16
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from to
Commission file Number 1-6707
------------
Providian Corporation
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 51-0108922
- ------------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 West Market Street, Louisville, Kentucky 40202
--------------------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (502) 560-2000
----------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No ___.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of July 31, 1996.
Class Shares Outstanding
- -------------------------------------------------- ----------------------
Common Stock, $1.00 par value 93,552,873
<PAGE>
<TABLE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
PROVIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<CAPTION>
June 30,1996 December 31,
(Unaudited) 1995
--------------- ---------------
(Amounts in millions)
<S> <C> <C>
Assets
Investments:
Bonds and stocks, available for sale, at fair value
(Amortized cost of $10,602 and $10,566
in 1996 and 1995, respectively) $10,704 $11,158
Trading account securities, at fair value 113 105
Commercial mortgage loans 2,763 2,740
Residential mortgage loans 2,789 3,063
Consumer loans, net 2,505 2,968
Consumer loans held for securitization 675 123
Policy loans 479 454
Other investments 549 605
------- -------
Total Investments 20,577 21,216
Cash and cash equivalents 830 708
Deferred policy and loan acquisition costs 1,534 1,481
Value of insurance in force purchased 247 256
Goodwill 206 214
Separate account assets 2,451 2,070
Other assets 979 894
------- -------
======= =======
Total Assets $26,824 $26,839
======= =======
Liabilities and Shareholders' Equity
Liabilities:
Benefit reserves and other policy liabilities $ 9,705 $ 9,894
Policyholder contract deposits 6,702 6,858
Banking deposits 2,303 2,158
Separate account liabilities 2,451 2,070
Long-term debt issued by:
Corporate 746 721
Bancorp 50 --
Deferred federal income tax 343 505
Other liabilities 1,643 1,572
------- -------
Total Liabilities 23,943 23,778
Commitments and Contingencies
Company-Obligated Mandatorily Redeemable
Preferred Securities of Providian LLC 100 100
Shareholders' Equity:
Common stock, $1 par 115 115
Additional paid-in capital 47 50
Net unrealized investment gain 66 359
Retained earnings 2,926 2,770
Common stock held in treasury - at cost:
1996 - 21,811 shares;
1995 - 20,967 shares (367) (330)
Unearned restricted stock (6) (3)
------- -------
Total Shareholders' Equity 2,781 2,961
------- -------
======= =======
Total Liabilities and Shareholders' Equity $26,824 $26,839
======= =======
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 1. -- (Continued)
PROVIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
<S> <C> <C> <C> <C>
Six Months Three Months
----------------- ------------------
Period Ended June 30 1996 1995 1996 1995
------ ------- ------- -------
(Amounts in millions, except per common share)
Revenues:
Premiums and other considerations $ 606 $ 606 $ 306 $ 311
Investment income, net of expenses 936 932 468 478
Consumer loan servicing fees 121 98 54 48
Realized investment loss (1) (50) (5) (16)
Other income, net 101 68 59 35
------- ------- ------- -------
Total Revenues 1,763 1,654 882 856
Benefits and Expenses:
Benefits and claims 473 451 237 223
Increase in benefit and contract reserves 390 440 199 234
Commissions, net 45 40 23 21
General, administrative and other expenses, net 354 320 177 163
Amortization of deferred policy and loan acquistion costs,
value of insurance in force purchased and goodwill 149 123 72 64
Interest expense 59 55 30 28
------- ------- ------- -------
Total Benefits and Expenses 1,470 1,429 738 733
------- ------- ------- -------
Income before Federal Income Tax 293 225 144 123
Federal Income Tax 88 68 43 38
------- ------- ------- -------
Net Income before Dividends on Company-Obligated Mandatorily
Redeemable Preferred Securities of Providian LLC 205 157 101 85
Dividends on Company-Obligated Mandatorily Redeemable
Preferred Securities of Providian LLC 3 3 1 1
------- ------- ------- -------
Net Income $ 202 $ 154 $ 100 $ 84
======= ======= ======= =======
Net Income per Common Share $ 2.16 $ 1.59 $ 1.07 $ .88
======= ======= ======= =======
Cash Dividends per Common Share $ .50 $ .45 $ .25 $ .225
======= ======= ======= =======
Weighted Average Number of Common Shares
Outstanding During the Period 93.7 96.7 93.5 96.2
======= ======= ======= =======
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Item 1. -- (Continued)
PROVIDIAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
<S> <C> <C>
Six Months Ended June 30 1996 1995
-------------- -----------
(Amounts in millions)
Net Cash Flows provided by Operations $ 625 $ 706
Cash Flows from Investment Activities:
Investments sold or matured 3,900 2,204
Cost of securities and mortgage loans acquired (3,522) (2,287)
Additions to operating property (29) (14)
Net increase in consumer loans (1,561) (1,067)
Securitization of loans 1,420 1,324
Purchase of securitized consumer loans - (241)
All other investment activities (66) (17)
-------------- -----------
Net Cash Flows provided by (used in) Investment Activities 142 (98)
Cash Flows from Financing Activities:
Net increase (decrease) in short-term borrowings (383) 2
Policyholder contract deposits 784 1,214
Withdrawals of policyholder contract deposits (1,516) (1,521)
Net increase (decrease) in banking deposits 145 (93)
Issuance of long-term debt by:
Corporate 63 84
Bancorp 50 -
Repayment of long-term debt (38) (24)
Net borrowings (repayments) on Providian Bancorp
revolving line of credit 345 (3)
Purchase of common stock for treasury (55) (88)
Dividends (47) (44)
Proceeds from exercise of stock options 7 6
-------------- -----------
Net Cash Flows used in Financing Activities (645) (467)
-------------- -----------
Net Increase in Cash and Cash Equivalents 122 141
Cash and Cash Equivalents at Beginning of Period 708 573
-------------- -----------
Cash and Cash Equivalents at End of Period $ 830 $ 714
============== ===========
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
Item 1. -- (Continued)
PROVIDIAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
A. The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and in conformity
with generally accepted accounting principles and reflect all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results for the interim periods presented. All such adjustments are of a normal
recurring nature. Certain 1995 amounts have been reclassified to conform to the
current year presentation. These reclassifications did not have a significant
effect on the Company's financial position, results of operations or cash flows.
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. These unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes included in the Company's annual report on Form 10-K for the year
ended December 31, 1995.
B. Per common share amounts have been calculated using net income divided by the
weighted average number of common shares outstanding during the six-month
period. Fully diluted net income per common share is not presented as it
approximates net income per common share.
C. Consumer loans have been reduced by the sale, without recourse, of unsecured
receivables under asset securitization plans during 1996 of $1,420.0 million. At
June 30, 1996, there were $675.0 million of consumer loans in process of
securitization. Total consumer receivables outstanding under securitization
plans were $4.6 billion at June 30, 1996.
D. An analysis of the allowance for loan losses on consumer and mortgage loans
for the six-month periods ended June 30, 1996 and 1995 is as follows:
Consumer Mortgage
------------------ -------------------
Six Months Ended June 30 1996 1995 1996 1995
------- -------- ------- --------
(Dollars in millions)
Balance at beginning of period $93 $76 $50 $52
Current period provision 52 19 3 8
Current period chargeoffs,
net of recoveries (50) (32) (1) (14)
======= ======== ======= ========
Balance at end of period $95 $63 $52 $46
======= ======== ======= ========
<PAGE>
E. During the six months ended June 30, 1996, Providian Bancorp had net
borrowings of $345.0 million from its revolving line of credit
agreement. Outstanding borrowings under the agreement were $666.0
million at June 30, 1996.
The amount available under Providian Bancorp's revolving line of credit
was increased from $800.0 million to $1,200.0 million during May 1996.
F. During the six months ended June 30, 1996, the Company issued $63.0
million of Series D medium-term notes with maturities of 10 to 30 years
and interest rates ranging from 6.31 percent to 7.44 percent. In
addition, long-term debt totaling $38.3 million matured during the six
months ended June 30, 1996.
Providian Bancorp issued $50.0 million of notes with a maturity of
three years and an interest rate of 5.74 percent during the six months
ended June 30, 1996.
G. During the six months ended June 30, 1996, the Company repurchased 1,255,980
shares of its common stock at an average price of $43.56 per share.
H. In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" (SFAS No. 125), which is
effective for transfers and servicing of financial assets and extinguishments of
liabilities occurring after December 31, 1996, and is to be applied
prospectively. The provisions of SFAS No. 125 which relate to accounting for
transfers and servicing of financial assets are applicable to the Company's loan
securitization activities. Management has not yet determined the impact that the
adoption of SFAS No. 125 will have on the Company's consolidated financial
statements.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This item presents specific comments on material changes to the Company's
results of operations, financial condition, liquidity and capital resources for
the periods reflected in the condensed consolidated financial statements filed
with this report. This analysis should be read in conjunction with the financial
statements, footnotes and management's discussion and analysis included in the
Company's annual report on Form 10-K for the year ended December 31, 1995 and
the Company's quarterly report on Form 10-Q for the quarter ended March 31,
1996.
Results of Operations
The following discussion compares the results of operations for the six months
ended June 30, 1996 to the six months ended June 30, 1995. The nature of and
reasons for any significant variation between the quarters ended June 30, 1996
and June 30, 1995 are the same as those discussed below for the respective six
month periods, except where otherwise noted herein.
Consolidated Results
Providian's net income for the three months ended June 30, 1996 was $1.07 per
common share, up 21.6 percent from the $.88 per common share in the same period
in 1995. Net income for the six months ended June 30, 1996 was $2.16 per common
share, up 35.8 percent from the $1.59 per common share in the same period in
1995. Net income for the three months ended June 30, 1996 included pretax
realized losses of $5.1 million, comprised of realized losses on investments and
securities of $3.6 million and $1.5 million in provisions for mortgage loan
losses. Net income for the six months ended June 30, 1996 included pretax
realized losses of $0.6 million, comprised of $3.1 million in provisions for
mortgage loan losses net of $2.5 million of realized gains on investments and
securities. Pretax realized losses were $16.1 million and $50.3 million for the
quarter and six months, respectively, in 1995.
