions
of the Indenture does not purport to be complete and is subject to and is
qualified in its entirety by reference to, all provisions of the Indenture,
including the definitions therein of certain terms. The Notes constitute a
single, separate series of unsubordinated debt of the Company and will rank
equally with all other unsecured and unsubordinated debt of the Company. The
Indenture does not limit the aggregate principal amount of Debt Securities that
may be issued thereunder. The Notes, however, are limited in amount as set
forth on the cover page hereof, less an amount equal to the aggregate proceeds
to the Company from the sale of any other Debt Securities (as defined in the
Prospectus) issued from time to time. The foregoing limit, however, may be
increased by the Company if in the future it determines that it may wish to
sell additional Notes. For a description of the rights attaching to different
series of Debt Securities under the Indenture, see "Description of Debt
Securities" in the Prospectus.
The Company will at all times have appointed and maintain a Paying Agent
(which may be the Trustee) authorized to pay the principal of (and premium, if
any) or interest on any Notes on the Company's behalf and having an office or
agency (the "Paying Agent Office") in the Borough of Manhattan, The City of New
York, where the Notes may be presented or surrendered for payment and notices,
designations, or requests in respect of payments with respect to Notes may be
served. The Company has initially appointed First Trust of New York, National
Association as the Paying Agent, with its Paying Agent Office at 100 Wall
Street, Suite 1600, New York, New York 10005, Attention: Corporate Trust
Operations.
Unless previously redeemed or repaid, a Note will mature on the date ("Stated
Maturity") 9 months or more from its date of issue specified on its face and in
the applicable Pricing Supplement or, if such Note is a Fixed Rate Note and
such specified date is not a Business Day (as defined below) for such Note, the
next succeeding Business Day or, if such Note is a Floating Rate Note and such
specified date is not a Market Day (as defined below) for such Note, the next
succeeding Market Day (or, for a LIBOR Note, if such next succeeding Market Day
falls in the next calendar month, the next preceding Market Day). The
"maturity" of any Note refers herein to the date on which its principal becomes
due and payable, whether at Stated Maturity, upon redemption, repayment, or
otherwise.
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Each Note will be denominated in a currency or composite currency ("Specified
Currency") as specified on its face and in the applicable Pricing Supplement,
which may include U.S. dollars, Australian dollars, New Zealand dollars,
Canadian dollars, Danish kroner, Italian lire, European Currency Units
("ECUs"), or any other currency set forth in the applicable Pricing Supplement.
Purchasers of the Notes are required to pay for them by delivery of the
requisite amount of the Specified Currency to an Agent, unless other
arrangements have been made. Unless otherwise specified in the applicable
Pricing Supplement, payments on the Notes will be made in the applicable
Specified Currency in the country issuing the Specified Currency (or, for ECUs,
in an ECU account), provided that, at the election of the registered holder of
any Note (the "Holder") and in certain circumstances at the Company's option,
payments on Notes denominated in other than U.S. dollars may be made in U.S.
dollars. See "--Payment of Principal and Interest."
Each Note will be represented by either a permanent global Note registered in
the name of, or a nominee of, the Depository Trust Company, which will act as
U.S. depositary (the "Depositary") (each such Note represented by a permanent
global Note being referred to herein as a "Book-Entry Note") or a certificate
issued in definitive registered form, without coupons, as set forth in the
applicable Pricing Supplement. Except as set forth under "--Book-Entry Notes"
below, Book-Entry Notes will not be issuable in certificated form. So long as
the Depositary or its nominee is the registered holder of any permanent global
Note, the Depositary or its nominee, as the case may be, will be considered the
sole Holder of the Book-Entry Note or Notes represented by such permanent
global Note for all purposes under the Indenture and the Notes. For a further
description of the respective forms, denominations, and transfer and exchange
procedures for any such permanent global Note and the Book-Entry Notes, refer
to "--Book-Entry Notes" below and to the applicable Pricing Supplement. Unless
otherwise specified in the applicable Pricing Supplement, the authorized
denominations of any Note denominated in U.S. dollars will be $100,000 and
integral multiples of $1,000 in excess thereof. The authorized denominations of
any Note denominated in other than U.S. dollars will be the amount of the
Specified Currency for such Note equivalent, at the noon buying rate in The
City of New York for cable transfers for such Specified Currency (the "Exchange
Rate") on the sixth Business Day next preceding the date of issue of such Note,
to U.S. $100,000 (rounded down to an integral multiple of 1,000 units of such
Specified Currency) and any greater amount that is an integral multiple of
1,000 units of such Specified Currency.
Notes will be sold in individual issues of Notes having such interest rate or
interest rate formula, if any, Stated Maturity, and date of original issuance
as shall be selected by the initial purchasers and agreed to by the Company.
Unless otherwise indicated in the applicable Pricing Supplement, each Note,
except any zero coupon note (a "Zero Coupon Note"), will bear interest at a
fixed rate or a rate determined by reference to the Commercial Paper Rate, the
Prime Rate, LIBOR, the Treasury Rate, the CD Rate, or the Federal Funds Rate,
as adjusted by the Spread and/or Spread Multiplier, if any, applicable to such
Note or will be an Indexed Note or Amortizing Note as described below. See
"Interest Rate." Zero Coupon Notes will be issued at a discount from the
principal amount payable at maturity thereof, but holders of Zero Coupon Notes
will not receive periodic payments of interest thereon.
The Notes may be issued as Original Issue Discount Notes ("OID Notes"). An
OID Note is a Note, including any Zero Coupon Note, that is issued at a price
lower than the principal amount thereof and that may provide that upon
redemption, repayment or acceleration of the maturity thereof an amount less
than the principal amount thereof shall become due and payable. In the event of
redemption, repayment or acceleration of the maturity of an OID Note, the
amount payable to the Holder of such OID Note upon such redemption, repayment
or acceleration will be determined in accordance with the terms of the OID
Note, but will be an amount less than the amount payable at the maturity of
such OID Note. In addition, a Note issued at a discount may, for United States
federal income tax purposes, be considered a Discount Debt Note (as defined
below), regardless of the amount payable upon redemption, repayment or
acceleration of maturity of such Note. See "United States Taxation--Original
Issue Discount."
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<PAGE>
Notes may be issued from time to time as Indexed Notes. "Indexed Notes" are
Notes issued with the principal amount payable at maturity or upon redemption
or repayment, or the amount of interest payable on an interest payment date, to
be determined by reference to a currency exchange rate, composite currency,
commodity price or other financial or non-financial index as set forth in the
applicable Pricing Supplement. Holders of Indexed Notes may receive a principal
amount at maturity that is greater than or less than the face amount of such
Notes depending upon the value at maturity of the applicable index. Information
as to the methods for determining the principal amount payable at maturity or
the amount of interest payable on an interest payment date, as the case may be,
any currency or commodity market to which principal or interest is indexed,
foreign exchange risks and certain additional tax considerations with respect
to Indexed Notes will be set forth in the applicable Pricing Supplement.
The Notes may be issued from time to time as Amortizing Notes. "Amortizing
Notes" are Notes for which payments of principal and interest are made in
installments over the life of the Notes. Unless otherwise specified 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
thereon and then to the reduction of the unpaid principal amount thereof.
Further information concerning additional terms and provisions of Amortizing
Notes will be specified in the applicable Pricing Supplement, including a table
setting forth repayment information for such Amortizing Notes.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund and, unless an initial date on which a
Note may be redeemed by the Company (a "Redemption Commencement Date") or a
date on which a Note may be repayable at the option of a Holder thereof (a
"Repayment Date") is specified in the applicable Pricing Supplement, will not
be redeemable or repayable prior to their Stated Maturity. If a Redemption
Commencement Date or Repayment Date is so specified with respect to any Note,
the applicable Pricing Supplement will also specify one or more redemption or
repayment prices (expressed as a percentage of the principal amount of such
Note) ("Redemption Prices" or "Repayment Prices", respectively) and the
redemption or repayment period or periods ("Redemption Periods" or "Repayment
Periods", respectively) during which such Redemption Prices or Repayment Prices
shall apply. Unless otherwise specified in the Pricing Supplement, any such
Note shall be redeemable at the option of the Company or repayable at the
option of the Holder thereof (as specified in such Pricing Supplement) at any
time on or after such specified Redemption Commencement Date or Repayment Date,
as the case may be, for a limited period (as specified in such Pricing
Supplement) at the specified Redemption Price or Repayment Price applicable to
the Redemption Period or Repayment Period during which such Note is to be
redeemed or repaid, together with interest accrued to the redemption date or
repayment date.
Only the Depositary may exercise the repayment option in respect of Book-
Entry Notes. Accordingly, beneficial owners of Book-Entry Notes that desire to
have all or any portion of the Book-Entry Notes repaid must instruct the
participant through which they own their interest to direct the Depositary to
exercise the repayment option on their behalf by delivering the related global
Note and duly completed election form to the Trustee. In order to ensure that
such global Note and election form are received by the Trustee on a particular
day, the applicable beneficial owner must so instruct the participant through
which it owns its interest before such participant's deadline for accepting
instructions for that day. Different firms may have different deadlines for
accepting instructions from their customers. Accordingly, beneficial owners
should consult the participants through which they own their interest for the
respective deadlines for such participants. All instructions given to
participants from beneficial owners of Book-Entry Notes relating to the option
to elect repayment shall be irrevocable. In addition, at the time such
instructions are given, each such beneficial owner shall cause the participant
through which it owns its interest to transfer such beneficial owner's interest
in the Book-Entry Note, on the Depositary's records, to the Trustee.
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<PAGE>
In the event that the option of the Holder to elect repayment as described
above is deemed to be a "tender offer" within the meaning of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Company will comply with Rule 14e-1 as then in effect to the extent applicable.
The Company may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Company may, at the discretion
of the Company, be held, resold or surrendered to the Trustee for cancellation.
The Pricing Supplement relating to each Note will describe the following
terms; (i) the Specified Currency with respect to such Note (and, if such
Specified Currency is other than U.S. dollars, certain other terms relating to
such Note, including the authorized denominations and the Exchange Rate Agent
(as defined below)); (ii) the price (expressed as a percentage of the aggregate
principal amount thereof) at which such Note will be issued; (iii) the date on
which such Note will be issued; (iv) the date on which such Note will mature;
(v) whether such Note is a Fixed Rate Note or a Floating Rate Note (each term,
as defined below); (vi) if such Note is a Fixed Rate Note, the rate per annum
at which such Note will bear interest, if any, and the interest payment date or
dates, if different from those set forth below; (vii) if such Note is a
Floating Rate Note, the interest rate basis (the "Interest Rate Basis") for
each such Floating Rate Note and, if applicable, the Calculation Agent, the
Index Maturity, the Spread or Spread Multiplier, the Maximum Rate, the Minimum
Rate, the Initial Interest Rate, the Interest Payment Dates, the Regular Record
Dates, the Calculation Date, the Interest Determination Date and the Interest
Reset Date (each term, as defined below) with respect to such Floating Rate
Note; (viii) whether such Note is an Original Issue Discount Note, and if so,
the yield to maturity; (ix) whether such Note is an Indexed Note, and if so,
the principal amount thereof payable at Stated Maturity, or the amount of
interest payable on an Interest Payment Date, as determined by reference to the
applicable index, in addition to certain other information relating to the
Indexed Note; (x) whether such Note is an Amortizing Note, and, if so,
repayment information with respect to installments of principal and interest;
(xi) whether such Note may be redeemed at the option of the Company, or repaid
at the option of the holder, prior to the Stated Maturity and, if so, the
provisions relating to such redemption or repayment; (xii) whether such Note
will be issued initially as a Book-Entry Note or a Certificated Note; and
(xiii) any other terms of such Note not inconsistent with the provisions of the
Indenture.
The Notes (other than Book-Entry Notes) may be presented for registration of
transfer or exchange at the Paying Agent Office in The City of New York. With
respect to transfers of Book-Entry Notes and exchanges of permanent global
Notes representing Book-Entry Notes, see "--Book-Entry Notes."
The Indenture provisions relating to defeasance and covenant defeasance which
are described in the accompanying Prospectus under "Description of Debt
Securities--Defeasance and Covenant Defeasance" will apply to the Notes. Under
current federal income tax law, such defeasance and discharge of the Company's
payment obligations with respect to the Notes would be treated as a taxable
exchange of the Notes for an issue of obligations of the defeasance trust or a
direct interest in the cash and securities deposited in such trust. In that
case, beneficial owners of the Notes would recognize gain or loss as if the
trust obligations or the cash or securities deposited, as the case may be, had
actually been received by them in exchange for their Notes. A beneficial owner
thereafter would be required to include in income an amount that might be
different from what would be includable in the absence of defeasance and
discharge. Under current federal income tax law, unless accompanied by other
changes in the terms of the Notes, covenant defeasance would not be treated as
a taxable exchange.
INTEREST RATE
Each Note, other than a Zero Coupon Note, will bear interest from its date of
issue or from the most recent Interest Payment Date (or, if such Note is a
Floating Rate Note and the Interest Reset
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Dates are weekly, from the day following the most recent Regular Record Date)
to which interest on such Note has been paid or duly provided for at the fixed
rate per annum, or at the rate per annum determined pursuant to the interest
rate formula, stated therein and in the applicable Pricing Supplement until the
principal thereof is paid or made available for payment. Interest will be
payable on each Interest Payment Date and at maturity as specified below under
"Payment of Principal and Interest."
Each Note, other than a Zero Coupon Note, will bear interest at either:
(a) a fixed rate (a "Fixed Rate Note"); or
(b) a variable rate determined by reference to an interest rate formula
(a "Floating Rate Note"), which may be adjusted by adding or subtracting
the Spread or multiplying by the Spread Multiplier (each term as defined
below), or in the case of an Indexed Note or Amortizing Note interest based
on a formula as set forth in the applicable Pricing Supplement.
A Floating Rate Note may also have either or both:
(a) a maximum, or ceiling, on the rate of interest that may accrue during
any interest period (a "Maximum Rate"); and
(b) a minimum, or floor, on the rate of interest that may accrue during
any interest period (a "Minimum Rate").
The "Spread" is the number of basis points specified in the applicable
Pricing Supplement as applying to the Interest Rate Basis (as defined below)
for such Note, and the "Spread Multiplier" is the percentage specified in the
applicable Pricing Supplement as applying to the Interest Rate Basis for such
Note.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is (i) not a day on which banking institutions in The City of New York
generally are authorized or obligated by law, regulation or executive order to
close, and (ii) if the Note is denominated in a Specified Currency other than
U.S. dollars, not a day on which banking institutions are authorized or
obligated by law, regulation or executive order to close in the financial
center of the country issuing the Specified Currency (which in the case of ECUs
shall be Luxembourg, in which case "Business Day" shall not include any day
that is a non-ECU clearing day as determined by the ECU Banking Association in
Paris).
"Market Day" means:
(a) for any Note other than a LIBOR Note (as defined below), any Business
Day in The City of New York; and
(b) for a LIBOR Note, any such Business Day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
"Index Maturity" means, for a Floating Rate Note, the period to maturity of
the interest or obligation on which the interest rate formula is based, as
specified in the applicable Pricing Supplement. Unless otherwise provided in
the applicable Pricing Supplement, First Trust of New York, National
Association will be the calculation agent (the "Calculation Agent") for
Floating 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.