Earnings, as discussed herein, exclude realized investment gains and losses and
related deferred acquisition cost amortization, net of taxes. Earnings for the
three months ended June 30, 1996 were $1.10 per common share, up 10.0 percent
from the $1.00 per common share reported in the same period last year. Earnings
year to date were $2.17 per common share, up 10.7 percent from the $1.96 per
common share reported in 1995. The discussion under "Business Segment Results"
highlights the key items which contributed to the overall growth in earnings.
Revenues, as discussed herein, exclude realized investment gains and losses.
Revenues for the three months ended June 30, 1996 were $887.3 million, up 1.7
percent from the $872.5 million reported in the same period last year. Revenues
for the six months were $1.8 billion, up 3.5 percent from the $1.7 billion
reported in the prior year. The increases were primarily a result of higher
revenues at Providian Bancorp. Providian Bancorp revenues increased $35.9
million for the quarter, or 18.6 percent, and $79.3 million for the six months,
or 21.2 percent, from the same periods in 1995 as a result of significant growth
in total managed loans.
<PAGE>
Realized investment loss decreased $11.0 million for the quarter, or 68.3
percent, and $49.7 million for the six months, or 98.8 percent, from the same
periods in 1995. The decreases reflect the losses of $56.1 million recognized in
1995 on futures transactions used as an economic hedge of the available for sale
debt securities portfolio during that period.
Total benefits and expenses were up $5.0 million for the quarter, or 0.7
percent, and $40.9 million for the six months, or 2.9 percent, from the same
periods in 1995. Benefits and claims increased $14.3 million for the quarter, or
6.4 percent, and $21.4 million for the six months, or 4.7 percent, from the same
periods in 1995. The increases were primarily due to Providian Bancorp's growth
in average deposits, offset slightly by a decrease in the average interest rate
paid to depositors, and Providian Direct Insurance's higher Property and
Casualty claims experience attributable to the severe winter storms. The
increase in benefit and contract reserves was $35.2 million lower for the
quarter, or 15.0 percent, and $49.8 million lower for the six months, or 11.3
percent, compared to the same periods in 1995. The decreases are due to
Providian Capital Management's lower credited rates on policyholder balances
during the first six months of 1996 as compared to 1995. General, administrative
and other expenses were up $14.8 million for the quarter, or 9.1 percent, and
$34.2 million for the six months, or 10.7 percent, from the same periods in
1995. The increases reflect an increase in the provision for loan losses by
Providian Bancorp to address significant on-balance sheet loan growth and higher
credit loss rates. Amortization increased $8.0 million for the quarter, or 12.6
percent, and $26.4 million for the six months, or 21.5 percent, from the same
periods in 1995. The increases were primarily due to the acceleration of the
amortization of home loan deferred acquisition costs in connection with the
securitization of a portion of Providian Bancorp's home equity loan portfolio.
Business Segment Results
Providian Bancorp
Providian Bancorp continued its outstanding performance with pretax earnings of
$55.4 million for the quarter and $106.7 million for the six months ended June
30, 1996, up 19.7 percent and 20.8 percent, respectively, from the same periods
in 1995. These results reflect strong growth in credit card receivables and the
home equity loan portfolio, partially offset by lower net interest margins and
higher net credit losses.
Total managed loans, including $4.6 billion of securitized receivables and
$675.0 million of receivables in the process of securitization, were $7.8
billion as of June 30, 1996, up 39.4 percent over June 30, 1995 balances.
Managed credit card receivables grew $1.8 billion from June 30, 1995 as a result
of the continued success of the Primary Lender strategy. Additionally, the
managed home equity loan portfolio reflected significant growth of $248.0
million from June 30, 1995.
The net interest margin on managed credit card receivables for the quarter ended
June 30, 1996 decreased to 10.50 percent from the 12.68 percent for the same
period in 1995. The net interest margin on managed credit card receivables for
the six months ended June 30, 1996 was 11.16 percent, down from the 12.77
percent for the same period last year. The decrease in margin from the prior
year resulted from an increase in market rates on the variable rate cost of
funds and, as expected, lower yields on new credit card loans reflecting the
guaranteed savings feature of the Primary Lender strategy. Loan loss reserves
related to on-balance sheet credit card receivables, excluding receivables held
for securitization, were 4.16 percent at June 30, 1996, compared to 3.97 percent
at December 31, 1995 and 3.85 percent at June 30, 1995. Net credit losses for
managed credit card receivables for the quarter ended June 30, 1996 increased to
5.49 percent from the 4.52 percent for the same period in 1995. Net credit
losses for managed credit card receivables was 5.28 percent for the six months
ended June 30, 1996, up from 4.40 percent for the same period last year.
Balances past due greater than 30 days related to on-balance sheet credit card
receivables were 2.38 percent at June 30, 1996 compared to 2.41 percent at
December 31, 1995 and 1.96 percent at June 30, 1995. Managed credit card
receivable balances past due greater than 30 days were 3.41 percent at June 30,
1996 compared to 3.22 percent at December 31, 1995 and 2.67 percent at June 30,
1995. These increases in net credit losses and past-due balances are consistent
with industry trends and Providian's expectations.
Providian Direct Insurance
Providian Direct Insurance (PDI) pretax earnings were $22.4 million for the
quarter and $44.2 million for the six months ended June 30, 1996, down 18.1
percent and 22.5 percent, respectively, from the same periods in 1995. These
results include losses in the Property and Casualty segment of $1.0 million for
the quarter, compared to income of $1.7 million in the same period in 1995, and
a loss of $4.4 million for the six months, compared to income of $4.7 million in
1995. This year's losses were primarily attributable to severe winter storm
losses in the fourth quarter of 1995 and first quarter of 1996 that were higher
than initially anticipated. Additionally, Health earnings were down $3.0 million
for the quarter and $5.2 million for the six months, as anticipated, resulting
from the continued run-off of the Medicare supplement in force block of
business.
PDI premiums and fee-based revenues were $168.0 million for the three months
ended June 30, 1996 and $339.9 million for the six months ended June 30, 1996,
down 2.0 percent and 1.6 percent, respectively, from the same periods in 1995.
The decrease was primarily due to declining Health premiums from the continued
run-off of the Medicare supplement in force block of business. Also, Property
and Casualty premiums declined slightly due to the repositioning of the military
auto business. PDI sales declined $12.7 million, or 20.0 percent, for the six
months, as a result of the discontinuance of a Life and Health partnership
arrangement and the repositioning of the military auto business. However, sales
in the direct Life business were up $1.4 million, or 9.8 percent, for the six
months over the same period in 1995.
Providian Agency Group
Providian Agency Group pretax earnings were $47.0 million for the three months
ended June 30, 1996, up 2.6 percent from the same period in the prior year, and
$93.2 million for the six months ended June 30, 1996, up 3.2 percent from the
same period in 1995. The increases reflect growth in Life premiums, improved
Health claims experience and the continuing effects of expense management
initiatives, partially offset by higher mortality experience.
Life premiums increased slightly due to the growth in premium in force, while
total premiums and fee-based revenues were essentially even with 1995. Life
sales increased from the same periods in 1995 due to higher Marketing
Partnership sales; however, total sales declined 2.7 percent for the quarter and
2.0 percent for the six months, primarily due to lower Life home service sales.
The combined Life and Health policy termination rate of 13.8 percent for the six
months ended June 30, 1996 improved slightly from the 13.9 percent rate for the
same period of 1995. Including fee-based products in 1996, the termination rate
was 14.3 percent, compared to the full year 1995 rate of 14.5 percent.
Providian Capital Management
Providian Capital Management pretax earnings were $39.8 million for the three
months ended June 30, 1996, up 24.6 percent from the same period in the prior
year, and $78.4 million for the six months ended June 30, 1996, up 26.9 percent
from 1995. The increases were primarily due to the impact of lower credited
rates and higher fee-based deposits, partially offset by lower investment
yields. Profit margins on spread-based deposits for the quarter and six months
ended June 30, 1996 were 115 basis points and 112 basis points, respectively,
which were significantly improved from the 87 basis points and 86 basis points,
respectively, in the same periods last year.
Providian Capital Management's Individual fee-based deposits continued growing
steadily with balances of $1.9 billion at June 30, 1996, an increase of 53.6
percent over June 30, 1995 balances. The Group fee-based Trust GIC product has
grown to $12.4 billion at June 30, 1996, despite a recent increase in
competition. Individual and Group spread-based deposits declined 5.8 percent and
11.2 percent, respectively, from June 30, 1995, due to anticipated withdrawals
as credited rates reset downward. Sales of Group products remained challenging
through June given the large amount of funds flowing into the equity market and
a very competitive pricing environment. Retention of Individual spread-based
deposits outside their surrender charge period remained difficult due to the
relative attractiveness of the equity market.
<PAGE>
Analysis of Financial Condition
Significant variations between June 30, 1996 and December 31, 1995 balance sheet
items are discussed below.
Assets
Cash and invested assets were $21.4 billion at June 30, 1996, down $517.5
million, or 2.4 percent, from December 31, 1995. The decrease in invested assets
is due to the decline in market value of the Company's available for sale bond
and stock portfolio, reflecting increases in market interest rates during 1996.
Residential mortgage loans decreased $273.4 million, or 8.9 percent, as a result
of the sale of $125.0 million of loans and due to payoffs exceeding purchases
during 1996. Separate account assets and liabilities increased $380.6 million,
or 18.4 percent, primarily due to variable annuity sales through one partnership
arrangement totaling $216.7 million and related fund growth of $97.4 million.
(For additional information on the Company's invested assets see the section
titled "Asset/Liability Review").
Liabilities
Providian Bancorp issued $50.0 million of three-year notes (see Note F to the
accompanying condensed consolidated financial statements and the section titled
"Liquidity and Capital Resources"). Deferred federal income tax decreased by
$162.0 million, or 32.1 percent, from year end due primarily to the $157.8
million change in deferred taxes associated with the market value decline on the
available for sale bond and stock portfolio.
Shareholders' Equity
The net unrealized investment gain component of shareholders' equity decreased
$293.1 million from December 31, 1995, reflecting the decrease in the fair value
of the Company's available for sale investment portfolio. The adjustments to
record the effect of the unrealized investment gain on shareholders' equity and
the related balance sheet accounts were as follows:
<TABLE>
<S> <C> <C> <C>
June 30 December 31
1996 1995 Change
-------------- -------------- ---------------
(Dollars in millions)
Unrealized investment gain
on available for sale securities $ 102.1 $ 592.6 $(490.5)
Adjusted by:
Decrease in deferred
policy acquisition costs (0.5) (40.1) 39.6
Increase in deferred
federal income taxes (35.5) (193.3) 157.8
-------------- -------------- ---------------
Net unrealized investment gain
on available for sale securities $ 66.1 $ 359.2 $(293.1)
============== ============== ===============
</TABLE>
Asset/Liability Review
Excluding Providian Bancorp, invested assets related to insurance operations
were $17.9 billion, compared to $18.5 billion at December 31, 1995. The
distribution of invested assets at June 30, 1996 has not changed significantly
from December 31, 1995.
Exposure to below investment grade bonds at June 30, 1996 was 4.7 percent, down
from 4.9 percent at December 31, 1995. Default and loss experience in the
securities portfolio was excellent with no defaults and no significant losses as
a result of impairments this year. As of June 30, 1996, there were minimal
securities in the bond or preferred stock portfolios that were delinquent as to
interest or dividends.
Problem commercial mortgage loans (based on the American Council of Life
Insurance definition, which includes loans past due 60 days or more, loans in
the process of foreclosure, restructured loans and real estate acquired through
foreclosure) as of June 30, 1996, amounted to 3.46 percent of total commercial
loans, up from the 3.00 percent at December 31, 1995. The industry average for
problem commercial mortgage loans was 15.07 percent at March 31, 1996 (the most
recently published statistics). Problem residential mortgage loans (based on
Mortgage Bankers Association (MBA) standards, which is based on the number of
loans that are past due 30 days or more, and loans in the process of
foreclosure) were 3.78 percent at June 30, 1996 compared to 3.30 percent at
December 31, 1995. The MBA average for problem residential mortgage loans was
5.04 percent at March 31, 1996 (the most recently published statistics). Loans
on which the Company has discontinued the accrual of interest and restructured
loans accruing interest as of June 30, 1996 and December 31, 1995 were as
follows:
<TABLE>
<S> <C> <C> <C> <C>
Commercial Loans Residential Loans
--------------------------------------- --------------------------------------
June 30 December 31 June 30 December 31
1996 1995 1996 1995
------------------ ----------------- ----------------- -----------------
Non-accrual loans $35.1 $28.5 $34.4 $31.8
Restructured loans,
accruing interest 14.0 14.5 - -
================== ================= ================= =================
$49.1 $43.0 $34.4 $31.8
================== ================= ================= =================
</TABLE>
As of June 30, 1996, there were approximately $63.7 million of commercial
mortgage loans with identified potential problems which could cause these loans
to be included in a problem category in the future; however, the Company does
not anticipate any material additional losses to arise from these loans.
<PAGE>
Liquidity and Capital Resources
Providian Corporation is a legal entity, separate and distinct from its
subsidiaries and has no business operations. The primary sources of cash to meet
its obligations, including principal and interest payments with respect to
indebtedness, are dividends and other statutorily permitted payments from its
subsidiaries. Management believes that overall sources of cash and liquidity
available to Providian Corporation and its subsidiaries (the "Company") will
continue to be sufficient to satisfy its foreseeable financial obligations.
Net consolidated cash flows from operations were $624.6 million during the six
months ended June 30, 1996, and $705.8 million for the same period of 1995.
These substantial levels come from a base of cash flows from insurance premiums
(particularly from the home service Providian Agency Group operations, which are
very predictable and relatively immune to disintermediation), from banking
operations and from other product sales.
Investment commitments are planned to coincide with expected cash flows. Normal
day to day cash variations are met by a commercial paper program, supplemented
by committed lines of credit. Commercial paper borrowings averaged $49.7 million
during the six months at a weighted average interest rate of 5.47 percent.
Commercial paper outstanding at June 30, 1996 was $49.9 million.
Excluding Providian Bancorp, the Company has committed lines of credit of $850.0
million which would provide additional liquidity should adverse conditions
materialize, and as back-up to the commercial paper program. There have been no
borrowings under these lines of credit during 1996 and there were no amounts
outstanding under these lines of credit as of June 30, 1996. In addition, the
Company's bond and stock portfolio of $10.8 billion at June 30, 1996 provides a
significant source of short-term liquidity.
Providian Bancorp analyzes its current and future liquidity needs to support its
deposit portfolio and asset growth and has a revolving line of credit agreement
which provides liquidity for the existing deposit base as well as satisfying
short-term funding requirements. During May 1996, the amount available under the
credit agreement was increased from $800.0 million to $1.2 billion. Outstanding
borrowings under the agreement were $666.0 million at June 30, 1996.
Excluding Providian Bancorp, the Company issued $63.0 million of its Series D
medium-term notes during the six months ended June 30, 1996, and $38.3 million
of the Company's long-term debt matured during that period. In addition,
Providian Bancorp issued $50.0 million of three-year notes during the six months
ended June 30, 1996.
As of June 30, 1996, $111.0 million of the Company's Series D medium-term notes
remain available for issuance. Further, the Company plans to register $389.0
million of additional debt securities during the second half of 1996.
During the first six months of 1996, the Company repurchased 1,255,980 shares of
its common stock at an average price of $43.56 per share to complete the 2.5
million share repurchase program announced during the third quarter of 1995.
In June, two Providian Bancorp subsidiaries, First Deposit National Bank and
Providian National Bank, received first time ratings on unsecured debt
obligations from Duff & Phelps and Standard & Poor's. The banks were assigned
senior long-term obligation ratings of A+ by Duff & Phelps and A by Standard &
Poor's. Short-term obligations were assigned ratings of D-1 by Duff & Phelps and
A-1 by Standard & Poor's. In July, Moody's assigned a first time A2 rating for
long-term deposits, as well as ratings of P-1 for short-term deposits and other
senior obligations. These ratings reflect Providian's Bancorp's strong operating
results and strategic position in the marketplace, as well as Providian's
ownership.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In the normal course of business, the Company and its subsidiaries are parties
to a number of lawsuits. Management believes that these suits will be resolved
with no material financial impact to the Company.
Item 2. Change in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
Exhibits: Exhibit 10 - Material Contracts
Exhibit 27 - Financial Data Schedule
Reports: None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Providian Corporation
-------------------------------------------------
(Registrant)
Date: August 13, 1996 Robert L. Walker
------------------------------------------------
Robert L. Walker
Senior Vice President -- Finance and Chief
Financial Officer
Date: August 13, 1996 Steven T. Downey
-------------------------------------------------
Steven T. Downey
Vice President and Controller
<PAGE>
PROVIDIAN CORPORATION AND SUBSIDIARIES
LIST AND INDEX OF EXHIBITS
Reference Number Per Exhibit
Exhibit Table Description of Exhibit Number Page
- -------------------- ------------------------------------- ---------- -------
(10) Revolving Credit Agreement between 10.1 --
Providian Bancorp, Inc. and various
domestic and international banks, as
terminated, replaced, and restated
on May 14, 1996.
(27) Financial Data Schedule 27 --
<PAGE>
================================================================================
$1,200,000,000
TERMINATION, REPLACEMENT AND
RESTATEMENT AGREEMENT
Dated as of May 14, 1996
among
FIRST DEPOSIT NATIONAL BANK,
PROVIDIAN NATIONAL BANK,
PROVIDIAN CREDIT CORPORATION
and
PROVIDIAN CREDIT SERVICES, INC.,
as Borrowers,
PROVIDIAN BANCORP, INC.,
as Guarantor,
THE LENDERS NAMED HEREIN,
as Lenders
and
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Administrative Agent
and
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION THE BANK OF NEW YORK
CITICORP USA, INC. COMMERZBANK AG
CREDIT LYONNAIS, SAN FRANCISCO BRANCH CREDIT SUISSE
DEUTSCHE BANK AG NATIONSBANK OF TEXAS, N.A.
================================================================================
<PAGE>
================================================================================
Contents
Page
1. TERMINATION, REPLACEMENT AND RESTATEMENT 1
2. REPRESENTATIONS AND WARRANTIES 6
3. CONDITIONS TO EFFECTIVENESS 6
4. APPLICABLE LAW 8
5. EXISTING CREDIT AGREEMENT 8
6. NEW CREDIT AGREEMENT 8
7. TRANSITION PROVISIONS 8
8. COUNTERPARTS 9
<PAGE>
TERMINATION, REPLACEMENT AND RESTATEMENT AGREEMENT
TERMINATION, REPLACEMENT AND RESTATEMENT AGREEMENT, dated as of May 14, 1996
(this "TRR Agreement"), among FIRST DEPOSIT NATIONAL BANK, a national banking
association incorporated, organized and existing under the laws of the United
States of America ("FDNB"), PROVIDIAN NATIONAL BANK, a national banking
association incorporated, organized and existing under the laws of the United
States of America ("PNB"), PROVIDIAN CREDIT CORPORATION, a corporation organized
and existing under the laws of the State of Delaware ("PCC"), and PROVIDIAN
CREDIT SERVICES, INC., a corporation organized and existing under the laws of
the State of Utah ("PCSI"; together with FDNB, PNB and PCC, the "Borrowers");
PROVIDIAN BANCORP, INC., a corporation organized and existing under the laws of
the State of Delaware (the "Guarantor"; together with the Borrowers, the
"Obligors"); the banks and financial institutions (individually, a "Lender" and,
collectively, the "Lenders") listed on the signature pages hereof under the
captions "Continuing Lenders" (the "Continuing Lenders") and "Additional
Lenders" (the "Additional Lenders"); and THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), a national banking association, as administrative agent for the
Lenders (in such capacity, the "Agent"). Terms used but not defined in this TRR
Agreement shall have the respective meanings assigned to them in the New Credit
Agreement (as defined below).