The applicable Pricing Supplement relating to a Floating Rate Note will
designate the Interest Rate Basis for such Floating Rate Note. The Interest
Rate Basis for each Floating Rate Note will be one or more of the following:
(a) the Commercial Paper Rate for Commercial Paper Rate Notes
("Commercial Paper Rate Notes");
(b) the Prime Rate for Prime Rate Notes ("Prime Rate Notes");
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(c) LIBOR for LIBOR Notes ("LIBOR Notes");
(d) the Treasury Rate for Treasury Rate Notes ("Treasury Rate Notes");
(e) the CD Rate for CD Rate Notes ("CD Rate Notes");
(f) the Federal Funds Rate for Federal Funds Rate Notes ("Federal Funds
Rate Notes"); or
(g) such other interest rate formula as such Pricing Supplement sets
forth.
The applicable Pricing Supplement for a Floating Rate Note will specify the
Interest Rate Basis and, if applicable, the Calculation Agent, the Index
Maturity, the Spread and/or Spread Multiplier, the Maximum Rate, the Minimum
Rate, the Initial Interest Rate, the Interest Payment Dates, the Regular Record
Dates, the Calculation Date, the Interest Determination Date, and the Interest
Reset Date for such Note.
The interest rate on each Floating Rate Note will be reset weekly, monthly,
quarterly, semi-annually, annually, or otherwise (each an "Interest Reset
Date"), as specified in the applicable Pricing Supplement. The Interest Reset
Date will be:
(a) for Floating Rate Notes (other than Treasury Rate Notes) that reset
weekly, the Wednesday of each week;
(b) for Treasury Rate Notes that reset weekly, the Tuesday of each week;
(c) for Floating Rate Notes that reset monthly, the third Wednesday of
each month;
(d) for Floating Rate Notes that reset quarterly, the third Wednesday of
March, June, September, and December;
(e) for Floating Rate Notes that reset semi-annually, the third Wednesday
of two months of each year as specified in the applicable Pricing
Supplement;
(f) for Floating Rate Notes that reset annually, the third Wednesday of
one month of each year as specified in the applicable Pricing Supplement;
and
(g) for Floating Rate Notes that reset at intervals other than those
described above, the days specified in the applicable Pricing Supplement;
provided, however, that:
(1) the interest rate in effect from the date of issue to the first
Interest Reset Date for a Floating Rate Note will be the Initial
Interest Rate (as set forth in the applicable Pricing Supplement); and
(2) the interest rate in effect for the ten calendar days immediately
before maturity or earlier redemption date of a Note will be that in
effect on the tenth calendar day preceding such maturity or redemption
date.
If any Interest Reset Date for any Floating Rate Note would otherwise be a day
that is not a Market Day for such Floating Rate Note, the Interest Reset Date
for such Floating Rate Note shall be postponed to the next day that is a Market
Day for such Floating Rate Note (except that for a LIBOR Note, if such Market
Day is in the next succeeding calendar month, such Interest Reset Date shall be
the immediately preceding Market Day).
The Interest Determination Date pertaining to an Interest Reset Date for a
Commercial Paper Rate Note (the "Commercial Paper Interest Determination
Date"), for a Prime Rate Note (the "Prime Rate Interest Determination Date"),
for a LIBOR Note (the "LIBOR Interest Determination Date"), for a CD Rate Note
(the "CD Rate Interest Determination Date"), and for a Federal Funds Rate Note
(the "Federal Funds Rate Interest Determination Date") will be the second
Market Day preceding such Interest Reset Date. The Interest Determination Date
pertaining to an Interest Reset Date for a Treasury Rate Note (the "Treasury
Interest Determination Date") will be the day of the week in which such
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Interest Reset Date falls on which Treasury bills would normally be auctioned.
Treasury bills are usually sold at auction on the 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 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 Market Day immediately
following such auction date.
All percentages resulting from any calculations referred to in this
Prospectus Supplement will be rounded upwards, if necessary, to the next higher
one hundred-thousandth of a percentage point (e.g., 9.876541% (or .09876541)
being rounded to 9.87655% (or .0987655)), and all U.S. dollar amounts used in
or resulting from such calculations will be rounded to the nearest cent (with
one-half cent being rounded upwards).
In addition to any Maximum Rate that may apply to a Floating Rate Note under
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, with certain exceptions. The limit may not apply to Floating Rate Notes
in which U.S. $2,500,000 or more has been invested.
Upon the request of the Holder of any Floating Rate Note, the Calculation
Agent will provide the interest rate then in effect, and, if determined, the
interest rate that will become effective on the next Interest Reset Date for
such Floating Rate Note. The Calculation Agent's determination of any interest
rate will be final and binding in the absence of manifest error.
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, specified on the
face of the Commercial Paper Rate Note and in the applicable Pricing
Supplement. Unless otherwise indicated in the applicable Pricing Supplement,
the "Calculation Date" pertaining to a Commercial Paper Interest Determination
Date will be the tenth day after such Commercial Paper Interest Determination
Date or, if any such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Commercial
Paper Rate" means, for any Interest Reset Date, the Money Market Yield
(calculated as described below) of the per annum rate (quoted on a bank
discount basis) for the relevant Commercial Paper Interest Determination Date
for commercial paper having the specified Index Maturity as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading
"Commercial Paper." If such rate is not published before 3:00 p.m., New York
City time, on the relevant Calculation Date, then the Commercial Paper Rate for
such Interest Reset Date shall be the Money Market Yield of such rate on such
Commercial Paper Interest Determination Date for commercial paper having the
specified Index Maturity as published by the Federal Reserve Bank of New York
in its daily statistical release, "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or any successor publication published by the Federal
Reserve Bank of New York ("Composite Quotations") under the heading "Commercial
Paper." If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, the
Commercial Paper Rate for such Interest Reset Date shall be calculated by the
Calculation Agent and shall be the Money Market Yield of the arithmetic mean of
the offered per annum rates (quoted on
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a bank discount basis), as of 11:00 a.m., New York City time, on such
Commercial Paper Interest Determination Date, of three leading dealers of
commercial paper in The City of New York (which may include one or more of the
Agents) selected by the Calculation Agent for commercial paper of the specified
Index Maturity placed for an industrial issuer whose bond rating is "AA," or
the equivalent, from a nationally recognized rating agency; provided, however,
that if fewer than three dealers selected by the Calculation Agent are quoting
as mentioned in this sentence, the Commercial Paper Rate for such Interest
Reset Date will be the Commercial Paper Rate in effect on such Commercial Paper
Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage) calculated
in accordance with the following formula:
360 X D
-----------
Money Market Yield = 100 X
360-
(D X M)
where "D" refers to the 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 period for which interest is being calculated.
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 their faces and in the
applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the "Calculation Date" pertaining to a Prime Rate Interest
Determination Date will be the tenth day after such Prime Rate Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Prime Rate"
means, for any Interest Reset Date, the rate set forth for the relevant Prime
Rate Interest Determination Date in H.15(519) under the heading "Bank Prime
Loan." If such rate is not published before 9:00 a.m., New York City time, on
the relevant Calculation Date, then the Prime Rate for such Interest Reset Date
will be the arithmetic mean of the rates of interest publicly announced by each
bank that appears on the display designated as page "USPRIME1" on the Reuter
Monitor Money Rates Service (or such other page as may replace the USPRIME1
page on that service for the purpose of displaying prime rates or base lending
rates of major United States banks) ("Reuters Screen USPRIME1 Page") as such
bank's prime rate or base lending rate as in effect for such Prime Rate
Interest Determination Date as quoted on the Reuters Screen USPRIME1 Page on
such Prime Rate Interest Determination Date. If fewer than four such rates
appear on the Reuters Screen USPRIME1 Page on such Prime Rate Interest
Determination Date, the Prime Rate for such Interest Reset Date will be the
arithmetic mean 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 three major
banks in The City of New York selected by the Calculation Agent; provided,
however, that if fewer than three banks selected as provided above by the
Calculation Agent are quoting as mentioned in this sentence, the Prime Rate for
such Interest Reset Date will be the Prime Rate in effect on such Prime Rate
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, specified on the face of the LIBOR Note and in the
applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, LIBOR for
any Interest Reset Date will be determined by the Calculation Agent in
accordance with the following provisions:
(i) With respect to a LIBOR Interest Determination Date, LIBOR will be
either (a) if "LIBOR Reuters" is specified in the applicable Pricing
Supplement, the arithmetic mean of the offered
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rates (unless the Designated LIBOR Page (as defined below) by its terms
provides only for a single rate, in which case such single rate shall be
used) for deposits in the Index Currency having the Index Maturity
specified in such Pricing Supplement, commencing on the applicable Interest
Reset Date, that appear (or, if only a single rate is required as
aforesaid, appears) on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date, or (b) if "LIBOR Telerate"
is specified in the applicable Pricing Supplement or if neither "LIBOR
Reuters" nor "LIBOR Telerate" is specified in the applicable Pricing
Supplement as the method of calculating LIBOR, the rate for deposits in the
Index Currency having the Index Maturity specified in such Pricing
Supplement, commencing on such Interest Reset Date, that appears on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date. If fewer than two such offered rates appear, or if no
such rate appears, as applicable, LIBOR on such LIBOR Interest
Determination Date will be determined in accordance with the provisions
described in clause (ii) below.
(ii) If LIBOR with respect to a LIBOR Interest Determination Date is to
be determined pursuant to this clause (ii), the Calculation Agent will
request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent after
consultation with the Company, to provide the Calculation Agent with its
offered quotation for deposits in the Index Currency for the period of the
Index Maturity designated in the applicable Pricing Supplement, commencing
on the Interest Reset 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 for a
single transaction in such Index 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 of such quotations.
If fewer than two quotations are provided, LIBOR determined on such LIBOR
Interest Determination Date will be the arithmetic mean of the rates quoted
at approximately 11:00 A.M., or such other time specified in the applicable
Pricing Supplement, in the applicable Principal Financial Center (as
defined below), on such LIBOR Interest Determination Date by three major
banks in such Principal Financial Center selected by the Calculation Agent
after consultation with the Company for loans in the Index 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 Index Currency in such
market at such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined on such LIBOR Interest Determination Date will be LIBOR in
effect on such LIBOR Interest Determination Date.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) for the purpose of displaying the London
interbank rates of major banks for the applicable Index Currency, or (b) if
"LIBOR Telerate" is specified 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 the Dow Jones
Telerate Service (or any successor service) for the purpose of displaying the
London interbank rates of major banks for the applicable Index Currency.
"Index Currency" means the currency (including composite currencies)
specified in the applicable Pricing Supplement as the currency for which LIBOR
shall be calculated. If no such currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Principal Financial Center" means the capital city of the country issuing
the currency or composite currency in which any payment in respect of the
relevant Notes is to be made or, solely with respect to the calculation of
LIBOR, the Index Currency, except that with respect to U.S. dollars, Deutsche
marks, Italian lira, Swiss francs, Dutch guilders and ECUs, the Principal
Financial Center shall be The City of New York, Frankfurt, Milan, Zurich,
Amsterdam and Brussels, respectively.
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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 on the face of the Treasury
Rate Note and in the applicable Pricing Supplement. Unless otherwise specified
in the applicable Pricing Supplement, the "Calculation Date" for a Treasury
Interest Determination Date will be the tenth day after such Treasury Interest
Determination Date or, if any such day is not a Market Day, the next succeeding
Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Treasury
Rate" means, for any Interest Reset Date, the rate for the auction on the
relevant Treasury Interest Determination Date of direct obligations of the
United States ("Treasury Bills") having the specified Index Maturity as
published in H.15(519) under the heading "U.S. Government Securities/Treasury
Bills/Auction Average (Investment)" or, if not so published by 9:00 a.m., New
York City time, on the relevant Calculation Date, the auction average rate
(expressed as a bond equivalent, on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) for such auction as otherwise
announced by the United States Department of the Treasury. If the results of
such auction of Treasury bills having the specified Index Maturity 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 during such week, then the
Treasury Rate shall be the rate set forth in H.15(519) for the relevant
Treasury Interest Determination Date for the specified Index Maturity under the
heading "U.S. Government Securities/Treasury Bills/Secondary Market." If such
rate is not so published by 3:00 p.m., New York City time, on the relevant
Calculation Date, the Treasury Rate for such Interest Reset Date shall be
calculated by the Calculation Agent and shall be a yield to maturity (expressed
as a bond equivalent, 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 primary United States government
securities dealers in The City of New York selected by the Calculation Agent
for the issue of Treasury bills with a remaining maturity closest to the
specified Index Maturity; provided, however, that if fewer than three dealers
selected as provided above by the Calculation Agent are quoting as mentioned in
this sentence, the Treasury Rate for such Interest Reset Date will be the
Treasury Rate in effect on such Treasury Interest Determination Date.
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, specified on the face of the CD Rate Note and in
the applicable Pricing Supplement. Unless otherwise indicated in the applicable
Pricing Supplement, the "Calculation Date" pertaining to a CD Interest
Determination Date will be the tenth day after such CD Interest Determination
Date or, if such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "CD Rate"
means, for any Interest Reset Date, the rate for the relevant CD Interest
Determination Date for negotiable certificates of deposit having the specified
Index Maturity as published in H.15(519) under the heading "CDs (Secondary
Market)." If such rate is not published before 9:00 a.m., New York City time,
on the relevant Calculation Date, then the CD Rate for such Interest Reset Date
shall be the rate on such CD Rate Interest Determination Date for negotiable
certificates of deposit having the specified Index Maturity as published in
Composite Quotations under the heading "Certificates of Deposit." If by 3:00
p.m., New York City time, on such Calculation Date such rate is not published
in either H.15(519) or Composite Quotations, the CD Rate for such Interest
Reset Date shall be calculated by the Calculation Agent and shall be the
arithmetic mean of the secondary market offered rates, as of 10:00 a.m., New
York City time, on such CD Rate Interest Determination Date, of three leading
nonbank dealers of negotiable U.S. dollar certificates of deposit in The City
of New York selected by the Calculation Agent for
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<PAGE>
negotiable certificates of deposit of major United States money market banks
with a remaining maturity closest to the specified Index Maturity in a
denomination of U.S. $5,000,000; provided, however, that if fewer than three
dealers selected as provided above by the Calculation Agent are quoting as
mentioned in this sentence, the CD Rate for such Interest Reset Date will be
the CD Rate in effect on such CD Rate Interest Determination Date.
FEDERAL FUNDS RATE NOTES
Federal Funds Rates 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, specified on the
face of the Federal Funds Rate Note and in the applicable Pricing Supplement.
Unless otherwise indicated in the applicable Pricing Supplement, the
"Calculation Date" pertaining to a Federal Funds Interest Determination Date
will be the tenth day after such Federal Funds Interest Determination Date or,
if such day is not a Market Day, the next succeeding Market Day.
Unless otherwise indicated in the applicable Pricing Supplement, "Federal
Funds Rate" means, for any Interest Reset Date, the rate on the relevant
Federal Funds Interest Determination Date for Federal Funds as published in
H.15(519) under the heading "Federal Funds (Effective)." If such rate is not
published before 9:00 a.m., New York City time, on the relevant Calculation
Date, then the Federal Funds Rate for such Interest Reset Date will be the rate
on such Federal Funds Interest Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate." If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not published in
either H.15(519) or Composite Quotations, the Federal Funds Rate for such
Interest Reset Date shall be calculated by the Calculation Agent and shall be
the arithmetic mean of the rates, as of 9:00 a.m., New York City time, on such
Federal Funds Interest Determination Date, for the last transaction in
overnight Federal Funds arranged by three leading brokers of Federal Funds
transactions in The City of New York selected by the Calculation Agent;
provided, however, that if fewer than three brokers selected by the Calculation
Agent are quoting as mentioned in this sentence, the Federal Funds Rate for
such Interest Reset Date will be the Federal Funds Rate in effect on such
Federal Funds Interest Determination Date.