RECITALS
A. The Borrowers, the Guarantor, the Continuing Lenders and the Agent are
parties to an $800,000,000 Amended and Restated Credit Agreement, dated as of
October 10, 1995 (the "Existing Credit Agreement"). B. The Borrowers, the
Guarantor, the Continuing Lenders and the Agent are willing, subject to the
terms and conditions of this TRR Agreement, to terminate the Existing Credit
Agreement. C. The Borrowers, the Guarantor, the Continuing Lenders, the
Additional Lenders and the Agent are willing, subject to the terms and
conditions of this TRR Agreement, to replace and restate the Existing Credit
Agreement to increase the aggregate Commitments thereunder, to extend the
maturity date thereof and to effect certain other changes thereto.
AGREEMENT
The parties hereto agree as follows:
1. Termination, Replacement and Restatement. Subject to the conditions set forth
in Section 3 hereof:
(a) the Existing Credit Agreement, including all schedules and exhibits
thereto, is hereby terminated, subject to Section 13.07 thereof as to the
survival of certain rights and obligations, and simultaneously replaced by a new
credit agreement (the "New Credit Agreement") identical in form and substance to
the Existing Credit Agreement except as expressly modified below.
(b) The preamble of the New Credit Agreement shall read as follows:
CREDIT AGREEMENT, dated as of May 14, 1996, among FIRST DEPOSIT
NATIONAL BANK, a national banking association incorporated, organized and
existing under the laws of the United States of America ("FDNB"), PROVIDIAN
NATIONAL BANK, a national banking association incorporated, organized and
existing under the laws of the United States of America ("PNB"), PROVIDIAN
CREDIT CORPORATION, a corporation organized and existing under the laws of the
State of Delaware ("PCC"), and PROVIDIAN CREDIT SERVICES, INC., a corporation
organized and existing under the laws of the State of Utah ("PCSI"; together
with FDNB, PNB and PCC, the "Borrowers"); PROVIDIAN BANCORP, INC., a corporation
organized and existing under the laws of the State of Delaware (the "Guarantor";
together with the Borrowers, the "Obligors"); the banks and financial
institutions listed on the signature pages to the TRR Agreement (as defined
herein) as Continuing Lenders and Additional Lenders (each as defined in the TRR
Agreement) or which, pursuant to Section 2.12, 2.13 or 13.06(b) hereof, shall
become a "Lender" hereunder (individually, a "Lender" and, collectively, the
"Lenders"); and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national
banking association, as administrative agent for the Lenders (in such capacity,
together with any successor appointed pursuant to Section 12.08, the "Agent").
(c) The New Credit Agreement shall not contain (i) the recitals set
forth in the Existing Credit Agreement or (ii) Paragraphs (I), (II) or (III) set
forth under the heading "Agreement" and the first sentence under the heading
"Agreement" shall read as follows:
"The parties hereto agree as follows:".
(d)(i) The definition of the term "Agreement" in Section 1.01 of the New Credit
Agreement shall read as follows:
"Agreement": this Credit Agreement, as amended, supplemented
or otherwise modified from time to time.
(ii) The definition of the term "Applicable Lending Office" in Section 1.01 of
the New Credit Agreement shall read as follows:
"Applicable Lending Office": for each Lender and for
each Type of Loan, the "Lending Office" of such Lender (or of an
affiliate of such Lender) designated for such Type of Loan on the
signature pages of the TRR Agreement or such other office of such
Lender (or of an affiliate of such Lender) as such Lender may from time
to time specify to the Agent and each Borrower as the office at which
its Loans of such Type are to be made and maintained.
(iii) The definition of the term "Co-Agents" in Section 1.01 of the New Credit
Agreement shall read as follows:
"Co-Agents": Bank of America National Trust and Savings Association, The Bank of
New York, Citicorp USA, Inc., Commerzbank AG, Credit Lyonnais, San Francisco
Branch, Credit Suisse, Deutsche Bank AG and NationsBank of Texas, N.A.
(iv) The definition of the term "Commitment" in Section 1.01 of the New Credit
Agreement shall read as follows:
"Commitment": as to any Lender, the obligation of
such Lender to make Syndicated Loans in an aggregate amount at any one
time outstanding up to but not exceeding the amount set opposite the
name of such Lender on the signature pages of the TRR Agreement under
the caption "Commitment", or if such Lender has entered into an
Increased Commitment Addendum or one or more Assignment and
Acceptances, and with respect to each Lender that becomes a Lender
pursuant to an Assignment and Acceptance or an Additional Lender
Addendum, as set forth in such Increased Commitment Addendum,
Assignment and Acceptance or Additional Lender Addendum (as the same
may be reduced from time to time pursuant to Section 2.05). The
original aggregate principal amount of the Commitments is
$1,200,000,000.
(v) The definition of the term "Effective Date" in Section 1.01 of the
New Credit Agreement shall read as follows:
"Effective Date": the Effective Date as defined in the TRR Agreement.
(vi) The definitions of the terms "Existing Agreement" and "Existing
Lenders" shall be deleted from Section 1.01 of the New Credit Agreement.
(vii) The definition of the term "Facility Fee Rate" in Section 1.01 of
the New Credit Agreement shall read as follows:
"Facility Fee Rate": for each Quarterly Period
commencing before the later of (i) the first anniversary of the
Effective Date and (ii) the second consecutive Quarterly Date on which
the Consolidated Tangible Capital of the Guarantor is greater than or
equal to $550,000,000, 0.1250%; and for each Quarterly Period
thereafter, the percentage set forth below opposite the Consolidated
Tangible Capital of the Guarantor as of the Quarterly Date immediately
preceding such Quarterly Period:
Consolidated Tangible Capital Facility Fee Rate
greater than or equal to
$550,000,000 0.1000%
less than $550,000,000 0.1250%
(viii) The definition of the term "Fee Letter" in Section 1.01 of the New Credit
Agreement shall read as follows:
"Fee Letter": the letter dated April 3, 1996 between the Obligors and
the Agent relating to certain agency and other fees in respect of the
credit facilities provided hereunder. (ix) The definition of the term
"Swing Line Amount" in Section 1.01 of the New Credit Agreement shall read
as follows:
"Swing Line Amount": $75,000,000.
(e) Section 1.01 of the New Credit Agreement shall contain the following
additional definition:
"TRR Agreement": the Termination, Replacement and Restatement
Agreement, dated as of May 14, 1996, among the Borrowers, the
Guarantor, the banks and other financial institutions listed on the
signature pages thereof as Continuing Lenders and Additional Lenders
(each as defined therein) and the Agent.
(f) The amount set forth in Section 2.03(i) of the New Credit Agreement
shall be "$1,000" rather than "$750".
(g) The first sentence of Section 2.13 of the New Credit Agreement shall
read as follows:
During the period from January 1, 1997 to the Termination Date with the
consent of the Borrowers and upon notification to the Agent, one or
more additional banks or financial institutions may become a party to
this Agreement by executing an addendum hereto with the Obligors and
the Agent, substantially in the form of Exhibit G, whereupon such bank
or financial institution (each, a "New Lender") shall become a Lender
for all purposes and to the same extent as if originally a party hereto
and shall be bound by and entitled to the benefits of this Agreement,
provided that, after giving effect to such addition, (i) the aggregate
Commitments shall not exceed $1,600,000,000 and (ii) no Lender shall
have a Commitment which equals or exceeds 25% of the aggregate
Commitments.
(h) The first sentence of Section 2.14 of the New Credit Agreement shall
read as follows:
During the period from January 1, 1997 to the Termination Date at the
request of the Borrowers and upon notification to the Agent, any Lender
may increase the amount of its Commitment by executing an addendum
hereto with the Obligors and the Agent, substantially in the form of
Exhibit H, whereupon such Lender shall be bound by and entitled to the
benefits of this Agreement with respect to the full amount of its
Commitment as so increased, provided that, after giving effect to any
such increase, (i) the aggregate Commitments shall not exceed
$1,600,000,000 and (ii) no Lender shall have a Commitment which equals
or exceeds 25% of the aggregate Commitments.
(i) Section 2.15 of the Existing Credit Agreement shall be deleted from the
New Credit Agreement.
(j) Section 6.01 of the New Credit Agreement shall read as follows: "6.01
Reserved".
(k) The dates set forth in the first and last sentences of Section 7.01
of the New Credit Agreement shall be "December 31, 1995" rather than "December
31, 1994" and the second sentence of Section 7.01 of the Existing Credit
Agreement shall be deleted from the New Credit Agreement.
(l) The date set forth in Section 7.02 of the New Credit Agreement
shall be "December 31, 1995" rather than "December 31, 1994".
(m) Section 9.01(a) of the New Credit Agreement shall read as follows:
(a) Maintenance of Consolidated Tangible Capital. Permit
Consolidated Tangible Capital at any time during any of the calendar
years set forth below to be less than the amount set forth below
opposite such year:
Year Amount
1996 $300,000,000
1997 $350,000,000
1998 and thereafter $400,000,000
n) Section 13.02 of the New Credit Agreement shall read as follows:
13.02 Notices. All notices, requests and other communications provided
for herein and under the other Credit Documents (including, without
limitation, any modifications of, or waivers or consents under, this
Agreement) shall be given or made in writing (including, without
limitation, by telex or telecopy), or, with respect to notices given
pursuant to Section 2.03 or 2.04, by telephone, confirmed in writing by
telecopier by the close of business on the day the notice is given,
delivered (or telephoned, as the case may be) to the intended recipient
at the "Address for Notices" specified below its name on the signature
pages of the TRR Agreement or the applicable Assignment and Acceptance
or Additional Lender Addendum; or, as to any party, at such other
address as shall be designated by such party in a notice to each other
party. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted
by telex or telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as
aforesaid.
(o) The first proviso in Section 13.03 of the New Credit Agreement shall
read as follows:
provided that the fees and expenses of the Agent and of counsel to the
Agent and the Lenders in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other Credit Documents
shall be payable by the Borrowers only to the extent set forth in the
letter agreement dated April 3, 1996 among the Agent and the Obligors.
2. Representations and Warranties. Each Obligor represents and warrants to
each of the Lenders that:
(a) This TRR Agreement, and the New Credit Agreement, have been duly
authorized, and, in the case of this TRR Agreement, executed and
delivered by it and constitute its legal, valid and binding obligations
enforceable in accordance with their terms except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of
creditors' rights generally, or by general equity principles, including
but not limited to principles governing the availability of the
remedies of specific performance and injunctive relief.
(b) The representations and warranties made by it under Section 7 of
the New Credit Agreement, after giving effect to this TRR Agreement,
are true and correct in all material respects on the date hereof with
the same effect as if made on the date hereof, except to the extent
such representations and warranties expressly relate to an earlier
date.
(c) Before and after giving effect to this TRR Agreement, no Default or
Event of Default has occurred and is continuing.
3. Condition to Effectiveness. This TRR Agreement shall become effective on
the first date (the "Effective Date") on which each of the following
conditions precedent is satisfied in full:
(a) The Agent shall have received counterparts of this TRR Agreement
which, when taken together, bear the signatures of all the parties hereto.
(b) The representations and warranties set forth in Section 7 of the
New Credit Agreement, once the Existing Credit Agreement is replaced thereby,
shall be true and correct in all material respects on and as of the Effective
Date, with the same effect as though made on and as of the Effective Date,
except to the extent such representations and warranties expressly relate to an
earlier date.
(c) Each Obligor shall be in compliance with all the terms and
provisions set forth in the Existing Credit Agreement and in the New Credit
Agreement, once the Existing Credit Agreement is replaced thereby, and in each
other document relating thereto on its part to be observed or performed, and no
Default or Event of Default shall have occurred and be continuing.
(d) The Agent shall have received the following documents, each
certified as indicated below:
(1) a copy of the charter, as amended and in effect, of each
Obligor certified as of a recent date by the secretary or assistant
secretary of such Obligor, and a certificate from the Comptroller of
the Currency or the Secretary of State of its jurisdiction of
incorporation, as the case may be, dated as of a recent date, as to the
good standing of such Obligor; and
(2) a certificate of the secretary or an assistant secretary
of each Obligor, dated the Effective Date and certifying (A) that
attached thereto is a true and complete copy of the by-laws of such
Obligor as amended and in effect at all times from the date on which
the resolutions referred to in clause (B) were adopted to and including
the date of such certificate, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the board of directors of
such Obligor authorizing the execution, delivery and performance of
this TRR Agreement and such of the Credit Documents to which such
Obligor is or is intended to be a party and the extensions of credit
hereunder, and that such resolutions have not been modified, rescinded
or amended and are in full force and effect, (C) that the charter of
such Obligor has not been amended since the date of the certification
thereto furnished pursuant to clause (1) above, and (D) as to the
incumbency and specimen signature of each officer of such Obligor
executing this TRR Agreement and the Credit Documents and each other
document to be delivered by such Obligor in connection therewith (and
the Agent and each Lender may conclusively rely on such certificate
until it receives notice in writing from such Obligor).
(e) The Agent shall have received (i) a favorable opinion, dated the
Effective Date, of in-house counsel to the Obligors, substantially in the form
of Exhibit A hereto and covering such other matters as the Agent may reasonably
request and (ii) a favorable opinion, dated the Effective Date, of Gibson, Dunn
& Crutcher, counsel to the Agent, substantially in the form of Exhibit B hereto
and covering such other matters as the Agent may reasonably request.
(f) All legal matters in connection with this TRR Agreement shall be
satisfactory to the Agent, in its reasonable discretion. The Agent shall
promptly give the Obligors and each Lender notice of the Effective Date.
4. Applicable Law. THIS TRR AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
5. Existing Credit Agreement. Until the occurrence of the Effective
Date as provided in Section 3 hereof, the Existing Credit Agreement shall
continue in full force and effect in accordance with the provisions thereof and
the rights and obligations of the parties thereto shall not be affected hereby.
6. New Credit Agreement. Any reference in the New Credit Agreement, or
in any documents or instruments required thereunder or annexes, exhibits or
schedules thereto, referring to the Existing Credit Agreement, shall be deemed
to refer to the New Credit Agreement which shall be deemed dated as of the date
hereof. As used in the New Credit Agreement, the terms "Agreement", "this
Agreement", "herein", "hereinafter", "hereto", "hereof" and words of similar
import shall, unless the context otherwise requires, mean the New Credit
Agreement. Except as expressly modified by this TRR Agreement, the terms and
provisions of the Existing Credit Agreement are hereby confirmed and ratified in
all respects and shall be in full force and effect as the terms and provisions
of the New Credit Agreement.
7. Transition Provisions. (a) On the Effective Date all Loans
outstanding under the Existing Credit Agreement shall automatically be deemed to
be Loans outstanding under the New Credit Agreement and all amounts and rights
accrued under the Existing Credit Agreement shall be deemed accrued under the
New Credit Agreement.
(b) If on the Effective Date there is an unpaid principal amount of
Syndicated Loans under the Existing Credit Agreement which are Base Rate Loans,
each Additional Lender and each Lender whose Commitment has increased under the
New Credit Agreement shall make Loans thereunder to the Borrowers in such
amounts as shall be necessary to cause the outstanding amount of each such
Lender's share of the Base Rate Loans of all Lenders (after giving effect to the
application of proceeds described in the last sentence of this paragraph),
expressed as a percentage, to be equal to such Lender's Commitment Percentage.
The Agent will notify each such Lender in writing of the amount of any such Loan
it shall be required to make, and on the Effective Date each such Lender will
transfer to the Agent, in immediately available funds, the amount of its Loan.
The proceeds of such Loans shall be applied by the Agent on behalf of the
Borrowers to the partial repayment of the other Lenders' Base Rate Loans to the
extent necessary to cause the outstanding amount of each such other Lender's
share of the Base Rate Loans of all Lenders under the New Credit Agreement,
expressed as a percentage, to be equal to such other Lender's Commitment
Percentage (and the pro-rata and sharing provisions of Section 4.02 shall not be
applicable to such payment).
(b) If on the Effective Date there is an unpaid principal amount of
Syndicated Loans which are Eurodollar Loans or Competitive Bid Option Loans
under the Existing Credit Agreement, the Additional Lenders and the Lenders
whose Commitments have increased under the New Credit Agreement shall not be
required to make any advances on the Effective Date in respect thereof and
Lenders whose Commitments have decreased under the New Credit Agreement shall
not receive any repayment on the Effective Date in respect thereof, provided
that, in the case of Syndicated Loans which are Eurodollar Loans, if such
Eurodollar Loans are converted or continued on the last day of the Interest
Period therefor, such conversion or continuation shall be pro rata according to
the Commitments of the Lenders after giving effect to the New Credit Agreement,
and provided, further, that if, for any reason, any such Eurodollar Loans are
not repaid, converted or continued on the last day of the Interest Period
therefor, effective on such last day, each Additional Lender and each Lender
whose Commitment has increased pursuant to the New Credit Agreement severally
agrees that it shall unconditionally and irrevocably, without regard to the
occurrence of any Default or Event of Default, purchase a participating interest
in such Eurodollar Loans ("Unrefunded Eurodollar Loans") in an amount equal to,
in the case of an Additional Lender, such Lender's Commitment Percentage of such
Eurodollar Loans, and, in the case of a Lender whose Commitment shall have
increased, the product of the principal amount of such Eurodollar Loans and a
fraction the numerator of which is the amount of the increase in such Lender's
Commitment and the denominator of which is the aggregate amount of the
Commitments. Each such Lender will immediately transfer to the Agent, in
immediately available funds, the amount of its participation, and the proceeds
of such participations shall be distributed by the Agent to the other Lenders in
such amounts as will reduce the amount of the participating interest retained by
each such other Lender in such Eurodollar Loans to their respective Commitment
Percentages of such Eurodollar Loans. Each Lender shall share on a pro rata
basis (calculated by reference to its participating interest in such Eurodollar
Loans) in any interest which accrues thereon and in all repayments thereof. All
payments in respect of Unrefunded Eurodollar Loans and participations therein
shall be made in accordance with Section 4.02.
8. Counterparts. This TRR Agreement may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and delivered as
of the day and year first above written.
<PAGE>
FIRST DEPOSIT NATIONAL BANK
By
Name: David J. Petrini
Title: Senior Vice President and Senior
Financial Officer
Address for Notices:
1) Before June 10, 1996:
c/o Providian Bancorp, Inc.
88 Kearny Street, Suite 1900
San Francisco, CA 94108
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 398-0731
Telephone No.: (415) 398-2893
2) From and after June 10, 1996:
c/o Providian Bancorp, Inc.
201 Mission Street
San Francisco, CA 94105
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 278-6028
Telephone No.: (415) 543-0404
<PAGE>
PROVIDIAN NATIONAL BANK
By
Name: David J. Petrini
Title: Senior Vice President and Senior
Financial Officer
Address for Notices:
1) Before June 10, 1996:
c/o Providian Bancorp, Inc.
88 Kearny Street, Suite 1900
San Francisco, CA 94108
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 398-0731
Telephone No.: (415) 398-2893
2) From and after June 10, 1996:
c/o Providian Bancorp, Inc.
201 Mission Street
San Francisco, CA 94105
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 278-6028
Telephone No.: (415) 543-0404
<PAGE>
PROVIDIAN CREDIT CORPORATION
By
Name: David J. Petrini
Title: Senior Vice President and Senior
Financial Officer
Address for Notices:
1) Before June 10, 1996:
c/o Providian Bancorp, Inc.
88 Kearny Street, Suite 1900
San Francisco, CA 94108
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 398-0731
Telephone No.: (415) 398-2893
2) From and after June 10, 1996:
c/o Providian Bancorp, Inc.
201 Mission Street
San Francisco, CA 94105
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 278-6028
Telephone No.: (415) 543-0404
<PAGE>
PROVIDIAN CREDIT SERVICES, INC.
By
Name: David J. Petrini
Title: Senior Vice President and Senior
Financial Officer
1) Before June 10, 1996:
Address for Notices:
c/o Providian Bancorp, Inc.
88 Kearny Street, Suite 1900
San Francisco, CA 94108
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 398-0731
Telephone No.: (415) 398-2893
2) From and after June 10, 1996:
c/o Providian Bancorp, Inc.
201 Mission Street
San Francisco, CA 94105
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 278-6028
Telephone No.: (415) 543-0404
<PAGE>
PROVIDIAN BANCORP, INC., as Guarantor
By
Name: David J. Petrini
Title: Senior Vice President and Senior
Financial Officer
Address for Notices:
1) Before June 10, 1996:
Providian Bancorp, Inc.