PAYMENT OF PRINCIPAL AND INTEREST
Payments of principal (and premium, if any) and interest on all Book-Entry
Notes will be payable in accordance with the procedure described below under
"--Book-Entry Notes". Unless otherwise specified in the applicable Pricing
Supplement, payments of principal (and premium, if any) and interest on all
Notes will be made in the applicable Specified Currency; provided, however,
that payments of principal (and premium, if any) and interest on Notes
denominated in other than U.S. dollars will nevertheless be made in U.S.
dollars:
(a) at the option of the Holders of such Notes under the procedures
described in the two following paragraphs; and
(b) at the Company's option in the case of imposition of exchange
controls or other circumstances beyond the Company's control as described
in the last paragraph under this heading.
Unless otherwise specified in the applicable Pricing Supplement, and except
as provided in the next paragraph, payments of interest and principal (and
premium, if any) for any Note denominated in other than U.S. dollars will be
made in U.S. dollars if the registered Holder of such Note on the relevant
Regular Record Date, or at maturity, as the case may be, has transmitted a
written request for such payment in U.S. dollars to the Paying Agent at the
Paying Agent Office in The City of New York on or before such Regular Record
Date, or the date 15 days before maturity, as the case may be. Such request may
be in writing (mailed or hand delivered) or by cable, telex, or other form of
facsimile transmission. Any such request made for any Note by a registered
Holder will remain in effect for any
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<PAGE>
further payments of interest and principal (and premium, if any) on such Note
payable to such Holder, unless such request is revoked on or before the
relevant Regular Record Date or the date 15 days before maturity, as the case
may be. Holders of Notes denominated in other than U.S. dollars whose Notes are
registered in the name of a broker or nominee should contact such broker or
nominee to determine whether and how to elect to receive payments in U.S.
dollars.
Unless otherwise specified in the applicable Pricing Supplement, the U.S.
dollar amount to be received by a Holder of a Note denominated in other than
U.S. dollars who elects to receive payment in U.S. dollars will be based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent (as defined below) as of 11:00 a.m., New York City time, on the second
Business Day next preceding the applicable payment date from three recognized
foreign exchange dealers (one of which may be the Exchange Rate Agent) for the
purchase by the quoting dealer of the Specified Currency for U.S. dollars for
settlement on such payment date in the aggregate amount of the Specified
Currency payable to all Holders of Notes electing to receive U.S. dollar
payments and at which the applicable dealer commits to execute a contract. If
three such bid quotations are not available on the second Business Day
preceding the date of payment of principal (and premium, if any) or interest
for any Note, such payment will be made in the Specified Currency. All currency
exchange costs associated with any payment in U.S. dollars on any such Note
will be borne by the Holder thereof by deductions from such payment. The
Exchange Rate Agent (the "Exchange Rate Agent") with respect to any Notes
denominated in other than U.S. dollars will be specified in the applicable
Pricing Supplement.
Interest, and in the case of Amortizing Notes, principal, will be payable to
the person in whose name a Note is registered (which for a permanent global
Note representing Book-Entry Notes will be the Depositary or a nominee of the
Depositary) 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
(which for permanent global Notes representing Book-Entry Notes, will be the
Depositary or a nominee of the Depositary). The first payment of interest, and
in the case of Amortizing Notes, principal, on any Note originally issued
between a Regular Record Date and an Interest Payment Date will be made on the
second such Interest Payment Date next succeeding its date of issue to the
registered owner on the Regular Record Date relating to such second Interest
Payment Date. Unless otherwise indicated in the applicable Pricing Supplement,
the "Regular Record Date" for any Floating Rate Note shall be the date 15
calendar days before each Interest Payment Date, whether or not such date shall
be a Business Day, and the "Regular Record Date" for any Fixed Rate Note shall
be the September 1 and March 1 next preceding the September 15 and March 15
Interest Payment Dates.
Unless otherwise indicated in the applicable Pricing Supplement and except as
provided below, interest will be payable:
(a) for Floating Rate Notes that reset 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);
(b) for Floating Rate Notes that reset quarterly, on the third Wednesday
of March, June, September, and December of each year;
(c) for Floating Rate Notes that reset semi-annually, on the third
Wednesday of the two months of each year specified in the applicable
Pricing Supplement;
(d) for Floating Rate Notes that reset annually, on the third Wednesday
of the month specified in the applicable Pricing Supplement; and
(e) for Floating Rate Notes that reset at intervals other than those
described above, on the days specified in the applicable Pricing
Supplement,
each an "Interest Payment Date," and in each case, at maturity. If an Interest
Payment Date for any Floating Rate Note would otherwise fall on a day that is
not a Market Day for such Note, such Interest
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Payment Date will be the next succeeding Market Day (or, for a LIBOR Note, if
such day falls in the next calendar month, the next preceding Market Day). If
the maturity date (or date of redemption or repayment) of a Floating Rate Note
falls on a day that is not a Market Day, the required payment of principal,
premium, if any, and interest will be made on the next succeeding Market Day
(or, in the case of a LIBOR Note, if such day falls in the next calendar month,
the next preceding Market Day) as if made on the date such payment was due, and
no interest will accrue on such payment for the period from and after the
maturity date (or date of redemption or repayment) to the date of such payment
on the next succeeding Market Day.
Payments of interest on any Fixed Rate Note or Floating Rate Note for any
Interest Payment Date will include interest accrued to but excluding such
Interest Payment Date; provided, however, that if the Interest Reset Dates for
any Floating Rate Note are weekly, interest payable on such Note on any
Interest Payment Date, other than interest payable on the date on which
principal on any such Note is payable, will include interest accrued to but
excluding the day following the next preceding Regular Record Date.
For a Floating Rate Note, accrued interest from (and including) the date of
issue or from (and including) 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 (and including) the date of issue,
or from (and including) the last date to which interest has been paid, but
excluding the date for which accrued interest is being calculated. The interest
factor (expressed as a decimal) for each such day is computed by dividing the
interest rate (expressed as a decimal) applicable to such date by 360 for
Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, CD Rate Notes, or
Federal Funds Rate Notes, or by the actual number of days in the year for
Treasury Rate Notes. Interest on Fixed Rate Notes will be computed on the basis
of a 360-day year of twelve 30-day months.
Except as otherwise specified herein, a payment on any Note due on any day
that is not a Market Day need not be made on such day, but may be made on the
next succeeding Market Day with the same force and effect as if made on the due
date, and no interest shall accrue for the period from and after such date.
Payment of the principal of (and premium, if any) and any interest due with
respect to any Note (other than a Book-Entry Note) at maturity to be made in
U.S. dollars will be made in immediately available funds upon surrender of such
Note at the Paying Agent Office in The City of New York, provided that the Note
is presented to the Paying Agent in time for the Paying Agent to make such
payments in such funds in accordance with its normal procedures. Payments of
interest on any Note (other than any Book-Entry Note) to be made in U.S.
dollars other than at maturity will be made by check mailed to the address of
the Person (which, in the case of a permanent global Note representing Book-
Entry Notes, shall be the Depositary) entitled thereto as it appears in the
Security Register or by wire transfer to such account as may have been
appropriately designated by such Person.
The total amount of any principal, premium, if any, and interest due on any
global Note representing one or more Book-Entry Notes on any Interest Payment
Date or at maturity will be made available to the Trustee on such date. As soon
as possible thereafter, the Trustee will make such payments to the Depositary.
The Depositary will allocate such payments to each Book-Entry Note represented
by such global Note and make payments to the owners thereof in accordance with
its existing operating procedures. Neither the Company nor the Trustee shall
have any responsibility or liability for such payments by the Depositary. So
long as the Depositary or its nominee is the registered owner of any global
Note, the Depositary or its nominee, as the case may be, will be considered the
sole owner or Holder of the Book-Entry Note or Notes represented by such global
Note for all purposes under the Indenture and the Book-Entry Notes. The Company
understands, however, that under existing industry
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practice, the Depositary will authorize the persons on whose behalf it holds a
global Note to exercise certain rights of Holders of Securities. See "--Book-
Entry Notes."
Unless otherwise specified in the applicable Pricing Supplement, payments of
interest and principal (and premium, if any) with respect to any Note to be
made in a Specified Currency other than U.S. dollars will be made by wire
transfer to such account with a bank located in the country issuing the
Specified Currency (or, for Notes denominated in ECUs, in an ECU account) or
other jurisdiction acceptable to the Company and the Paying Agent as shall have
been designated at least five days before the Interest Payment Date or
maturity, as the case may be, by the registered Holder of such Note on the
relevant Regular Record Date or at maturity, provided that, in the case of
payment of principal of (and premium, if any) and any interest due at maturity,
the Note is presented to the Paying Agent in time for the Paying Agent to make
such payments in such funds in accordance with its normal procedures. Such
designation shall be made by filing the appropriate information with the Paying
Agent at the Paying Agent Office in The City of New York, and, unless revoked,
any such designation made for any Note by a registered Holder will remain in
effect for any further payments with respect to such Note payable to such
Holder. If a payment with respect to any such Note cannot be made by wire
transfer because the required designation has not been received by the Paying
Agent on or before the requisite date or for any other reason, a notice will be
mailed to the Holder at its registered address requesting a designation
pursuant to which such wire transfer can be made and, upon the Paying Agent's
receipt of such a designation, such payment will be made within five days of
such receipt. The Company will pay any administrative costs imposed by banks in
connection with making payments by wire transfer, but any tax, assessment, or
governmental charge imposed upon payments will be borne by the Holders of the
Notes in respect of which payments are made.
If the principal of (and premium, if any) or interest on any Note is payable
in other than U.S. dollars and such Specified Currency is not available due to
the imposition of exchange controls or other circumstances beyond the control
of the Company, the Company will be entitled to satisfy its obligations to
Holders of the Notes by making such payment in U.S. dollars on the basis of the
most recently available Exchange Rate. Any payment made under such
circumstances in U.S. dollars where the required payment is in other than U.S.
dollars will not constitute an Event of Default under the Indenture.
BOOK-ENTRY NOTES
Upon issuance, all Book-Entry Notes of like tenor and having the same date of
issue will be represented by one or more permanent global Notes. Each permanent
global Note representing Book-Entry Notes will be deposited with, or on behalf
of, the Depositary, located in the Borough of Manhattan, The City of New York,
and will be registered in the name of the Depositary or a nominee of the
Depositary.
Ownership of beneficial interests in a permanent global Note representing
Book-Entry Notes will be limited to institutions that have accounts with the
Depositary or its nominee ("participants") or persons that may hold interests
through participants. In addition, ownership of beneficial interests by
participants in such a permanent global Note will be shown on, and the transfer
of that ownership interest will be effected only through, records maintained by
the Depositary or its nominee for such permanent global Note. Ownership of
beneficial interests in such a permanent global Note by persons that hold
through participants will be evidenced only by, and the transfer of that
ownership interest within such participant will be effected only through,
records maintained by such participant. The laws of some jurisdictions require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such laws may impair the ability to transfer beneficial
interests in such a permanent global Note.
Upon the issuance of a permanent global Note representing Book-Entry Notes,
and the deposit of such permanent global Note with the Depositary, the
Depositary will credit, on its book-entry registration
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and transfer system, the respective principal amounts of the Book-Entry Notes
represented by such permanent global Note to the accounts of participants. The
accounts to be credited shall be designated by the soliciting Agent or, to the
extent that the Book-Entry Notes are offered and sold directly, by the Company.
Payment of principal of and any premium and interest on Book-Entry Notes
represented by any permanent global Note registered in the name of or held by
the Depositary or its nominee will be made to the Depositary or its nominee, as
the case may be, as the registered owner and Holder of the permanent global
Note representing such Book-Entry Notes. Neither the Company, the Trustee, nor
any agent of the Company or the Trustee will have any responsibility or
liability for any aspect of the Depositary's records or any participant's
records relating to or payments made on account of beneficial ownership
interests in a permanent global Note representing such Book-Entry Notes or for
maintaining, supervising or reviewing any of the Depositary's records or any
participant's records relating to such beneficial ownership interests.
The total amount of any principal, premium, if any, and interest due on any
global Note representing one or more Book-Entry Notes on any Interest Payment
Date or at maturity (or at redemption or repayment) will be made available to
the Trustee on such date. As soon as possible thereafter, the Trustee will make
such payments to the Depositary. None of the Company, the Trustee, the Paying
Agent or any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the Depositary's records relating to or payments
made on account of beneficial ownership interests in a global Note representing
any Book-Entry Notes or for maintaining, supervising or reviewing any of the
Depositary's records relating to such beneficial ownership interests.
With respect to any Book-Entry Note denominated in a Specified Currency other
than U.S. dollars, the Depositary currently has elected to have payments of
principal (and premium, if any) and interest on such Note made in U.S. dollars
unless notified by any of its participants through which an interest in such
Note is held that it elects to receive such payment of principal (or premium,
if any) or interest in such Specified Currency. Unless otherwise specified in
the applicable Pricing Supplement, a beneficial owner of Book-Entry Notes
denominated in a Specified Currency other than U.S. dollars electing to receive
payments of principal or any premium or interest in a currency other than U.S.
dollars must notify the participant through which its interest is held on or
prior to the applicable Record Date, in the case of a payment of interest, and
on or prior to the sixteenth day prior to the maturity date, in the case of
principal or premium, of such beneficial owner's election to receive all or a
portion of such payment in such Specified Currency. Such participant must
notify the Depositary of such election on or prior to the third Business Day in
The City of New York after such Record Date or after such sixteenth day. The
Depositary will notify the Trustee of such election on or prior to the fifth
Business Day in The City of New York after such Record Date or after such
sixteenth day. If complete instructions are received by the participant and
forwarded by the participant to the Depositary and by the Depositary to the
Trustee, on or prior to such dates, the beneficial owner will receive payments
in the Specified Currency.
The practice of the Depositary is to credit accounts of participants on the
Interest Payment Date with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such permanent
global Note as shown on the records of the Depositary unless the Depositary has
reason to believe that it will not receive payment on the Interest Payment
Date. Payments by participants to owners of beneficial interests in a permanent
global Note held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers registered in "street name," and will be the sole
responsibility of such participants.
No permanent global Note described above may be transferred except as a whole
by the Depositary for such permanent global Note to a nominee of the Depositary
or by a nominee of the Depositary to the Depositary or another nominee of the
Depositary.
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Unless otherwise specified in the applicable Pricing Supplement, a permanent
global Note representing Book-Entry Notes is exchangeable for definitive Notes
registered in the name of, and a transfer of a permanent global Note may be
registered to, any Person other than the Depositary or its nominee, only if:
(a) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for such permanent global Note or if at any time the
Depositary ceases to be a clearing agency registered under the Exchange
Act;
(b) the Company in its sole discretion determines that such permanent
global Note shall be exchangeable for definitive Notes in registered form;
or
(c) any event shall have happened and be continuing that constitutes or,
after notice or lapse of time, or both, would constitute an Event of
Default with respect to the Notes.
Any permanent global Note that is exchangeable pursuant to the preceding
sentence shall be exchangeable in whole for definitive Notes in registered
form, of like tenor and of an equal aggregate principal amount, in
denominations of U.S. $100,000 and integral multiples of U.S. $1,000 in excess
thereof. Such definitive Notes shall be registered in the name or names of such
person or persons as the Depositary shall instruct the Trustee. It is expected
that such instructions may be based upon directions received by the Depositary
from its participants with respect to ownership of beneficial interests in such
permanent global Note.