88 Kearny Street, Suite 1900
San Francisco, CA 94108
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 398-0731
Telephone No.: (415) 398-2893
2) From and after June 10, 1996:
Providian Bancorp, Inc.
201 Mission Street
San Francisco, CA 94105
Attention: Senior Vice President and Senior
Financial Officer
Telecopier No.: (415) 278-6028
Telephone No.: (415) 543-0404
<PAGE>
CONTINUING LENDERS
Commitment [NAME OF LENDER]
By
Name: [Printed]
Title:
Lending Office for Base Rate Loans:
Lending Office for Loans other than Base
Rate Loans:
Address for Notices:
=================================
Attention: ___________________________
Telex No.: __________________________
Telecopier No.: ______________________
Telephone No.: _______________________
<PAGE>
ADDITIONAL LENDERS
Commitment [NAME OF LENDER]
By
Name: [Printed]
Title:
Lending Office for Base Rate Loans:
Lending Office for Loans other than Base
Rate Loans:
Address for Notices:
=================================
Attention: ___________________________
Telex No.: __________________________
Telecopier No.: ______________________
Telephone No.: _______________________
<PAGE>
THE CHASE MANHATTAN BANK (NATIONAL
ASSOCIATION), as Agent
By_________________________________
Name: Dennis L. Cogan
Title: Vice President
Address for Notices to Chase as Agent:
The Chase Manhattan Bank
(National Association)
4 Chase Metro Tech Center
13th Floor
Brooklyn, New York 11245
Attention: New York Agency
Telex No.: 6720516 (Answerback: CMBNYAUW)
Telecopier No.: (718) 242-6909/6910
Telephone No.: (718) 242-7945
<PAGE>
May , 1996
The Chase Manhattan Bank (National Association), as Administrative Agent, and
the Lenders party to the TRR Agreement (as hereinafter defined)
Re: Termination, Replacement and Restatement Agreement
Ladies and Gentlemen:
I have acted as in-house counsel for Providian Bancorp, Inc., a
Delaware corporation ("PBI"), First Deposit National Bank, a national banking
association ("FDNB"), Providian National Bank, a national banking association
("PNB"), Providian Credit Corporation, a Delaware corporation ("PCC"), and
Providian Credit Services, Inc., a Utah corporation ("PCSI"), in connection with
the Termination, Replacement and Restatement Agreement dated as of May , 1996
(the "TRR Agreement") among FDNB, PNB, PCC and PCSI, as borrowers (collectively,
the "Borrowers"), PBI, as guarantor (the "Guarantor" and, together with the
Borrowers, the "Obligors"), the lenders party thereto (the "Lenders") and The
Chase Manhattan Bank (National Association), as administrative agent for the
Lenders (in such capacity, the "Agent"). All capitalized terms used but not
defined herein have the respective meanings given to such terms in the TRR
Agreement.
This opinion is being furnished to you pursuant to Section 3(e) of the
TRR Agreement.
For purposes of rendering this opinion, I have examined originals or
copies identified to my satisfaction of the following documents:
(a) the TRR Agreement, including the Exhibits and Schedules
thereto and the terms thereof incorporated by reference to the Amended and
Restated Credit Agreement dated as of October 10, 1995;
(b) the Fee Letter dated April 3, 1996; and
(c) the articles of association, articles of incorporation or
certificate of incorporation, as the case may be, and by-laws, each as amended
to the date hereof, of each of the Obligors.
The documents referred to in items (a) and (b) above are sometimes referred
to herein as the "Restated Credit Documents."
In addition, I have made such inquiries and investigations and examined
such corporate records of the Obligors as I have deemed necessary to render the
opinions set forth herein.
As used herein, the phrase "to my knowledge" refers to my actual
knowledge based on my review of the documents listed above and the information,
inquiries and investigations described herein and no others.
For purposes of this opinion, I have assumed (i) the due authorization,
execution and delivery of the Restated Credit Documents by each of the Lenders
and the Agent, as applicable; (ii) that each Lender and the Agent have the legal
power to act in the capacities in which they are to act under the Restated
Credit Documents; (iii) the conformity to the original documents of any
documents submitted to me as certified or photostatic copies, the authenticity
of such documents and the genuineness of all signatures on such documents; (iv)
that each of the Restated Credit Documents is the legal, valid and binding
obligation of each of the Lenders and the Agent, as applicable, enforceable
against each such party in accordance with its terms; and (v) that each of the
Lenders and the Agent has performed and will perform its obligations thereunder.
Based upon the foregoing, and subject to the qualifications,
limitations and assumptions hereinafter set forth, I am of the opinion that:
1. Each of the Guarantor and PCC is a corporation validly existing and
in good standing under the laws of the State of Delaware. PCSI is a corporation
validly existing and in good standing under the laws of the State of Utah. Each
of FDNB and PNB is a national banking association validly existing and in good
standing under the laws of the United States of America.
2. Each of the Obligors has all requisite corporate power and authority
to own and operate its properties, to conduct its business in the manner in
which it presently is conducted and to execute, deliver and perform its
obligations under each of the Restated Credit Documents to which it is a party.
3. Each of the Restated Credit Documents to which an Obligor is a party
has been duly authorized by all necessary corporate action on the part of such
Obligor.
4. Neither the execution and delivery by any Obligor of the Restated
Credit Documents to which it is a party nor the performance by such Obligor of
its obligations thereunder constitutes or will result in a breach of such
Obligor's charter or by-laws or, to my knowledge, any order of any court or
governmental authority having jurisdiction over such Obligor or constitutes a
violation of applicable law. Neither the execution and delivery by any Obligor
of the Restated Credit Documents to which it is a party nor the performance by
such Obligor of its obligations thereunder will conflict with, or result in any
material breach of, or constitute a default under, or result in the creation or
imposition of any lien upon any property or assets of such Obligor pursuant to,
or require any consent not obtained under, any indenture, mortgage, deed of
trust, agreement or other instrument to which such Obligor is a party or by
which it or any of its property or assets are bound or to which it is subject,
which conflict, breach or default, or lien created or imposed, or the failure to
obtain such consent, would have a material adverse effect on the financial
condition of such Obligor and its Subsidiaries taken as a whole or the ability
of such Obligor to perform its obligations under the Restated Credit Documents
to which it is a party.
5. Except as disclosed in the TRR Agreement or in any Schedule or
Exhibit thereto or any terms incorporated therein by reference, to my knowledge
there is pending or threatened no action, suit or proceeding or governmental
investigation, or any order, writ, injunction or decree, against any Obligor
before or by any court, arbitrator or governmental or administrative body that
challenges the validity or enforceability of any of the Restated Credit
Documents or the transactions contemplated thereby or that restrains, prevents
or imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, any such transaction or in which there
is a reasonable probability of an adverse decision against such Obligor and
which, if adversely determined, would reasonably be expected to have a material
adverse effect on the financial condition of such Obligor and its Subsidiaries
taken as a whole or the ability of such Obligor to perform its obligations under
the Credit Documents to which it is a party.
6. None of the Obligors is an "investment company" or a person directly
or indirectly controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. None of the Obligors is a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
7. Neither the making of any Loans pursuant to, nor application of the
proceeds thereof in accordance with, the Restated Credit Documents will violate
Regulation U or X promulgated by the Board of Governors of the Federal Reserve
System.
The foregoing opinions are subject to the following qualifications,
limitations and assumptions:
A. I render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the State of California, the General
Corporation Law of the State of Delaware, the Revised Business Corporation Act
of the State of Utah and the federal law of the United States of America. This
opinion is limited to the effect of the present state of such laws, as applied
to the facts on which I have relied (as set forth above), in existence on the
date hereof. I express no opinion as to the laws of any other time or
jurisdiction or the applicability of the laws of any particular jurisdiction. I
assume no obligation to revise or supplement this opinion in the event of future
changes in such laws or the interpretations thereof or such facts, and I assume
no responsibility to advise you of any such changes.
B. This opinion is delivered solely for your benefit in connection with
the TRR Agreement and may not be relied upon by any person other than the Agent
and the Lenders (including any Lender becoming a party to the New Credit
Agreement after the date hereof pursuant to the terms of the New Credit
Agreement) or by the Agent or the Lenders in any other context, nor may this
opinion be used, circulated, published, communicated or otherwise referred to or
made available to any other Person except that the Agent and the Lenders may
provide this opinion (i) to bank examiners and other regulatory authorities
should they so request or in connection with their normal examinations, (ii) to
the independent auditors and attorneys of the Agent and the Lenders, (iii)
pursuant to order or legal process of any court or governmental agency, (iv) in
connection with any legal action to which the Agent or any Lender is a party
arising out of the transactions contemplated by the TRR Agreement or (v) to any
permitted prospective transferee (including any prospective Participant) of the
Loans or Commitments. This opinion may not be quoted without my prior written
consent.