Except as provided above, owners of beneficial interests in such permanent
global Note will not be entitled to receive physical delivery of Notes in
definitive form and will not be considered the Holders thereof for any purpose
under the Indenture, and no permanent global Note representing Book-Entry Notes
shall be exchangeable, except for another permanent global Note of like
denomination and tenor to be registered in the name of the Depositary or its
nominee. Accordingly, each person owning a beneficial interest in such
permanent global Note must rely on the procedures of the Depositary and, if
such person is not a participant, on the procedures of the participant through
which such person owns its interest, to exercise any rights of a Holder under
the Indenture.
The Indenture provides that the Depositary, as a Holder, may appoint agents
and otherwise authorize participants to give or take any request, demand,
authorization, direction, notice, consent, waiver, or other action which a
Holder is entitled to give or take under the Indenture. The Company understands
that, under existing industry practices, in the event that the Company requests
any action of Holders or an owner of a beneficial interest in such permanent
global Note desires to give or take any action that a Holder is entitled to
give or take under the Indenture, the Depositary would authorize the
participants holding the relevant beneficial interests to give or take such
action, and such participants would authorize beneficial owners owning through
such participants to give or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
The Depositary has advised the Company that the Depositary is a limited
purpose trust company organized under the laws of the State of New York, 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 Exchange Act. The
Depositary was created to hold securities of its participants and to facilitate
the clearance and settlement of securities transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. The Depositary's participants include securities brokers and
dealers (including the Agents), banks, trust companies, clearing corporations,
and certain other organizations, some of whom (or their representatives) own
the Depositary. Access to the Depositary's book-entry system is also available
to others, such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a participant, either
directly or indirectly. The Rules applicable to the Depositary and its
participants are on file with the Securities and Exchange Commission.
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UNITED STATES TAXATION
The following summary of the principal United States federal income tax
consequences of ownership of Notes deals only with Notes held as capital assets
by initial purchasers, and not with special classes of holders, such as dealers
in securities or currencies, banks, tax-exempt organizations, life insurance
companies, persons that hold Notes that are a hedge or that are hedged against
currency risks or that are part of a straddle or conversion transaction,
persons that are not "United States Holders", as defined below, or persons
whose functional currency is not the U.S. dollar. Moreover, the 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 ownership
of Notes that are due to mature more than 30 years from their date of issue
will be discussed in an applicable Pricing Supplement. The summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), its legislative
history, existing and proposed regulations thereunder, published rulings and
court decisions, all as currently in effect and all subject to change at any
time, perhaps with retroactive effect.
Prospective purchasers of Notes should consult their own tax advisors
concerning the consequences, in their particular circumstances, under the Code
and the laws of any other taxing jurisdiction, of ownership of Notes.
PAYMENTS OF INTEREST
Interest on a Note, whether payable in U.S. dollars or a currency, composite
currency or basket of currencies other than U.S. dollars (a "foreign
currency"), other than interest on a "Discount Note" that is not "qualified
stated interest" (each as defined below under "Original Issue Discount
General"), will be taxable to a United States Holder as ordinary income at the
time it is received or accrued, depending on the holder's method of accounting
for tax purposes. A United States Holder is a beneficial owner who or that is
(i) a citizen or resident of the United States, (ii) a domestic corporation or
(iii) otherwise subject to United States federal income taxation on a net
income basis in respect of the Note.
If an interest payment is denominated in, or determined by reference to, a
foreign currency, the amount of income recognized by a cash basis United States
Holder will be the U.S. dollar value of the interest payment, based on the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
An accrual basis United States Holder may determine the amount of income
recognized with respect to an interest payment denominated in, or determined by
reference to, a foreign currency in accordance with either of two methods.
Under the first method, the amount of income accrued will be 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 part of the
period within the taxable year).
Under the second method, the United States Holder may elect to determine the
amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. Additionally, if a payment of interest is
actually received within five business days of the last day of the accrual
period or taxable year, an electing accrual basis United States Holder may
instead translate such 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 Internal
Revenue Service (the "Service").
Upon receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a Note) denominated
in, or determined by reference to, a foreign
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currency, the United States Holder will recognize ordinary income or loss
measured by the difference between (x) the average exchange rate used to accrue
interest income, or the exchange rate as determined under the second method
described above if the United States Holder elects that method, and (y) the
exchange rate in effect on the date of receipt, regardless of whether the
payment is in fact converted into U.S. dollars.
ORIGINAL ISSUE DISCOUNT
General. A Note, other than a Note with a term of one year or less (a "short-
term Note"), will be treated as issued at an original issue discount (a
"Discount Note") if the excess of the Note's "stated redemption price at
maturity" over its issue price is more than a "de minimis amount" (as defined
below). Generally, the issue price of a Note will be the first price at which a
substantial amount of Notes included in the issue of which the Note is a part
is sold to other than bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers. The
stated redemption price at maturity of a Note is the total of all payments
provided by the Note that are not payments of "qualified stated interest". A
qualified stated interest payment is generally any one of a series of stated
interest payments on a Note that are unconditionally payable at least annually
at a single fixed rate (with certain exceptions for lower rates paid during
some periods) applied to the outstanding principal amount of the Note. Special
rules for "Variable Rate Notes" (as defined below under "Original Issue
Discount--Variable Rate Notes") are described below under "Original Issue
Discount--Variable Rate Notes".
In general, if the excess of a Note's stated redemption price at maturity
over its issue price is less than 1/4 of 1 percent of the Note's stated
redemption price at maturity multiplied by the number of complete years to its
maturity (the "de minimis amount"), then such excess, if any, constitutes "de
minimis original issue discount" and the Note is not a Discount Note. Unless
the election described below under "Election to Treat All Interest as Original
Issue Discount" is made, a United States Holder of a Note with de minimis
original issue discount must include such de minimis original issue discount in
income as stated principal payments on the Note are made. The includible amount
with respect to each such payment will equal the product of the total amount of
the Note's de minimis original issue discount and a fraction, the numerator of
which is the amount of the principal payment made and the denominator of which
is the stated principal amount of the Note.
United States Holders of Discount Notes having a maturity of more than one
year from their date of issue must generally include original issue discount
("OID") in income calculated on a constant-yield method before the receipt of
cash attributable to such income, and generally will have to include in income
increasingly greater amounts of OID over the life of the Discount Note. The
amount of OID includible in income by a United States Holder of a Discount Note
is the sum of the daily portions of OID with respect to the Discount Note for
each day during the taxable year or portion of the taxable year on which the
United States Holder holds such Discount Note ("accrued OID"). The daily
portion is determined by allocating to each day in any "accrual period" a pro
rata portion of the OID allocable to that accrual period. Accrual periods with
respect to a Discount Note may be of any length selected by the United States
Holder and may vary in length over the term of the Discount Note as long as (i)
no accrual period is longer than one year and (ii) each scheduled payment of
interest or principal on the Discount Note occurs on either the final or first
day of an accrual period. The amount of OID allocable to an accrual period
equals the excess of (a) the product of the Discount Note's adjusted issue
price at the beginning of the accrual period and such Discount Note's yield to
maturity (determined on the basis of compounding at the close of each accrual
period and properly adjusted for the length of the accrual period) over (b) the
sum of the payments of qualified stated interest on the Discount Note allocable
to the accrual period. The "adjusted issue price" of a Discount Note at the
beginning of any accrual period is the issue price of the Discount Note
increased by (x) the amount of accrued OID for each prior accrual period and
decreased by (y) the amount of any payments previously made on the Discount
Note that
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were not qualified stated interest payments. For purposes of determining the
amount of OID allocable to an accrual period, if an interval between payments
of qualified stated interest on the Discount Note contains more than one
accrual period, the amount of qualified stated interest payable at the end of
the interval (including any qualified stated interest that is payable on the
first day of the accrual period immediately following the interval) is
allocated pro rata on the basis of relative lengths to each accrual period in
the interval, and the adjusted issue price at the beginning of each accrual
period in the interval must be increased by the amount of any qualified stated
interest that has accrued prior to the first day of the accrual period but that
is not payable until the end of the interval. The amount of OID allocable to an
initial short accrual period may be computed using any reasonable method if all
other accrual periods other than a final short accrual period are of equal
length. The amount of OID allocable to the final accrual period is the
difference between (x) the amount payable at the maturity of the Discount Note
(other than any payment of qualified stated interest) and (y) the Discount
Note's adjusted issue price as of the beginning of the final accrual period.
Acquisition Premium. A United States Holder that purchases a Note for an
amount 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 but in
excess of its adjusted issue price (any such excess being "acquisition
premium") and that does not make the election described below under "Election
to Treat All Interest as Original Issue Discount" is permitted to reduce the
daily portions of OID by a fraction, the numerator of which is the excess of
the United States Holder's adjusted basis in the Note immediately after its
purchase over the adjusted issue price of the Note, and the denominator of
which is the excess of the sum of all amounts payable on the Note after the
purchase date, other than payments of qualified stated interest, over the
Note's adjusted issue price.
Market Discount. A Note, other than a short-term Note, will be treated as
purchased at a market discount (a "Market Discount Note") if (i) the amount for
which a United States Holder purchased the Note is less than the Note's issue
price (as determined above under "Original Issue Discount--General") and (ii)
the Note's stated redemption price at maturity or, in the case of a Discount
Note, the Discount Note's "revised issue price", exceeds the amount for which
the United States Holder purchased the Note by at least 1/4 of 1 percent of
such Note's stated redemption price at maturity or revised issue price,
respectively, multiplied by the number of complete years to the Note's
maturity. If such excess is not sufficient to cause the Note to be a Market
Discount Note, then such excess constitutes "de minimis market discount". The
Code provides that, for these purposes, the "revised issue price" of a Discount
Note generally equals its issue price, increased by the amount of any OID that
has accrued on the Discount Note.
Any gain recognized on the maturity or disposition of a Market Discount Note
will be treated as ordinary income to the extent that such gain does not exceed
the accrued market discount on such Market Discount Note. Alternatively, a
United States Holder of a Market Discount Note may elect to include market
discount in income currently over the life of the Market Discount Note. Such an
election shall apply to all debt instruments with market discount acquired by
the electing United States Holder on or after the first day of the first
taxable year to which the election applies. This election may not be revoked
without the consent of the Service.
Market discount on a Market Discount Note will accrue on a straight-line
basis unless the United States Holder elects to accrue such market discount on
a constant-yield method. Such an election shall apply only to the Market
Discount Note with respect to which it is made and may not be revoked. A United
States Holder of a Market Discount Note that does not elect to include market
discount in income currently generally will be required to defer deductions for
interest on borrowings allocable to such Market Discount Note in an amount not
exceeding the accrued market discount on such Market Discount Note until the
maturity or disposition of such Market Discount Note.
Pre-Issuance Accrued Interest. If (i) a portion of the initial purchase price
of a Note is attributable to pre-issuance accrued interest, (ii) the first
stated interest payment on the Note is to be made within
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one year of the Note's issue date and (iii) 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.
Notes Subject to Contingencies Including Optional Redemption. In general, if
a Note provides for an alternative payment schedule or schedules applicable
upon the occurrence of a contingency or contingencies and the timing and
amounts of the payments that comprise each payment schedule are known as of the
issue date, the yield and maturity of the Note are determined by assuming that
the payments will be made according to the Note's payment schedule that is
significantly more likely than not to occur. If, however, based on all the
facts and circumstances as of the issue date, none of the alternative payment
schedules is significantly more likely than not to occur, the Note will
generally be treated as a contingent payment debt obligation. These rules will
be discussed in an applicable Pricing Supplement.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the Holder has an
unconditional option or options that, if exercised, would require payments to
be made on the Note under an alternative payment schedule or schedules, then
(i) in the case of an option or options of the Company, the Company will be
deemed to exercise or not exercise an option or combination of options in the
manner that minimizes the yield on the Note and (ii) in the case of an option
or options of the Holder, the Holder will be deemed to exercise or not exercise
an option or combination of options in the manner that maximizes the yield on
the Note. For purposes of these calculations, the yield on the Note is
determined by using any date on which the Note may be redeemed or repurchased
as the maturity date and the amount payable on such date in accordance with the
terms of the Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the
Note is repaid as a result of the change in circumstances and solely for
purposes of the accrual of OID, the yield and maturity of the Note are
redetermined by treating the Note as reissued on the date of the change in
circumstances for an amount equal to the Note's adjusted issue price on that
date.
Election to Treat All Interest as Original Issue Discount. A United States
Holder may elect to include in gross income all interest that accrues on a Note
using the constant-yield method described above under the heading "Original
Issue Discount--General", with the modifications described below. For purposes
of this election, interest includes stated interest, OID, de minimis original
issue discount, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium (described below under
"Notes Purchased at a Premium") or acquisition premium.
In applying the constant-yield method to a Note with respect to which this
election has been made, the issue price of the Note will equal the electing
United States Holder's adjusted basis in the Note immediately after its
acquisition, the issue date of the Note will be the date of its acquisition by
the electing United States Holder, and no payments on the Note will be treated
as payments of qualified stated interest. This election will generally apply
only to the Note with respect to which it is made and may not be revoked
without the consent of the Service. If this election is made with respect to a
Note with amortizable bond premium, then the electing United States Holder will
be deemed to have elected to apply amortizable bond premium against interest
with respect to all debt instruments with amortizable bond premium (other than
debt instruments the interest on which is excludible from gross income) held by
the electing United States Holder as of the beginning of the taxable year in
which the Note with respect to which the election is made is acquired or
thereafter acquired. The deemed election with respect to amortizable bond
premium may not be revoked without the consent of the Service.
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If the election to apply the constant-yield method to all interest on a Note
is made with respect to a Market Discount Note, the electing United States
Holder will be treated as having made the election discussed above under
"Original Issue Discount--Market Discount" to include market discount in income
currently over the life of all debt instruments held or thereafter acquired by
such United States Holder.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an issue
price that does not exceed the total noncontingent principal payments by more
than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) provides for no stated interest other than stated interest compounded or
paid at least annually at (1) one or more "qualified floating rates", (2) a
single fixed rate and one or more qualified floating rates, (3) a single
"objective rate" or (4) a single fixed rate and a single objective rate that is
a "qualified inverse floating rate".
A qualified floating rate or objective rate in effect at any time during the
term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no
earlier than 3 months prior to the first day on which that value is in effect
and no later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the value
of the rate can reasonably be expected to measure contemporaneous variations in
the cost of newly borrowed funds in the currency in which the Note is
denominated or (ii) it is equal to the product of such a rate and either (a) a
fixed multiple that is greater than 0.65 but not more than 1.35, or (b) a fixed
multiple greater than 0.65 but not more than 1.35, increased or decreased by a
fixed rate. A rate is not a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the Note or are not reasonably expected to significantly affect the yield on
the Note.
An "objective rate" is 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 that is not within the control of or unique
to the circumstances of the issuer or a related party. A variable rate is not
an objective rate, however, if it is reasonably expected that the average value
of the rate during the first half of the Note's term will be either
significantly less than or significantly greater than the average value of the
rate during the final half of the Note's term. An objective rate is a
"qualified inverse floating rate" if (i) the rate is equal to a fixed rate
minus a qualified floating rate, and (ii) the variations in the rate can
reasonably be expected to inversely reflect contemporaneous variations in the
cost of newly borrowed funds.
In general, if a Variable Rate Note provides for stated interest at a single
qualified floating rate or objective rate, all stated interest on the Variable
Rate Note is qualified stated interest and the amount of OID, if any, is
determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or, in the case of an objective rate,
a fixed rate that reflects the yield reasonably expected for the Variable Rate
Note.
If a Variable Rate Note does not provide for stated interest at a single
qualified floating rate or objective rate or at a fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals on the Variable Rate Note are generally determined by (i) determining
a fixed rate substitute for each variable rate provided under the Variable Rate
Note (generally, the value of each variable rate as of the issue date or, in
the case of an objective rate that is not a qualified inverse floating rate, a
rate that reflects the reasonably expected yield on the Variable Rate Note),
(ii) constructing the equivalent fixed rate debt instrument (using the fixed
rate substitute described above),
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(iii) determining the amount of qualified stated interest and OID with respect
to the equivalent fixed rate debt instrument, and (iv) making the appropriate
adjustments for actual variable rates during the applicable accrual period.
If a Variable Rate Note provides for stated interest either at one or more
qualified floating rates or at a qualified inverse floating rate, and in
addition provides for stated interest at a single fixed rate (other than at a
single fixed rate for an initial period), the amount of interest and OID
accruals are determined as in the immediately preceding paragraph with the
modification that the Variable Rate Note is treated, for purposes of the first
three steps of the determination, as if it provided for a qualified floating
rate (or a qualified inverse floating rate, as the case may be) rather than the
fixed rate. The qualified floating rate (or qualified inverse floating rate)
replacing the fixed rate must be such that the fair market value of the
Variable Rate Note as of the issue date would be approximately the same as the
fair market value of an otherwise identical debt instrument that provides for
the qualified floating rate (or qualified inverse floating rate) rather than
the fixed rate.
Short-Term Notes. In general, an individual or other cash basis United States
Holder of a short-term Note is not required to accrue OID (as specially defined
below for the purposes of this paragraph) for United States federal income tax
purposes unless it elects to do so (but may be required to include any stated
interest in income as the interest is received). Accrual basis United States
Holders and certain other United States Holders, including banks, regulated
investment companies, dealers in securities, common trust funds, United States
Holders who hold Notes as part of certain identified hedging transactions,
certain pass-through entities and cash basis United States Holders who so
elect, are required to accrue OID on short-term Notes on either a straight-line
basis or under the constant-yield method (based on daily compounding), at the
election of the United States Holder. In the case of a United States Holder not
required and not electing to include OID in income currently, any gain realized
on the sale or retirement of the short-term Note will be ordinary income to the
extent of the OID accrued on a straight-line basis (unless an election is made
to accrue the OID under the constant-yield method) through the date of sale or
retirement. United States Holders who are not required and do not elect to
accrue OID on short-term Notes will be required to defer deductions for
interest on borrowings allocable to short-term Notes in an amount not exceeding
the deferred income until the deferred income is realized.
For purposes of determining the amount of OID 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.
Foreign Currency Discount Notes. OID for any accrual period on a Discount
Note that is denominated in, or determined by reference to, a foreign currency
will be determined in the foreign currency and then translated into U.S.
dollars in the same manner as stated interest accrued by an accrual basis
United States Holder, as described under "Payments of Interest". Upon receipt
of an amount attributable to OID (whether in connection with a payment of
interest or the sale or retirement of a Discount Note), a United States Holder
may recognize ordinary income or loss.
NOTES PURCHASED AT A PREMIUM
A United States Holder that purchases a Note for an amount in excess of its
principal amount may elect to treat such excess as "amortizable bond premium",
in which case the amount required to be included in the United States Holder's
income each year with respect to interest on the Note will be reduced by the
amount of amortizable bond premium allocable (based on the Note's yield to
maturity) to such year. In the case of a Note that is denominated in, or
determined by reference to, a foreign currency, bond premium will be computed
in units of foreign currency, and amortizable bond premium will reduce interest
income in units of the foreign currency. At the time amortized bond premium
offsets interest income, exchange gain or loss (taxable as ordinary income or
loss) is realized and is
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determined by the difference between exchange rates at that time and at the
time of the acquisition of the Notes. Any election to amortize bond premium
shall apply to all bonds (other than bonds the interest on which is excludible
from gross income) 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 is irrevocable without the consent of the Service.
See also "Original Issue Discount--Election to Treat All Interest as Original
Issue Discount".
PURCHASE, SALE AND RETIREMENT OF THE NOTES
A United States Holder's tax basis in a Note will generally be its U.S.
dollar cost (as defined below), increased by the amount of any OID or market
discount included in the United States Holder's income with respect to the Note
and the amount, if any, of income attributable to de minimis original issue
discount and de minimis market discount included in the United States Holder's
income with respect to the Note, and reduced by (i) the amount of any payments
that are not qualified stated interest payments, and (ii) the amount of any
amortizable bond premium applied to reduce interest on the Note. The U.S.
dollar cost of a Note purchased with a foreign currency will generally be the
U.S. dollar value of the purchase price on the date of purchase or, in the case
of Notes traded on an established securities market, as defined in the
applicable Treasury Regulations, that are purchased by a cash basis United
States Holder (or an accrual basis United States Holder that so elects), on the
settlement date for the purchase.
A United States Holder will generally recognize gain or loss on the sale or
retirement of a Note equal to the difference between the amount realized on the
sale or retirement and the tax basis of the Note. The amount realized on a sale
or retirement for an amount in foreign currency will be the U.S. dollar value
of such amount on (i) the date payment is received in the case of a cash basis
United States Holder, (ii) the date of disposition in the case of an accrual
basis United States Holder or (iii) in the case of Notes traded on an
established securities market, as defined in the applicable Treasury
Regulations, sold by a cash basis United States Holder (or an accrual basis
United States Holder that so elects), on the settlement date for the sale.
Except to the extent described above under "Original Issue Discount--Short-Term
Notes" or "Original Issue Discount--Market Discount" or described in the next
succeeding paragraph or attributable to accrued but unpaid interest, gain or
loss recognized on the sale or retirement of a Note will be capital gain or
loss and will be long-term capital gain or loss if the Note was held for more
than one year.
Gain or loss recognized by a United States Holder on the sale or retirement
of a Note that is attributable to changes in exchange rates will be treated as
ordinary income or loss. However, exchange gain or loss is taken into account
only to the extent of total gain or loss realized on the transaction.
EXCHANGE OF AMOUNTS IN OTHER THAN U.S. DOLLARS
Foreign currency received as interest on a Note or on the sale or retirement
of a Note will have a tax basis equal to its U.S. dollar value at the time such
interest is received or at the time of such sale or retirement. Foreign
currency that is purchased will generally have a tax basis equal to the U.S.
dollar value of the foreign currency on the date of purchase. Any gain or loss
recognized on a sale or other disposition of a foreign currency (including its
use to purchase Notes or upon exchange for U.S. dollars) will be ordinary
income or loss.
INDEXED NOTES AND RENEWABLE AND EXTENDIBLE NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes payments on which are
determined by reference to any index and with respect to any renewable or
extendible Notes.
S-24
<PAGE>
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments of
principal, any premium and interest on a Note and the proceeds of the sale of a
Note before maturity within the United States to, and to the accrual of OID on
a Discount Note with respect to, non-corporate United States Holders, and
"backup withholding" at a rate of 31% will apply to such payments and to
payments of OID if the United States Holder fails to provide an accurate
taxpayer identification number or is notified by the Internal Revenue Service
that it has failed to report all interest and dividends required to be shown on
its federal income tax returns.
RISKS RELATING TO INDEXED NOTES
In addition to potential foreign currency risks as described below under
"Foreign Currency Risks", an investment in Indexed Notes presents certain
significant risks not associated with other types of securities. Certain risks
associated with a particular Indexed Note may be set forth more fully in the
applicable Pricing Supplement. Indexed Notes may present a high level of risk,
and investors in certain Indexed Notes may lose their entire investment.
The treatment of Indexed Notes for United States federal income tax purposes
is often unclear due to the absence of any authority specifically addressing
the issues presented by any particular Indexed Note. Accordingly, investors in
Indexed Notes should, in general, be capable of independently evaluating the
federal income tax consequences applicable in their particular circumstances of
purchasing an Indexed Note.
LOSS OF PRINCIPAL OR INTEREST
The principal amount of an Indexed Note payable at maturity, and/or the
amount of interest payable on an interest payment date, will be determined by
reference to one or more currencies (including baskets of currencies), one or
more commodities (including baskets of commodities), one or more securities
(including baskets of securities) and/or any other index (each an "Index"). The
direction and magnitude of the change in the value of the relevant Index will
determine either or both the principal amount of an Indexed Note payable at
maturity or the amount of interest payable on an interest payment date. The
terms of a particular Indexed Note may or may not include a guaranteed return
of a percentage of the face amount at maturity or a minimum interest rate.
Accordingly, the Holder of an Indexed Note may lose all or a portion of the
principal invested in an Indexed Note and may receive no interest thereon.
VOLATILITY
Certain indices are highly volatile. The expected principal amount payable at
maturity of, or the interest rate on, an Indexed Note based on a volatile Index
may vary substantially from time to time. Because the principal amount payable
at the maturity of, or interest payable on, an Indexed Note is generally
calculated based on the value of the relevant Index on a specified date or over
a limited period of time, volatility in the Index increases the risk that the
return on the Indexed Notes may be adversely affected by a fluctuation in the
level of the relevant Index.
The volatility of an Index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets, any of which could adversely affect the value of an Indexed
Note.
AVAILABILITY AND COMPOSITION OF INDICES
Certain indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an Index
typically reserves the right to alter the composition of the
S-25
<PAGE>
Index and the manner in which the value of the Index is calculated. Such an
alteration may result in a decrease in the value of or return on an Indexed
Note which is linked to such Index.
An Index may become unavailable due to such factors as war, natural
disasters, cessation of publication of the Index, or suspension of or
disruption in trading in the currency or currencies, commodity or commodities,
security or securities or other financial instrument or instruments comprising
or underlying such Index. If an Index becomes unavailable, the determination of
principal of or interest on an Indexed Note may be delayed or an alternative
method may be used to determine the value of the unavailable Index. Alternative
methods of valuation are generally intended to produce a value similar to the
value resulting from reference to the relevant Index. However, it is unlikely
that such alternative methods of valuation will produce values identical to
those which would be produced were the relevant Index to be used. An
alternative method of valuation may result in a decrease in the value of or
return on an Indexed Note.
Certain Indexed Notes are linked to Indices which are not commonly utilized
or have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks to which such a Note is
subject. In addition, there may be less trading in such Indices or instruments
underlying such Indices, which could increase the volatility of such Indices
and decrease the value of or return on Indexed Notes relating thereto.
FOREIGN CURRENCY RISKS
GENERAL
Exchange Rates and Exchange Controls. An investment in Notes denominated in
currencies other than U.S. dollars entails significant risks that are not
associated with a similar investment in a security denominated in U.S. dollars.
Such risks include, without limitation, the possibility of significant changes
in rates of exchange between the U.S. dollar and the various foreign currencies
or composite currencies and the possibility of the imposition or modification
of foreign exchange controls by either the U.S. or foreign governments. Such
risks generally depend on economic and political events over which the Company
has no control. In recent years, rates of exchange between the U.S. dollar and
certain foreign currencies have been highly volatile, and such volatility may
be expected to continue in the future. Fluctuations in any particular exchange
rate that have occurred in the past are not necessarily indicative, however, of
fluctuations in the rate that may occur during the term of any Note.
Depreciation of the Specified Currency against the U.S. dollar would result in
a decrease in the effective yield of such Note below its coupon rate, and in
certain circumstances could result in a loss to the investor on a U.S. dollar
basis.
Governments have imposed from time to time and may in the future impose
exchange controls that could affect exchange rates as well as the availability
of a Specified Currency at a Note's maturity. Even if there are no actual
exchange controls, it is possible that the Specified Currency for any
particular Note would not be available at such Note's maturity. In that event,
the Company will repay in U.S. dollars on the basis of the most recently
available applicable exchange rate.
Currently, there are limited facilities in the United States for conversion
of U.S. dollars into foreign currencies, and vice versa. Accordingly, payments
on Notes made in a Specified Currency will be made from an account with a bank
located in the country issuing the Specified Currency (or, for Notes
denominated in ECUs, in an ECU account).
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL THE RISKS OF AN INVESTMENT
IN NOTES DENOMINATED IN OTHER THAN U.S. DOLLARS. PROSPECTIVE INVESTORS SHOULD
CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS ENTAILED BY AN
INVESTMENT IN NOTES DENOMINATED IN OTHER THAN U.S. DOLLARS. NOTES DENOMINATED
IN OTHER THAN U.S. DOLLARS ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO
ARE UNSOPHISTICATED ABOUT FOREIGN CURRENCY TRANSACTIONS.
S-26
<PAGE>
Unless otherwise specified in this Prospectus Supplement, Notes denominated
in other than U.S. dollars or ECUs will not be sold in, or to residents of, the
country issuing the Specified Currency in which particular Notes are
denominated. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents, and the
Company disclaims any responsibility to advise prospective purchasers who are
resident of countries other than the United States as to any matters that may
affect the purchase, holding, or receipt of payments of principal of and
interest on the Debt Securities. Such persons should consult their own
financial and legal advisors with regard to such matters.
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
generally would grant a judgment only in U.S. dollars for an action based on
Notes denominated in other than U.S. dollars, and the date used to determine
the rate of conversion of foreign currencies into U.S. dollars will depend on
various factors, including which court rendered judgment. Section 27 of the
Judiciary Law of the State of New York provides that a New York State court
would be required to enter judgment in the Specified Currency; such judgment
would then be converted into U.S. dollars at the rate of exchange prevailing on
the date judgment was rendered. Other United States courts, however, in
granting such judgment, might determine the rate of conversion into U.S.
dollars with reference to the date of default, the date judgment is rendered,
or some other date.
EXCHANGE RATE AND CONTROLS FOR SPECIFIED CURRENCIES
For any Note denominated in other than U.S. dollars, a Currency Supplement
with respect to the applicable Specified Currency (which supplement shall
include information about any applicable current foreign exchange controls)
shall be attached to the related Prospectus Supplement. The information
concerning exchange rates is furnished as a matter of information only and
should not be regarded as indicative of the rate of or trends in future
fluctuations in currency exchange rates.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms of the Distribution Agreement, dated September 27, 1996
(the "Distribution Agreement"), the Notes are being offered on a continuing
basis by the Company through Goldman, Sachs & Co. and Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Agents"), who have
agreed to use reasonable efforts to solicit purchases of the Notes. The Company
will have the sole right to accept offers to purchase Notes and may reject any
proposed purchase of Notes in whole or in part. The Agents shall have the
right, in their discretion reasonably exercised, to reject any offer to
purchase Notes, in whole or in part. The Company will pay the Agents a
commission of from .125% to .750% of the principal amount of Notes, depending
upon maturity, for sales made through them as Agents.
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page of this Prospectus Supplement in the case of any
such principal transaction in which no other discount is agreed upon. Such
Notes may be resold at prevailing market prices, or at prices related thereto,
at the time of such resale, as determined by the Agents. The Company reserves
the right to sell Notes directly on its own behalf. No commission will be
payable on any Notes sold directly by the Company.
In addition, the Agents may offer the Notes they have purchased as principal
to other dealers. The Agents may sell Notes to any dealer at a discount and,
unless otherwise specified in the applicable Pricing Supplement, such discount
allowed to any dealer may include all or part of the discount to be received
from the Company. Unless otherwise indicated in the applicable Pricing
Supplement, any Note
S-27
<PAGE>
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. After
the initial public offering of Notes to be resold to investors and other
purchasers on a fixed public offering price basis, the public offering price,
concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse the Agents for
certain expenses.