Very truly yours,
Mary Ellen Richey
General Counsel
A960990.112_/_info subject_1_
<PAGE>
May 14, 1996
(212) 351-4000 C 14073-00164
To: The Chase Manhattan Bank (National Association),
as Administrative Agent, and the Lenders party to the
TRR Agreement (as hereinafter defined)
Ladies and Gentlemen: We have acted as special counsel to The Chase Manhattan
Bank (National Association) as Agent and the Lenders (as hereinafter defined) in
connection with the Termination, Replacement and Restatement Agreement dated as
of May 14, 1996 (the "TRR Agreement") among (i) First Deposit National Bank, a
national banking association incorporated, organized and existing under the laws
of the United States of America ("FDNB"), Providian National Bank, a national
banking association incorporated, organized and existing under the laws of the
United States of America ("PNB"), Providian Credit Corporation, a corporation
organized and existing under the laws of the State of Delaware ("PCC"), and
Providian Credit Services, Inc., a corporation organized and existing under the
laws of the State of Utah ("PCSI"; together with FDNB, PNB and PCC, the
"Borrowers"), (ii) Providian Bancorp, a corporation organized existing under the
laws of the State of Delaware (the "Guarantor"; together with the Borrowers, the
"Obligors"), (iii) the lenders party thereto from time to time (the "Lenders")
and (iv) The Chase Manhattan Bank (National Association) as administrative agent
for Lenders (in such capacity, the "Agent"). This opinion is being rendered to
you pursuant to Section 3(e) of the TRR Agreement. All capitalized terms used
but not defined herein have the respective meanings given to such terms in the
New Credit Agreement (as defined in the TRR Agreement). In rendering this
opinion, we have examined an executed copy of each of the TRR Agreement and the
Existing Credit Agreement (as defined in the TRR Agreement). We have, with your
permission, assumed, without independent investigation or inquiry with respect
to any such matter, that: (a) each of the Obligors is a corporation, partnership
or other entity validly existing and in good standing under the laws of the
jurisdiction of its organization, with all requisite corporate or other power
and authority to execute, deliver and perform its obligations under the TRR
Agreement and to perform its obligations under the New Credit Agreement; the
execution and delivery of the TRR Agreement by each Obligor, and the performance
of the obligations of each Obligor thereunder and under the New Credit
Agreement, have been duly authorized by all necessary corporate action on the
part of each Obligor; and the TRR Agreement has been duly executed and delivered
by or on behalf of each Obligor or by a person or persons thereunto duly
authorized; (b) to the extent that the obligations of the Obligors may be
dependent upon such matters, each of the Agent and the Lenders has all requisite
corporate power and authority to execute, deliver and perform its respective
obligations under the TRR Agreement and to perform its obligations under the New
Credit Agreement; the execution and delivery of the TRR Agreement and
performance of the obligations thereunder and under the New Credit Agreement
have been duly authorized by all necessary corporate action on the part of the
Agent and the Lenders; the TRR Agreement has been duly executed and delivered by
or on behalf of each of the Agent and the Lenders; and each of the TRR Agreement
and the New Credit Agreement is a legal, valid and binding obligation of each of
the Agent and the Lenders, enforceable against each of them its accordance with
its terms; (c) the documents submitted to us as originals are authentic and the
documents submitted to us as certified or reproduction copies conform to the
originals; and (d) there are no agreements or understandings between or among
the Agent, the Lenders, the Obligors or third parties that would expand, modify
or otherwise affect the terms of the TRR Agreement or the New Credit Agreement
or the respective rights or obligations of the parties thereunder, and the TRR
Agreement and the New Credit Agreement correctly and completely set forth the
intent of all parties thereto. Based upon the foregoing and subject to the
qualifications, limitations and assumptions set forth below, we are of the
opinion that each of the TRR Agreement and the New Credit Agreement constitutes
the legal, valid and binding obligation of each Obligor, enforceable against
such Obligor in accordance with its terms. The foregoing opinion is subject to
the following qualifications, limitations and assumptions: A. We render no
opinion herein as to matters involving the laws of any jurisdiction other than
the State of New York and the United States of America. This opinion is limited
to the effect of the present state of the laws of the State of New York and of
the United States of America and the facts as they presently exist. We assume no
obligation to revise or supplement this opinion in the event of future changes
in such laws or the interpretations thereof or such facts. B. Our opinions are
subject to (i) the effect of bankruptcy, insolvency reorganization, moratorium,
arrangement or other similar laws affecting enforcement of creditors' rights
generally (including, without limitation, the effect of statutory or other laws
regarding fraudulent transfers or conveyances or preferential transfers); (ii)
the application of general principles of equity, whether considered in a case or
proceeding at law or in equity, including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or other equitable relief (whether sought
in a proceeding at law or in equity); and (iii) the qualification that
indemnification provisions in the New Credit Agreement may be unenforceable to
the extent that such indemnification relates to claims made under any federal or
state securities laws or is otherwise limited by public policy. C. We express no
opinion as to the legality, validity, binding effect or enforceability (whether
according to its terms or otherwise) of: (i) any provision of the New Credit
Agreement to the effect that rights or remedies are not exclusive, that every
right or remedy is cumulative and may be exercised in addition to any other
right or remedy, that the election of some particular remedy does not preclude
recourse to one or more other remedies or that failure to exercise or delay in
exercising rights or remedies will not operate as a waiver of any such right or
remedy; (ii) any waiver or any consent relating to the rights of the Obligors
under the New Credit Agreement or applicable law or duties owing to the Obligors
existing as a matter of law to the extent such waivers or consents are found by
a court to be against public policy or are ineffective pursuant to applicable
law; (iii) any waiver or consent contained in the New Credit Agreement relating
to such rights or duties that is broadly or vaguely stated or unknown future
rights; (iv) any provision of the New Credit Agreement requiring written
amendments or waivers of such documents insofar as it suggests that oral or
other modifications, amendments or waivers could not effectively be agreed upon
by the parties or that the doctrine of promissory estoppel might not apply; (v)
Section 10.02 of the New Credit Agreement (except for rights of setoff provided
by Section 151 of the Debtor and Creditor Law of the State of New York, as
interpreted by applicable judicial decisions); (vi) any provision in the New
Credit Agreement waiving the right to object to venue or with respect to the
jurisdiction of the United States District Court for the Southern District of
New York; and (vii) the effect of the laws of any jurisdiction in which any
Lender is located (other than New York) that limit the interest, fees or other
charges such Lender may impose. This opinion is rendered to the Agent and the
Lenders in connection with the TRR Agreement and the New Credit Agreement and
may not be relied upon by any person other than the Agent and the Lenders
(including any Lender becoming a party to the New Credit Agreement after the
date hereof pursuant to the terms of the New Credit Agreement) or by the Agent
or the Lenders in any other context, nor may any copies of this opinion be
provided to any other Person except that the Agent and the Lenders may provide
this opinion (i) to bank examiners and other regulatory authorities should they
so request or in connection with their normal examinations, (ii) to the
independent auditors and attorneys of the Agent and the Lenders, (iii) pursuant
to order or legal process of any court or governmental agency, (iv) in
connection with any legal action to which the Agent or any Lender is a party
arising out of the transactions contemplated by the New Credit Agreement or (v)
to any permitted prospective transferee of the Loans or Commitments. This
opinion may not be quoted without the prior written consent of this Firm.
Very truly yours,
GIBSON, DUNN & CRUTCHER LLP
NA961270.115/6+
<PAGE>
May 14, 1996
The Chase Manhattan Bank (National Association), as Administrative Agent, and
the Lenders party to the TRR Agreement (as hereinafter defined)
Re: Termination, Replacement and Restatement Agreement
Ladies and Gentlemen:
I have acted as in-house counsel for Providian Bancorp, Inc., a
Delaware corporation ("PBI"), First Deposit National Bank, a national banking
association ("FDNB"), Providian National Bank, a national banking association
("PNB"), Providian Credit Corporation, a Delaware corporation ("PCC"), and
Providian Credit Services, Inc., a Utah corporation ("PCSI"), in connection with
the Termination, Replacement and Restatement Agreement dated as of May 14, 1996
(the "TRR Agreement") among FDNB, PNB, PCC and PCSI, as borrowers (collectively,
the "Borrowers"), PBI, as guarantor (the "Guarantor" and, together with the
Borrowers, the "Obligors"), the lenders party thereto (the "Lenders") and The
Chase Manhattan Bank (National Association), as administrative agent for the
Lenders (in such capacity, the "Agent"). All capitalized terms used but not
defined herein have the respective meanings given to such terms in the New
Credit Agreement (as defined in the TRR Agreement).
This opinion is being furnished to you pursuant to Section 3(e) of the
TRR Agreement.
For purposes of rendering this opinion, I have examined originals or
copies identified to my satisfaction of the following documents:
(a) the TRR Agreement and the terms of the New Credit Agreement
incorporated by reference to the Amended and Restated Credit Agreement
dated as of October 10, 1995;
(b) the Fee Letter dated April 3, 1996; and
(c) the articles of association, articles of
incorporation or certificate of incorporation, as the
case may be, and by-laws, each as amended to the date
hereof, of each of the Obligors.
The documents referred to in items (a) and (b) above are sometimes referred
to herein as the "Restated Credit Documents."
In addition, I have made such inquiries and investigations and examined
such corporate records of the Obligors as I have deemed necessary to render the
opinions set forth herein.
As used herein, the phrase "to my knowledge" refers to my actual
knowledge based on my review of the documents listed above and the information,
inquiries and investigations described herein and no others.
For purposes of this opinion, I have assumed (i) the due authorization,
execution and delivery of the Restated Credit Documents by each of the Lenders
and the Agent, as applicable; (ii) that each Lender and the Agent have the legal
power to act in the capacities in which they are to act under the Restated
Credit Documents and the New Credit Agreement; (iii) the conformity to the
original documents of any documents submitted to me as certified or photostatic
copies, the authenticity of such documents and the genuineness of all signatures
on such documents; (iv) that each of the Restated Credit Documents and the New
Credit Agreement is the legal, valid and binding obligation of each of the
Lenders and the Agent, as applicable, enforceable against each such party in
accordance with its terms; and (v) that each of the Lenders and the Agent has
performed and will perform its obligations thereunder.
Based upon the foregoing, and subject to the qualifications,
limitations and assumptions hereinafter set forth, I am of the opinion that:
1. Each of the Guarantor and PCC is a corporation validly existing and
in good standing under the laws of the State of Delaware. PCSI is a corporation
validly existing and in good standing under the laws of the State of Utah. Each
of FDNB and PNB is a national banking association validly existing and in good
standing under the laws of the United States of America.
2. Each of the Obligors has all requisite corporate power and authority
to own and operate its properties, to conduct its business in the manner in
which it presently is conducted and to execute and deliver the Restated Credit
Documents and perform its obligations under each of the Restated Credit
Documents to which it is a party and the New Credit Agreement.
3. Each of the Restated Credit Documents to which an Obligor is a party
and the New Credit Agreement has been duly authorized by all necessary corporate
action on the part of such Obligor.