The Agents may sell Notes to or through dealers who may resell to investors,
and the Agents may reallow all or part of their discount or commission to such
dealers. Such dealers may be deemed to be "underwriters" within the meaning of
the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately
available funds in The City of New York.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
VALIDITY OF NOTES
The validity of the Notes will be passed upon for the Company by Stites &
Harbison, Louisville, Kentucky, and for the Agents by Sullivan & Cromwell, New
York, New York. In giving their opinion, Stites & Harbison will rely on
Sullivan & Cromwell as to matters of New York law. The opinions of Stites &
Harbison and Sullivan & Cromwell will be conditioned upon, and subject to,
certain assumptions as to future actions required to be taken in connection
with the issuance and sale of the Notes and as to other events that may affect
the validity of the Notes but which cannot be ascertained on the date of such
opinions.
S-28
<PAGE>
LOGO
$500,000,000
PROVIDIAN CORPORATION
DEBT SECURITIES
----------------
The Company may from time to time offer Debt Securities consisting of
debentures, notes, and/or other unsecured evidences of indebtedness in one or
more series at an aggregate initial public offering price not to exceed
$500,000,000 or its equivalent in any other currency or composite currency. The
Debt Securities may be offered as separate series in amounts, at prices, and on
terms to be determined at the time of sale. The accompanying Prospectus
Supplement sets forth with regard to the series of Debt Securities in respect
of which this Prospectus is being delivered the title, aggregate principal
amount, denominations (which may be in United States dollars, in any other
currency or in a composite currency), maturity, rate, if any (which may be
fixed or variable), time of payment of any interest, any terms for redemption
at the option of the Company or the holder, any terms for sinking fund
payments, any listing on a securities exchange, the initial public offering
price, and any other terms in connection with the offering and sale of such
series of Debt Securities.
The Company may sell Debt Securities to or through underwriters, and also may
sell Debt Securities directly to other purchasers or through agents. Such
underwriters may include Goldman, Sachs & Co. or may be a group of underwriters
represented by firms which may include Goldman, Sachs & Co. Goldman, Sachs &
Co. and other persons may also act as agents. The accompanying Prospectus
Supplement sets forth the names of any underwriters or agents involved in the
sale of the series of Debt Securities in respect of which this Prospectus is
being delivered, the principal amounts, if any, to be purchased by
underwriters, and the compensation, if any, of such underwriters or agents.
----------------
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.
----------------
GOLDMAN, SACHS & CO.
----------------
The date of this Prospectus is September 27, 1996.
<PAGE>
FOR NORTH CAROLINA RESIDENTS ONLY: THE COMMISSIONER OF INSURANCE OF THE STATE
OF NORTH CAROLINA HAS NOT APPROVED OR DISAPPROVED THE OFFERING, NOR HAS THE
COMMISSIONER PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
----------------
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "SEC")
a Registration Statement on Form S-3 (herein, together with all amendments and
exhibits, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Debt Securities. This
Prospectus does not contain all information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is hereby made to the Registration Statement
for further information on the Company and the Debt Securities.
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, proxy statements and other information under the
Exchange Act with the SEC. Such reports, proxy statements, and other
information can be inspected and copied at the SEC, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies may also be obtained from the SEC's
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Copies of such material and other information about the
Company can also be inspected at the offices of the New York Stock Exchange,
Inc., 20 Broad Street, New York, New York 10005; and the Pacific Stock
Exchange, 301 Pine Street, San Francisco, California.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed by the Company with the SEC (File No. 1-6701)
under the Exchange Act, are incorporated herein by reference:
(a) the Company's Annual Report on Form 10-K for the year ended December
31, 1995 (which incorporates by reference certain portions of the 1995
Annual Report to Stockholders and the Proxy Statement for the Annual
Meeting of Stockholders held on May 1, 1996);
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996; and
(c) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996.
All documents filed by the Company under Sections 13(a), 13(c), 14, or 15(d)
of the Exchange Act after the date of this Prospectus and before the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part of it from the respective dates such documents
are filed. Any statement contained in a document all or a portion of which is
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for the purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is incorporated or deemed to be incorporated by reference
herein modifies or supersedes such statement. Any statements so modified shall
not be deemed to be a part of this Prospectus, except as so modified, and any
statement so superseded shall not be deemed to constitute part of this
Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered (including any beneficial owner), on written or oral
request, a copy of any or all of the documents incorporated in this Prospectus
by reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference in such documents). Requests should be
made to Providian Corporation, P.O. Box 32830, Louisville, Kentucky 40232,
Attention: Office of the Secretary, Telephone: (502) 560-2000.
2
<PAGE>
PROVIDIAN CORPORATION
Providian Corporation (formerly Capital Holding Corporation) (the "Company")
is a diversified insurance and financial services company. The Company markets
products and services through its subsidiaries, one or more of which is
licensed to do business in all 50 states, in Puerto Rico, and in the District
of Columbia.
The Company is incorporated under the laws of the State of Delaware. Its
principal executive offices are located in the Providian Center, 400 West
Market Street, Louisville, Kentucky 40202, and its telephone number is (502)
560-2000.
BUSINESS SEGMENTS
The operations of the Company and its subsidiaries have been classified into
five business segments: Providian Bancorp, Providian Direct Insurance,
Providian Agency Group, Providian Capital Management, and Corporate and Other.
Providian Bancorp
Providian Bancorp ("Bancorp") markets consumer loans, deposit products and
other banking services using mail, telephone and other direct response
channels. Consumer loans include unsecured credit cards, unsecured revolving
lines, revolving secured home equity loans, closed end mortgages, a credit card
primarily secured by an interest-bearing savings account and insurance premium
financing loans. In addition to lending products, Bancorp provides money market
deposit accounts to retail customers and certificates of deposit to both retail
and institutional customers and provides certain fee-based products and
services to its customers. Bancorp does business primarily through First
Deposit National Bank ("FDNB") and Providian National Bank ("PNB").
Bancorp's unsecured consumer loans are principally generated through direct
mail and telephone solicitations directed to a prescreened list of prospective
accountholders, followed by credit verification. Four principles guide
development of specific underwriting criteria for each mailing: (i) sufficient
credit history; (ii) demonstrated responsible use of credit; (iii) necessary
income qualification; and (iv) no recent significant increase in revolving
indebtedness.
Key profit drivers for Bancorp's spread-based businesses are portfolio asset
growth, the level of credit losses, the cost to acquire customers, pricing
(rates offered to borrowers) and funding costs. Bancorp limits its exposure to
changes in interest rates through various asset/liability management
strategies. As a result of these strategies and the relatively stable cost of
funds, asset growth, credit losses and acquisition costs have a much stronger
influence on the profitability of the spread-based businesses than cost of
funds. Key profit drivers for Bancorp's fee-based businesses (including its
consumer lending businesses which generate significant fee income) include the
number of customer relationships, pricing, servicing costs, persistency, and
the cost to acquire customers. Bancorp's strategy is to profitably build
sustainable, long-term customer relationships generating both spread- and fee-
based income.
Providian Direct Insurance
Providian Direct Insurance ("PDI") markets life, health and personal lines
property and casualty insurance and related fee-based products to individuals
directly and through third-party organizations primarily using television,
direct mail and telephone. PDI also markets its products to retired and active
duty military service personnel through the agency field force of Academy
Insurance Group, Inc. ("Academy"), a subsidiary of the Company. Academy has the
endorsement of the Non-Commissioned Officers Association, providing its
agents/counselors with preferred access to military personnel.
3
<PAGE>
The more significant profit drivers for PDI's business include the overall
level of sales and persistency as well as claims and operating expense
management. PDI's practice is to design profitability into its products through
its underwriting and rate structuring activities, while actively managing its
markets. This approach includes first looking for high-potential markets and
then identifying the types of products that can profitably serve needs in those
markets.
Providian Agency Group
Providian Agency Group ("PAG") markets traditional and interest-sensitive
individual life insurance products, health insurance products and related
services through home service representatives of the Company's following life
insurance subsidiaries: Commonwealth Life Insurance Company; Peoples Security
Life Insurance Company; and Capital Security Life Insurance Company. PAG is a
market-focused distributor of insurance products committed to meeting the needs
of low and middle income families, primarily in the Southeastern and Mid-
Atlantic states. In addition, PAG leverages its insurance capabilities by
marketing insurance products in partnerships with several third-party insurance
and marketing organizations.
Substantially all of PAG's home service representatives are employees of the
Company and do not represent other insurers. Such representatives receive
compensation from sales commissions and from renewal and service commissions.
The compensation arrangement is designed to reward representatives who not only
sell new policies, but who also effectively maintain and service in-force
business to meet Company sales and persistency objectives.
Premium growth, interest spreads, spending levels and underwriting margins
are key drivers of PAG's profitability. Premium growth is driven by three
important factors: the number and retention of agents in the field, agent
productivity and policy persistency. The individual life insurance business is
a mature market in which first year premiums are expected to grow slowly as the
primary insurance-buying population decreases slightly over the next several
years. In response, PAG has reduced its spending levels by streamlining
operations and strengthening its risk management capabilities. PAG has also
been successful in retaining its current business and in generating a
relatively stable stream of earnings.
Providian Capital Management
Providian Capital Management ("PCM") is responsible for the marketing and
management of spread- and fee-based retirement and savings products issued
through the Company's life insurance subsidiaries as well as the management of
all insurance-related invested assets. In the spread-based management business,
PCM receives deposits from customers, and in most situations, guarantees to
return the full principal plus interest at a specified or formula-driven rate.
These funds are invested to earn income and capital appreciation sufficient to
cover customer guarantees, pay expenses and produce a profit. In the fee-based
business, PCM assumes little, if any, investment risk. Fee-based products
provide certain liquidity and withdrawal benefits or tax advantages to
customers but generally do not guarantee the performance of underlying assets.
PCM offers a broad array of financial products, including floating and fixed
rate guaranteed investment contracts (GICs), Trust GIC (synthetic GICs) and
separate account products offered to pension funds, banks, mutual funds and
other organizations. These contracts have stated as well as indeterminant
maturities. PCM markets individual annuities including fixed and variable
contracts and immediate life annuities (primarily structured settlements) to
customers through banks, securities brokerage firms, financial planners and
third-party marketing organizations.
The level of PCM's profits is a function of a number of business and economic
factors which may change in importance from time to time given market
conditions and management's perspective of and tolerance for risk.
4
<PAGE>
Profits on spread-based products represent the excess of investment earnings
over the interest credited on policyholder deposits and related costs. Profits
are primarily driven by changes in interest rates, product growth, mix of
assets and liabilities, credit experience and spending levels. Interest rate
exposure is controlled through asset/liability strategies designed to
appropriately manage the estimated durations of both assets and liabilities. To
control credit risk, PCM maintains strict underwriting standards and emphasizes
a diverse investment portfolio. The current asset/liability mix will result
over time in lower spread margins in a rising interest rate environment and
higher spread margins in a falling interest rate environment.
Corporate and Other
Corporate and Other includes activities of a general corporate nature such as
debt service, corporate-wide marketing programs, intersegment eliminations, an
allocation of net investment income for the capital allocated to business
segments, adjustments given to the business segments for tax preferenced
investments, intercompany service fees, real estate development activities and
certain staff functions. This category also includes the results of businesses
that have not yet been integrated into the Company's other business segments.
The following summary of operations by business segment sets forth amounts
for the years ended December 31, 1995, 1994 and 1993.
REVENUES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------
SEGMENT 1995 1994 1993
- ------- -------- -------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Providian Bancorp:
Interest income................................. $ 457.1 $ 322.0 $ 316.8
Other income.................................... 335.8 269.6 223.1
-------- -------- --------
Total....................................... 792.9 591.6 539.9
Providian Direct Insurance:
Premiums:
Life.......................................... 320.3 307.6 298.9
Health........................................ 180.1 186.1 198.0
Property and casualty......................... 174.8 176.5 143.7
Other product lines........................... 6.5 6.4 7.1
-------- -------- --------
Total premiums.............................. 681.7 676.6 647.7
Investment and other income, net of expenses.... 104.8 103.1 109.5
-------- -------- --------
Total....................................... 786.5 779.7 757.2
Providian Agency Group:
Premiums:
Life.......................................... 359.6 347.8 344.4
Health........................................ 59.6 62.4 65.5
Other product lines........................... 28.1 30.1 37.3
-------- -------- --------
Total premiums.............................. 447.3 440.3 447.2
Investment and other income, net of expenses.... 295.8 286.0 287.6
-------- -------- --------
Total....................................... 743.1 726.3 734.8
Providian Capital Management:
Premiums........................................ 65.6 24.7 71.1
Investment and other income, net of expenses.... 1,019.0 883.5 761.7
-------- -------- --------
Total....................................... 1,084.6 908.2 832.8
Corporate and Other:
Realized investment loss........................ (68.5) (100.3) (20.2)
Other........................................... 49.8 53.6 34.5
-------- -------- --------
Total....................................... (18.7) (46.7) 14.3
-------- -------- --------
Consolidated...................................... $3,388.4 $2,959.1 $2,879.0
======== ======== ========
</TABLE>
5
<PAGE>
INCOME BEFORE FEDERAL INCOME TAX
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31
------------------------
SEGMENT 1995 1994 1993
- ------- ------- ------- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Providian Bancorp.................................... $ 187.9 $ 150.0 $117.7
Providian Direct Insurance:
Life............................................... 72.1 64.5 56.5
Health............................................. 36.5 41.8 45.8
Property and casualty.............................. 9.3 10.1 8.2
Other product lines................................ (5.4) (6.4) (12.6)
------- ------- ------
112.5 110.0 97.9
Providian Agency Group:
Life............................................... 175.9 179.0 185.7
Health............................................. 2.9 4.0 3.9
Other product lines................................ 3.3 (1.0) 4.1
------- ------- ------
182.1 182.0 193.7
Providian Capital Management:
Spread-based....................................... 118.6 130.7 131.3
Fee-based.......................................... 16.4 5.9 2.8
------- ------- ------
135.0 136.6 134.1
Corporate and Other:
Realized investment loss, net of related
amortization...................................... (68.2) (106.1) (21.9)
Other.............................................. (43.0) (32.0) (34.4)
------- ------- ------
(111.2) (138.1) (56.3)
------- ------- ------
Consolidated......................................... $ 506.3 $ 440.5 $487.1
======= ======= ======
</TABLE>
REGULATORY ENVIRONMENT
Banking
The primary regulator of the Company's principal consumer lending
subsidiaries, FDNB and PNB, is the Office of the Comptroller of the Currency
("OCC"). The banks' deposits are insured by the Bank Insurance Fund of the
Federal Deposit Insurance Corporation ("FDIC") and, accordingly, the banks are
subject to certain regulations of the FDIC. As members of the Federal Reserve
System, the banks are also subject to regulation by the Board of Governors of
the Federal Reserve System. Regulations of the OCC and other applicable federal
regulatory agencies affect many areas of banking operations, including capital
ratios, reserve requirements, the payment of dividends and permitted
investments.
FDNB must comply with certain restrictions under the Bank Holding Company Act
in order to maintain its grandfathered status. These restrictions include a
limitation on its ability to engage in certain new activities and a 7% annual
cap on its asset growth. PNB's charter limits its activities to credit card
operations.
Notwithstanding their direct or indirect ownership of FDNB and PNB, neither
the Company nor any of its subsidiaries is a "bank holding company" within the
meaning of the Bank Holding Company Act of 1956, as amended.
The relationship between the Company's consumer banking subsidiaries and
their customers is extensively regulated by federal and state consumer
protection laws. The most significant laws include the federal Truth-in-
Lending, Equal Credit Opportunity, Fair Credit Reporting and Truth-in-Savings
Acts.
6
<PAGE>
These laws impose disclosure requirements when a consumer credit loan is
advertised, when it is extended and in connection with monthly billing
statements, limit the liability of credit card holders for unauthorized use,
prohibit certain discriminatory practices and limit the manner in which
consumer credit reports may be used.
Insurance
The business of the Company's insurance subsidiaries is subject to regulation
and supervision by the insurance regulatory authority of each state in which
the subsidiaries are licensed to do business. Such regulators grant licenses to
transact business; regulate trade practices; approve policy forms; license
agents; approve certain premium rates; establish minimum reserve and loss ratio
requirements; review form and content of required financial statements;
prescribe the type and amount of investments permitted; and assure that
capital, surplus and solvency requirements are met. Insurance companies can
also be required under the solvency or guaranty laws of most states in which
they do business to pay assessments up to prescribed limits to fund
policyholder losses or liabilities of insolvent insurance companies. They are
also required to file detailed annual reports with supervisory agencies, and
records of their business are subject to examination at any time. Under the
rules of the National Association of Insurance Commissioners (the "NAIC"), a
self-regulatory organization of state insurance commissioners, insurance
companies are examined periodically by one or more of the supervisory agencies.
In 1992, the NAIC adopted the "Risk Based Capital for Life and/or Health
Insurers Model Act" (the "Model Act") which was designed to identify
inadequately capitalized life and health insurers. The Model Act defines two
key measures: (i) Total Adjusted Capital, which equals an insurer's statutory
capital and surplus plus its Asset Valuation Reserve, plus half its liability
for policyholder dividends, and (ii) Risk Based Capital. Risk Based Capital is
determined by a complex formula which is intended to take into account the
various risks assumed by an insurer. The NAIC adopted a similar, though more
elaborate model act for property/casualty insurers in 1993. Should an insurer's
Adjusted Capital fall below certain prescribed levels (defined in terms of its
Risk Based Capital), the Model Act provides for four different levels of
regulatory attention:
"Company Action Level": Triggered if an insurer's Adjusted Capital is less
than 100% but greater than or equal to 75% of its Risk Based Capital; requires
the insurer to submit a plan to the appropriate regulatory authority that
discusses proposed corrective action.
"Regulatory Action Level": Triggered if an insurer's Adjusted Capital is less
than 75% but greater than or equal to 50% of its Risk Based Capital; authorizes
the regulatory authority to perform a special examination of the insurer and to
issue an order specifying corrective actions.
"Authorized Control Level": Triggered if an insurer's Adjusted Capital is
less than 50% but greater than or equal to 35% of its Risk Based Capital;
authorizes the regulatory authority to take whatever action it deems necessary.
"Mandatory Control Level": Triggered if an insurer's Adjusted Capital falls
below 35% of its Risk Based Capital; requires the regulatory authority to place
the insurer under its control.
Since the Total Adjusted Capital levels of the Company's insurance
subsidiaries currently exceed all of the action levels as defined by the NAIC's
Model Acts, these Model Acts currently have no impact on the Company's
operations or financial condition.
Although the federal government does not directly regulate insurance
business, except with respect to Medicare supplement plans, legislation and
administration policies concerning premiums, age and gender discrimination,
financial services and taxation, among other areas, can significantly affect
the insurance business.
7
<PAGE>
Insurance Holding Company
States have enacted legislation requiring registration and periodic reporting
by insurance companies domiciled within their respective jurisdictions that
control or are controlled by other corporations so as to constitute a holding
company system. The Company and its subsidiaries have registered as a holding
company system pursuant to such legislation in Kentucky, Missouri, North
Carolina, New York, Illinois and New Jersey.
Insurance holding company system statutes and rules impose various
limitations on investments in subsidiaries and may require prior regulatory
approval for the payment of dividends and other distributions in excess of
statutory net gain from operations on an annual noncumulative basis by the
registered insurance company to the holding company or its affiliates. The NAIC
is seeking changes in state law which would further restrict the amount of
dividends which could be paid without prior approval.
Separate Accounts
Separate accounts of the Company's subsidiaries that offer individual
variable annuities are registered with the SEC under the Investment Company Act
of 1940 and are governed by the provisions of the Internal Revenue Code of
1986, as amended, pertaining to the tax treatment of annuities.
COMPETITION
Banking
The credit card and consumer revolving loan business is highly competitive.
The industry has recently experienced rising charge-offs and continued
competitive pressure. Competitors continually refine their use of advertising,
target marketing, balance transfers, pricing competition, incentive programs
and changes in the terms of certain credit cards, including lowering the rate
of interest charged on balances and adopting "tiered" or "risk-adjusted" or
"performance-based" rates under which the annual percentage rate is lowered or
raised for the issuer's most or least creditworthy customers.
In response to the competitive environment, Bancorp has implemented a variety
of new programs to attract and retain customers, including reducing interest
rates on selected accounts and marketing additional fee-based products. Bancorp
has generally retained the right to alter various charges, fees and other terms
with respect to consumer credit accounts. In addition, Bancorp has experienced
steady growth in its secured loan products and is increasing its efforts to
offer additional products to underserved markets.
Insurance
The insurance industry is highly competitive with over 2,000 life insurance
companies competing in the United States, some of which have substantially
greater financial resources, broader product lines and larger staffs than the
Company's insurance subsidiaries. Additionally, life insurance companies face
increasing competition from banks, mutual funds and other financial entities
for attracting investment funds.
The Company's insurance subsidiaries differentiate themselves through
progressive marketing techniques, product features, price, customer service,
stability and reputation, as well as competitive credit ratings. The insurance
subsidiaries maintain their competitive position by their focus on lower risk
markets and efficient cost structure. Other competitive strengths include
integrated asset/liability management, risk management and innovative product
engineering.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of Debt Securities
offered hereby for general corporate purposes.
8
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following summary consolidated financial data presents the consolidated
results of operations of the Company and its subsidiaries. The summary
information should be read in conjunction with and is qualified in its
entirety by the detailed information and financial statements, including the
notes thereto, contained in the documents incorporated by reference in this
Prospectus. See "Incorporation of Certain Documents by Reference." The Summary
Consolidated Financial Data for the six-month periods ended June 30, 1996 and
1995, are unaudited and reflect all adjustments which are, in the opinion of
management, necessary to a fair presentation for the interim periods. All such
adjustments are of a normal recurring nature. The results of operations for
the six-month period ended June 30, 1996 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
-------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS EXCEPT PER COMMON AND COMMON EQUIVALENT SHARE AND
RATIO DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF STATEMENTS OF
INCOME:
Premiums and other
considerations......... $ 605.5 $ 606.0 $ 1,194.6 $ 1,141.2 $ 1,167.7 $ 1,190.0 $ 1,056.0
Investment income, net
of expenses............ 936.2 932.0 1,861.4 1,595.6 1,461.4 1,453.5 1,479.9
Consumer loan servicing
fees................... 121.2 98.3 250.2 206.8 172.8 140.3 110.0
Realized investment gain
(loss)................. (0.6) (50.3) (68.5) (100.3) (20.1) 6.5 (18.8)
Other income, net....... 100.3 67.9 150.7 115.8 97.2 47.3 33.3
--------- --------- --------- --------- --------- --------- ---------
Total revenues....... 1,762.6 1,653.9 3,388.4 2,959.1 2,879.0 2,837.6 2,660.4
Total benefits and
expenses............... 1,469.8 1,428.9 2,882.1 2,518.6 2,391.9 2,385.6 2,314.5
Federal income tax...... 87.6 68.3 155.2 135.9 164.4 129.5 95.7
Dividends on Company-
obligated mandatorily
redeemable preferred
securities of Providian
LLC.................... 2.9 2.9 5.8 3.7 -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.............. 202.3 153.8 345.3 300.9 322.7 322.5 250.2
Dividends on
nonconvertible
preferred stock........ -- -- -- 1.2 6.8 6.8 8.6
--------- --------- --------- --------- --------- --------- ---------
Net income applicable to
common stock........... $ 202.3 $ 153.8 $ 345.3 $ 299.7 $ 315.9 $ 315.7 $ 241.6
========= ========= ========= ========= ========= ========= =========
Net income per common
and common equivalent
share.................. $ 2.16 $ 1.59 $ 3.60 $ 3.02 $ 3.12 $ 3.14 $ 2.66
========= ========= ========= ========= ========= ========= =========
SELECTED DATA FROM
STATEMENTS OF FINANCIAL
CONDITION:
Cash and investments.... $21,407.0 $20,880.9 $21,924.6 $19,268.9 $18,734.4 $16,791.3 $15,661.7
Total assets............ 26,824.3 25,742.2 26,838.6 23,613.4 22,929.0 20,588.3 18,873.0
Total policy
liabilities............ 16,407.4 17,439.5 16,751.5 16,509.8 15,500.5 13,928.8 12,877.5
Long-term debt issued
by:
Corporate.............. 745.6 754.3 720.8 694.3 589.3 589.3 611.2
Bancorp................ 50.0 -- -- -- -- -- --
Company-obligated
mandatorily redeemable
preferred securities of
Providian LLC.......... 100.0 100.0 100.0 100.0 -- -- --
Realized shareholders'
equity (1)............. 2,715.0 2,485.0 2,596.4 2,431.3 2,478.7 2,195.7 1,947.1
Total shareholders'
equity (2)............. 2,781.2 2,653.1 2,961.0 2,121.9 2,492.9 2,185.9 1,930.9
RATIO OF EARNINGS TO
FIXED CHARGES (3)...... 5.6 4.8 5.1 5.7 7.0 6.0 4.7
RATIO OF EARNINGS TO
FIXED CHARGES,
INCLUDING INTEREST ON
BANKING DEPOSITS (4)... 3.2 3.0 3.2 3.8 4.6 3.9 2.9
RATIO OF EARNINGS TO
FIXED CHARGES,
INCLUDING INTEREST ON
BANKING DEPOSITS,
ANNUITIES AND OTHER
FINANCIAL PRODUCTS (5). 1.5 1.3 1.4 1.5 1.6 1.5 1.4
</TABLE>
- -------
(1) Realized shareholders' equity excludes from total shareholders' equity the
net unrealized investment gain (loss) on debt securities and redeemable
preferred stocks, net of adjustments for deferred acquisition costs and
deferred income taxes.
(2) Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which increased
shareholders' equity by $261.4 million as of that date.
(3) For the purpose of computing the ratio of earnings to fixed charges,
earnings have been calculated by adding to pretax income from continuing
operations the amount of fixed charges reduced for capitalized interest
and increased for amortization of previously capitalized interest. Fixed
charges consists of interest on debt and a portion of net rental expense,
approximately one-third, deemed to represent interest.
(4) Computation of this ratio is the same as described in note (3) above
except that fixed charges also include interest on banking deposits.
(5) Computation of this ratio is the same as described in note (3) above
except that fixed charges also include interest on banking deposits,
annuities and other financial products.
9
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The following description of the terms of the Debt Securities sets forth
certain general terms and provisions of the Debt Securities to which any
Prospectus Supplement may relate. The particular terms of the Debt Securities
offered by any Prospectus Supplement (the "Offered Debt Securities") and the
extent, if any, to which such general provisions may apply to the Debt
Securities so offered will be described in that Prospectus Supplement. The term
"Debt Securities," as used in this caption, refers to all Securities issued
under the Indenture (as defined below) and includes any Offered Debt
Securities.
The Offered Debt Securities are to be issued under an Indenture dated as of
January 1, 1994 (the "Indenture"), between the Company and First Trust of New
York, National Association (successor to Morgan Guaranty Trust Company of New
York), as Trustee (the "Trustee"), which is incorporated by reference as an
exhibit to the Registration Statement. The following summaries of certain
provisions of the Debt Securities and the Indenture do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture, including the definitions therein of
certain terms. Wherever particular provisions or defined terms of the Indenture
are referred to, such provisions or defined terms are incorporated herein by
reference. Section or Article references are to the Indenture. Capitalized
terms not otherwise defined herein shall have the meaning given them in the
Indenture.
GENERAL
The Debt Securities will be unsecured obligations of the Company and will
rank equally and ratably with other unsecured and unsubordinated indebtedness
of the Company. The Indenture does not limit the amount of debentures, notes,
or other evidences of indebtedness that may be issued under it. Debt Securities
may be issued from time to time in one or more series up to the aggregate
amount authorized by the Company.
Reference is made to the Prospectus Supplement relating to the particular
series of Offered Debt Securities offered thereby for the following terms and
additional provisions, where applicable, of the Offered Debt Securities: (1)
the title of the Offered Debt Securities; (2) any limit on their aggregate
principal amount; (3) the Person to whom any interest on any Offered Debt
Security shall be payable if other than to the Person in whose name the Offered
Debt Security is registered at the Regular Record Date; (4) the price(s)
(expressed as a percentage of the aggregate principal amount thereof) at which
they will be issued; (5) the date(s), or the methods by which to determine such
date(s), on which the principal of the Offered Debt Securities will be payable;
(6) the rate(s) (which may be fixed or variable) at which they will bear
interest, if any, and the date from which such interest will accrue and the
dates on which such interest will be payable and the Regular Record Dates for
such Interest Payment Dates; (7) the Place(s) of Payment for the principal,
premium, if any, and interest on the Offered Debt Securities; (8) any mandatory
or optional sinking fund or analogous provisions; (9) any index used to
determine the amount of payments of principal of and premium, if any, and
interest; (10) the date, if any, after which, the terms upon which and the
price(s) at which the Company may redeem them at its option; (11) the currency
or currencies (including composite currencies) of payment of principal of and
premium, if any, and interest thereon if other than U.S. dollars; (12) whether
the Indenture provisions relating to defeasance and/or covenant defeasance will
apply to them; (13) whether they are to be issuable in the form of one or more
Global Securities; (14) the denominations of the Offered Debt Securities, if
other than in denominations of $1,000 and any integral multiple thereof; (15)
the portion of the principal (if other than all principal Outstanding) due upon
a declaration of acceleration of the Offered Debt Security; and (16) any other
terms.
Unless otherwise indicated in the Prospectus Supplement, principal (and
premium, if any) and interest, if any, on the Offered Debt Securities will be
payable, and transfers of the Offered Debt Securities will be registrable, at
the Corporate Trust Office of the Trustee; provided that, at the
10
<PAGE>
Company's option, interest may be paid by (i) check mailed to the address of
the Person entitled thereto as it appears in the Security Register or (ii) wire
transfer to an account maintained by such Person located in the United States.
(Sections 301, 305, 307, 308 and 1002) Unless otherwise indicated in an
applicable Prospectus Supplement, payment of any interest due on any Offered
Debt Security will be payable to the Person in whose name such Offered Debt
Security is registered at the close of business on the Regular Record Date for
such interest. (Sections 307 and 308)
Unless the Prospectus Supplement otherwise indicates, the Offered Debt
Securities will be issued in registered form without coupons in denominations
of $1,000 and any integral multiple thereof. (Section 302) No service charge
will be made for any registration of transfer or exchange of Offered Debt
Securities, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge imposed in connection therewith, other
than for certain exchanges not involving any transfer. (Section 305) The
Indenture provides that Debt Securities may be issuable in the form of one or
more Global Securities. (Sections 205, 301 and 305) See "--Global Securities."
Debt Securities may be issued as Original Issue Discount Securities to be
offered and sold at a substantial discount from their stated principal amount.
Special United States federal income tax and other considerations applicable to
Offered Debt Securities issued at an original issue discount, including
Original Issue Discount Securities, and special United States federal income
tax considerations applicable to any Offered Debt Securities that are
denominated in other than U.S. dollars are described under "United States
Taxation."
GLOBAL SECURITIES
If any Offered Debt Securities are issuable in the form of one or more Global
Securities, the applicable Prospectus Supplement will describe the
circumstances, if any, under which beneficial owners of interests in any such
Offered Debt Security issuable in the form of one or more Global Securities may
exchange such interests for Offered Debt Securities of such series and of like
tenor and principal amount in any authorized form and denomination. (Sections
101, 301 and 305) Principal of and any premium and interest on Offered Debt
Securities issuable in the form of one or more Global Securities will be
payable in the manner described in the applicable Prospectus Supplement.
RESTRICTIVE COVENANTS
Limitations on Liens on Restricted Subsidiaries' Capital Stock
The Company will not, and it will not permit any Restricted Subsidiary
(defined below) at any time directly or indirectly to, create, assume, incur,
or permit to exist any indebtedness secured by a pledge, lien, or other
encumbrance on the capital stock of any Restricted Subsidiary without making
effective provision whereby the Debt Securities then outstanding (and, if the
Company so elects, any other indebtedness ranking on a parity with the Debt
Securities) shall be equally and ratably secured with such secured indebtedness
so long as such other indebtedness shall be secured; provided, however, that
this covenant shall not be applicable to liens (as defined in Section 1007) of
(i) taxes or assessments or governmental charges or levies not then due and
delinquent or the validity of which is being contested in good faith or which
is less than $5,000,000, (ii) liens created by or resulting from any litigation
or legal proceeding being contested in good faith or involving claims of less
than $5,000,000, or (iii) deposits to secure (or in lieu of) surety, stay,
appeals or custom bonds. (Section 1007)
Limitations on Sales of Restricted Subsidiaries' Capital Stock
The Company is restricted from disposing of in any way any shares of capital
stock of a Restricted Subsidiary (other than for directors' qualifying shares
or dispositions to a Subsidiary), and Restricted
11
<PAGE>
Subsidiaries are restricted from disposing of in any way any shares of capital
stock of any other Restricted Subsidiary (other than for directors' qualifying
shares or dispositions to the Company or to a Subsidiary), except the entire
capital stock of such Restricted Subsidiary owned by the Company for a
consideration which, in the opinion of the Board of Directors, is at least
equal to the fair value thereof. (Section 1008) Unless otherwise specified in
the Prospectus Supplement, the term "Restricted Subsidiary" means any
Subsidiary of the Company with assets greater than or equal to 5% of all assets
of the Company and its Subsidiaries (excluding the assets of Providian Bancorp,
Inc. and its subsidiaries), computed and consolidated in accordance with
generally accepted accounting principles. The term "Restricted Subsidiary" does
not include Providian Bancorp, Inc. (a subsidiary of the Company) or any of its
subsidiaries. (Section 101)
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides, if such provision is made applicable to the Debt
Securities of any series pursuant to Section 301 of the Indenture, that the
Company may elect either:
(a) to defease and be discharged from any and all obligations with
respect to Outstanding Debt Securities of such series (except for the
obligations to register the transfer or exchange of such Debt Securities;
to replace temporary or mutilated, destroyed, lost, or stolen Debt
Securities; to maintain an office or agency in respect of the Debt
Securities; and to hold moneys for payment in trust) ("defeasance"); or
(b)(1) to be released from its obligations with respect to the
Outstanding Debt Securities of such series under Sections 801(3)
(limitation on creation of liens in connection with mergers or
consolidations of the Company, etc.), 1006 (payment of taxes and other
claims), 1007 (limitation on creation of liens on capital stock of
Restricted Subsidiaries), and 1008 (limitation on sales of capital stock of
Restricted Subsidiaries) of the Indenture; and (2) that the occurrence of
an event specified in Section 501(4) (with respect to Sections 801(3),
1007, and 1008) or Section 501(5), as described in clauses (d) and (e)
under "Events of Default," shall not be deemed to be an Event of Default
under the Indenture with respect to such Debt Securities ("covenant
defeasance"),
upon the irrevocable deposit with the Trustee (or other qualifying trustee), in
trust for such purpose, of money and/or U.S. Government Obligations (as
defined) that through the payment of principal and interest in accordance with
their terms will provide money in an amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants, to pay the
principal of (and premium, if any) and interest on such series of Debt
Securities, and any mandatory sinking funds or analogous payments thereon, on
the scheduled due dates therefor.
Such a trust may be established only 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 series of Debt Securities will not
recognize income, gain, or loss for federal income tax purposes as a result of
the deposit, defeasance (and discharge of such series of Debt Securities) or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner, and at the same times as would have been the case
if such deposit, defeasance (and discharge of such series of Debt Securities)
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. The Prospectus Supplement may
further describe the provisions, if any, permitting such defeasance and/or
covenant defeasance with respect to the Debt Securities of a particular series.
In the event the Company exercises its option to omit compliance with certain
covenants of the Indenture with respect to any series of Debt Securities and
the Debt Securities of such series are declared due and payable because of the
occurrence of any Event of Default, the amount of money and U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due
on
12
<PAGE>
the Debt Securities of such series at the time of their Stated Maturity but may
not be sufficient to pay amounts due on the Debt Securities of such series at
the time of the acceleration resulting from such Event of Default. However, the
Company shall remain liable for such payments.
The Prospectus Supplement will state if the defeasance and/or the covenant
defeasance provisions will apply to the Offered Debt Securities. (Article
Thirteen)
EVENTS OF DEFAULT
The following are Events of Default with respect to Debt Securities of any
series: (a) failure to pay any interest on any Debt Security of that series
when due, continued for 30 days; (b) failure to pay any principal of or
premium, if any, on any Debt Security of that series when due; (c) failure to
deposit any sinking fund payment, when due, in respect of any Debt Security of
that series; (d) default in the performance, or breach, of any other covenant
or warranty of the Company in the Indenture (other than a covenant or warranty
included solely for the benefit of any series of Debt Securities other than
that series), continued for 60 days after written notice as provided in the
Indenture; (e) default in and acceleration of any indebtedness for money
borrowed by the Company or any Restricted Subsidiary in excess of an aggregate
principal amount of $10,000,000 under the terms of the instrument under which
such indebtedness is issued or secured, if such acceleration is not rescinded
or annulled within 10 days after written notice as provided in the Indenture;
(f) certain events in bankruptcy, insolvency, or reorganization; and (g) any
other Event of Default provided with respect to Debt Securities of that series.
(Section 501)
If an Event of Default with respect to Debt Securities of any series at the
time Outstanding occurs and is continuing, either the Trustee or the Holders of
at least 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities, such portion of the principal
amount as may be specified in the terms of that series) of all the Debt
Securities of that series to be due and payable immediately. At any time after
a declaration of acceleration with respect to Debt Securities of any series has
been made, but before a judgment or decree based on acceleration has been
obtained by the Trustee, the Holders of a majority in principal amount of the
Outstanding Debt Securities of that series may, under certain circumstances,
rescind and annul such acceleration. (Section 502)
The Trustee will be under no obligation, subject to the provisions of the
Indenture relating to the duties of the Trustee in the case an Event of Default
shall occur and be continuing, to exercise any of its rights or powers under
the Indenture at the request or direction of any of the Holders of the Debt
Securities, unless such Holder shall have offered to the Trustee reasonable
indemnity. (Sections 601 and 603) Subject to such indemnification provisions,
the Holders of a majority in principal amount of the Outstanding Debt
Securities of any series affected will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with
respect to the Debt Securities of that series. (Section 512)
No Holder of any Debt Security of any series will have any right to institute
any proceeding with respect to the Indenture or for any remedy thereunder,
unless such Holder shall have previously given to the Trustee written notice of
a continuing Event of Default with respect to Debt Securities of that series
and unless also the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of that series shall have made written request, and
offered reasonable indemnity, to the Trustee to institute such proceeding as
trustee, and the Trustee shall not have received from the Holders of a majority
in aggregate principal amount of the Outstanding Debt Securities of that series
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. (Section 507) However, the Holder of any Debt
Security will have an absolute and unconditional right to receive payment of
the principal of (and premium, if any) and interest on such Debt Security on or
after the due dates expressed in such Debt Security and to institute suit for
the enforcement of any such payment. (Section 508)
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The Company will be required to furnish to the Trustee within 120 days after
the end of each fiscal year of the Company a statement as to any default in the
performance and observance of any of the terms, provisions and conditions of
the Indenture or any Board Resolution adopted with respect to the issuance of
any series of Debt Securities under Section 301 of the Indenture. (Section
1004)
MODIFICATION AND WAIVER
The Company and the Trustee may modify or amend the Indenture with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of each series affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each affected Outstanding Debt Security
affected thereby: (a) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Debt Security; (b) reduce the
principal amount of, or the premium (if any) or interest payable upon the
redemption of any Debt Security; (c) change the Place of Payment where, or the
coin or currency in which, any Debt Security or the premium (if any) or
interest thereon is payable; (d) reduce the amount of principal of an Original
Issue Discount Debt Security payable upon acceleration of the Maturity thereof;
(e) impair the right to institute suit for the enforcement of any payment on or
with respect to any Debt Security on or after the Stated Maturity or Redemption
Date thereof; or (f) reduce the percentage in principal amount of Outstanding
Debt Securities of any series, the consent of whose Holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults. (Section
902)
The Company may omit in any particular instance to comply with certain
restrictive provisions set forth in the Indenture (Sections 1004 to 1008,
inclusive) with respect to the Debt Securities of any series if before the time
for such compliance the Holders of at least a majority in principal amount of
the Outstanding Debt Securities of such series shall by the Act of such Holders
either expressly waive such compliance in such instance or generally waive
compliance with such term, provision, covenant or condition. (Section 1009) The
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may on behalf of the Holders of all Debt Securities of
that series waive any past default under the Indenture with respect to that
series, except a default in the payment of the principal of (or premium, if
any) or interest on any Debt Security of that series or in respect of a
provision that under the Indenture cannot be modified or amended without the
consent of the Holder of each Outstanding Debt Security of that series
affected. (Section 513)
The Indenture provides that, in determining whether the Holders of the
requisite principal amount of the Outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver
thereunder: (a) the principal amount of an Original Issue Discount Security
that shall be deemed to be Outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination upon
acceleration of the Maturity thereof to such date; and (b) the principal amount
of a Debt Security denominated in other than U.S. dollars shall be the U.S.
dollar equivalent, determined in the manner contemplated by Section 301 of the
Indenture on the date of original issuance of such Debt Security, of the
principal amount of such Debt Security (or, in the case of an Original Issue
Discount Debt Security, the U.S. dollar equivalent on the date of original
issuance of such Debt Security of that amount determined as provided in clause
(a) above of such Debt Security). (Section 101)
CONSOLIDATION, MERGER, AND SALE OF ASSETS
The Indenture provides that the Company, without the consent of any Holders
of Outstanding Debt Securities, may (i) consolidate or merge with or into any
Person, or convey, transfer or lease its properties and assets substantially as
an entirety to any Person, or permit any Person to consolidate with or merge
into the Company, or (ii) permit any Person to convey, transfer or lease its
properties and
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assets substantially as an entirety to the Company (collectively, the
"Transactions"), provided that in any such case: (a) the successor Person, in
connection with any Transaction, is organized under the laws of any United
States jurisdiction and assumes the Company's obligations on the Debt
Securities and under the Indenture; (b) after giving effect to a Transaction,
no Event of Default (and no event which, after notice or lapse of time or both,
would become an Event of Default) shall have happened and be continuing; (c)
if, as a result of any Transaction, properties or assets of the Company would
become subject to a mortgage, pledge, lien, security interest or other
encumbrance which would not be permitted by the Indenture, the Company or such
successor Person, as the case may be, shall take steps as shall be necessary
effectively to secure the Debt Securities equally and ratably with (or prior
to) all indebtedness secured thereby; and (d) certain other conditions, with
respect to the Transactions described in clause (i) of this paragraph, are met.
(Article Eight)
GOVERNING LAW
The Indenture and the Debt Securities will be governed by, and construed in
accordance with, the laws of the State of New York. (Section 112)
REGARDING THE TRUSTEE
Under the Indenture, First Trust of New York, National Association, as
successor Trustee to Morgan Guaranty Trust Company of New York, any future
successor Trustee thereto under the Indenture, or any other Trustee under the
Indenture, is required to satisfy certain continuing eligibility criteria,
including the maintenance of certain ratings assigned to the long-term debt of
any such Trustee (or the long-term debt of the holding company of which such
Trustee is a subsidiary if no such ratings for such Trustee are available), in
order to be and remain a trustee under the Indenture. (Section 609) No
resignation or removal of the Trustee and appointment of a successor Trustee
will be effective until the acceptance of appointment by a successor Trustee
pursuant to the provisions of the Indenture. (Sections 610 and 611)
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through underwriters and also may
sell Debt Securities directly to other purchasers or through agents. Such
underwriters or agents may include Goldman, Sachs & Co. or a group of
underwriters represented by firms including Goldman, Sachs & Co., and will be
named in the Prospectus Supplement. Goldman, Sachs & Co. may also act as
agents.
The distribution of the Debt Securities may be affected from time to time in
one or more transactions at a fixed price or prices, which may be changed, or
at market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Debt Securities, underwriters may receive
compensation from the Company or from purchasers of Debt Securities, for whom
they may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Debt Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they act
as agents. Underwriters, dealers, and agents that participate in the
distribution of Debt Securities may be deemed to be underwriters, and any
discounts or commissions they receive from the Company, and any profit on the
resale of Debt Securities they realize may be deemed to be underwriting
discounts and commissions under the Securities Act. Any such underwriter or
agent will be identified, and any such compensation received from the Company
will be described, in the Prospectus Supplement.
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<PAGE>
Each series of Offered Debt Securities will be a new issue with no
established trading market. The Company may elect to list any series of Offered
Debt Securities on an exchange, but is not obligated to do so. It is possible
that one or more underwriters may make a market in a series of Offered Debt
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of the trading market for the Debt Securities.
Under agreements the Company may enter into, underwriters, dealers, and
agents who participate in the distribution of Debt Securities may be entitled
to indemnification by the Company against certain liabilities, including
liabilities under the Securities Act.
Certain of the underwriters or agents and their associates may be customers
of, engage in transactions with, and perform services for the Company in the
ordinary course of business.
VALIDITY OF DEBT SECURITIES
Unless otherwise specified in the Prospectus Supplement with respect to the
Offered Debt Securities, the validity of the Debt Securities will be passed
upon for the Company by Stites & Harbison, Louisville, Kentucky, and if sold to
or through underwriters or agents, by Sullivan & Cromwell, New York, New York.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, and the related schedules included therein, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and related schedules are incorporated herein
by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTA-
TIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN ANY PRICING
SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE
PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE NOTES DESCRIBED IN THIS PROSPECTUS SUPPLE-
MENT. ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, AND THE PROSPECTUS
DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH
NOTES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF ANY PRICING SUPPLEMENT, THIS PROSPECTUS SUPPLEMENT, OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIR-
CUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
OR INCORPORATED BY REFERENCE HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUB-
SEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of Notes....................................................... S-2
United States Taxation..................................................... S-18
Risks Relating to Indexed Notes............................................ S-25
Foreign Currency Risks..................................................... S-26
Supplemental Plan of Distribution.......................................... S-27
Validity of Notes.......................................................... S-28
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Providian Corporation...................................................... 3
Use of Proceeds............................................................ 8
Summary Consolidated Financial Data........................................ 9
Description of Debt Securities............................................. 10
Plan of Distribution....................................................... 15
Validity of Debt Securities................................................ 16
Experts.................................................................... 16
</TABLE>
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$500,000,000
PROVIDIAN
CORPORATION
MEDIUM-TERM NOTES,
SERIES E
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LOGO
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GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
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