4. Neither the execution and delivery by any Obligor of the Restated
Credit Documents to which it is a party nor the performance by such Obligor of
its obligations thereunder or under the New Credit Agreement constitutes or will
result in a breach of such Obligor's charter or by-laws or, to my knowledge, any
order of any court or governmental authority having jurisdiction over such
Obligor or constitutes a violation of applicable law. Neither the execution and
delivery by any Obligor of the Restated Credit Documents to which it is a party
nor the performance by such Obligor of its obligations thereunder or under the
New Credit Agreement will conflict with, or result in any material breach of, or
constitute a default under, or result in the creation or imposition of any lien
upon any property or assets of such Obligor pursuant to, or require any consent
not obtained under, any indenture, mortgage, deed of trust, agreement or other
instrument to which such Obligor is a party or by which it or any of its
property or assets is bound or to which it is subject, which conflict, breach or
default, or lien created or imposed, or the failure to obtain such consent,
would have a material adverse effect on the financial condition of such Obligor
and its Subsidiaries taken as a whole or the ability of such Obligor to perform
its obligations under the Restated Credit Documents to which it is a party and
the New Credit Agreement.
5. Except as disclosed in the TRR Agreement or the New Credit Agreement
or in any Schedule or Exhibit thereto, to my knowledge there is pending or
threatened no action, suit or proceeding or governmental investigation, or any
order, writ, injunction or decree, against any Obligor before or by any court,
arbitrator or governmental or administrative body that challenges the validity
or enforceability of any of the Restated Credit Documents or the New Credit
Agreement or the transactions contemplated thereby or that restrains, prevents
or imposes material adverse conditions upon, or seeks to restrain, prevent or
impose material adverse conditions upon, any such transaction or in which there
is a reasonable probability of an adverse decision against such Obligor and
which, if adversely determined, would reasonably be expected to have a material
adverse effect on the financial condition of such Obligor and its Subsidiaries
taken as a whole or the ability of such Obligor to perform its obligations under
the Credit Documents to which it is a party and the New Credit Agreement.
6. None of the Obligors is an "investment company" or a Person directly
or indirectly controlled by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. None of the Obligors is a "holding
company", or an "affiliate" of a "holding company" or a "subsidiary company" of
a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
7. Neither the making of any Loans pursuant to, nor application of the
proceeds thereof in accordance with, the New Credit Agreement will violate
Regulation U or X promulgated by the Board of Governors of the Federal Reserve
System.
The foregoing opinions are subject to the following qualifications,
limitations and assumptions:
A. I render no opinion herein as to matters involving the laws of any
jurisdiction other than the laws of the State of California, the General
Corporation Law of the State of Delaware, the Revised Business Corporation Act
of the State of Utah and the federal law of the United States of America. This
opinion is limited to the effect of the present state of such laws, as applied
to the facts on which I have relied (as set forth above), in existence on the
date hereof. I express no opinion as to the laws of any other time or
jurisdiction or the applicability of the laws of any particular jurisdiction. I
assume no obligation to revise or supplement this opinion in the event of future
changes in such laws or the interpretations thereof or such facts, and I assume
no responsibility to advise you of any such changes.
B. This opinion is delivered solely for your benefit in connection with the TRR
Agreement and the New Credit Agreement and may not be relied upon by any Person
other than the Agent and the Lenders (including any Lender becoming a party to
the New Credit Agreement after the date hereof pursuant to the terms of the New
Credit Agreement) or by the Agent or the Lenders in any other context, nor may
this opinion be used, circulated, published, communicated or otherwise referred
to or made available to any other Person except that the Agent and the Lenders
may provide this opinion (i) to bank examiners and other regulatory authorities
should they so request or in connection with their normal examinations, (ii) to
the independent auditors and attorneys of the Agent and the Lenders, (iii)
pursuant to order or legal process of any court or governmental agency, (iv) in
connection with any legal action to which the Agent or any Lender is a party
arising out of the transactions contemplated by the TRR Agreement or the New
Credit Agreement or (v) to any permitted prospective transferee (including any
prospective Participant) of the Loans or Commitments. This opinion may not be
quoted without my prior written consent.
Very truly yours,
Mary Ellen Richey
General Counsel
<PAGE>
LENDERS
CONTINUING LENDERS:
Commitment ABN AMRO BANK N.V.
$30,000,000
By
Name:
Title:
By
Name:
Title:
Lending Office for Base Rate Loans:
ABN AMRO Bank N.V.
One PPG Place, Suite 2950
Pittsburgh, PA 15222-5400
Lending Office for Loans other than Base
Rate Loans:
ABN AMRO Bank N.V.
One PPG Place, Suite 2950
Pittsburgh, PA 15222-5400
Address for Notices:
ABN AMRO Bank N.V.
One PPG Place, Suite 2950
Pittsburgh, PA 15222-5400
Attention: James M. Janovsky
Telex No.: 6734601 ABNAMRO UT
Telecopier No.: 412-566-2266
Telephone No.: 412-566-2269
<PAGE>
Commitment BANK OF AMERICA ILLINOIS
$70,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Bank of America Illinois
1850 Gaterway Blvd., 4th floor
Concord, CA 94520
Lending Office for Loans other than Base
Rate Loans:
Bank of America Illinois
1850 Gaterway Blvd., 4th floor
Concord, CA 94520
Address for Notices:
Bank of America Illinois
1850 Gaterway Blvd., 4th floor
Concord, CA 94520
Attention: Marianne Runyen
Telecopier No.: 510-675-8218
Telephone No.: 510-675-7719
<PAGE>
Commitment THE FIRST NATIONAL BANK OF BOSTON
$25,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
The First National Bank of Boston
100 Rustcraft Rd. Mail Stop 74-02-05
Dedham, Massachusetts 02026
Attention: Mary Kucharski
Lending Office for Loans other than Base
Rate Loans:
The First National Bank of Boston
100 Rustcraft Rd. Mail Stop 74-02-05
Dedham, Massachusetts 02026
Address for Competitive Bid Notices:
The First National Bank of Boston
100 Federal Street Mail Stop 01-10-08
Boston, Massachusetts 02110
Attention: John B. Sinclair
Telecopier No.: 617-434-1096
Telephone No.: 617-434-5045
<PAGE>
Commitment THE BANK OF NEW YORK
$70,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
The Bank of New York
1 Wall Street, 22nd Floor
New York, New York 10286
Lending Office for Loans other than Base
Rate Loans:
The Bank of New York
1 Wall Street, 22nd Floor
New York, New York 10286
Address for Notices:
The Bank of New York
1 Wall Street, 22nd Floor
New York, New York 10286
and
10990 Wilshire Boulevard
Suite 1125
Los Angeles, California 90024
Attention: Lorna Alleyne/Elizabeth T. Ying
Telecopier No.: 212-635-6399
310-996-8667
Telephone No.: 212-635-6737
310-996-8661
<PAGE>
Commitment BANQUE NATIONAL DE PARIS
$25,000,000
By
Name:
Title:
By
Name:
Title:
Lending Office for Base Rate Loans:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Lending Office for Loans other than Base
Rate Loans:
Banque Nationale de Paris
180 Montgomery Street
San Francisco, CA 94104
Address for Notices:
Banque National de Paris
180 Montgomery Street
San Francisco, CA 94104
Attention: William J. La Herran
Telex No.: RCA278900 (BNPSUR)
Telecopier No.: 415-296-8954
Telephone No.: 415-956-0707
<PAGE>
Commitment THE CHASE MANHATTAN BANK
$70,000,000 (NATIONAL ASSOCIATION)
By
Name: Dennis L. Cogan
Title: Vice President
Lending Office for all Loans:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Address for Notices:
The Chase Manhattan Bank
(National Association)
1 Chase Manhattan Plaza
New York, New York 10081
Attention: Monique Parker
Telecopier No.: 212-552-1368
Telephone No.: 212-552-5920
<PAGE>
Commitment CITICORP USA, INC.
$60,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Lending Office for Loans other than Base
Rate Loans:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Address for Notices:
Citicorp USA, Inc.
399 Park Avenue
New York, New York 10043
Attention: James Lee/Peter C. Bickford
Telecopier No.: 212-371-6309
Telephone No.: 212-559-8146/4412
<PAGE>
Commitment COMMERZBANK AG, LOS ANGELES
$70,000,000 BRANCH
By
Name:
Title:
By
Name: Werner Schmidbauer
Title: Vice President
Lending Office for Base Rate Loans:
Commerzbank AG, Los Angeles Branch
660 So. Figueroa, Suite 1450
Los Angeles, CA 90017
Lending Office for Loans other than Base
Rate Loans:
Commerzbank AG, Los Angeles Branch
660 So. Figueroa, Suite 1450
Los Angeles, CA 90017
Address for Notices:
Commerzbank AG, Los Angeles Branch
660 So. Figueroa, Suite 1450
Los Angeles, CA 90017
Attention: Werner Schmidbauer/Edna Youna
Telex No.: 678338 CBKLA UI
Telecopier No.: 213-623-0039
Telephone No.: 213-623-8223/5419
<PAGE>
Commitment CAISSE NATIONALE DE
$30,000,000 CREDIT AGRICOLE
By
Name:
Title:
Lending Office for Base Rate Loans:
Caisse Nationale de Credit Agricole
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Lending Office for Loans other than Base
Rate Loans:
Caisse Nationale de Credit Agricole
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Address for Notices:
Caisse Nationale de Credit Agricole
55 East Monroe Street, Suite 4700
Chicago, Illinois 60603
Attention: Kathleen Martens
Telex No.: 190063 AGRICOUT
Telecopier No.: 312-372-4421
Telephone No.: 312-917-7444/7420
<PAGE>
Commitment CREDIT LYONNAIS , SAN FRANCISCO
$70,000,000 BRANCH AND/OR CREDIT LYONNAIS,
CAYMAN ISLAND BRANCH
By
Name:
Title:
Lending Office for Base Rate Loans:
Credit Lyonnais, San Francisco Branch
c/o 3 Embarcadero Center, Suite 1640
San Francisco, California 94111
Lending Office for Loans other than Base
Rate Loans:
Credit Lyonnais, San Francisco Branch
3 Embarcadero Center, Suite 1640
San Francisco, California 94111
Address for Notices:
Credit Lyonnais, San Francisco Branch
3 Embarcadero Center, Suite 1640
San Francisco, California 94111
Attention: William J. Fischer/
Christiane Balouny
Telecopier No.: 415-956-7008
Telephone No.: 415-956-7002
<PAGE>
Commitment CREDIT SUISSE
$70,000,000
By
Name:
Title:
By
Name:
Title:
Lending Office for Base Rate Loans:
Credit Suisse
633 West Fifth Street, 64th Floor
Los Angeles, CA 90071
Lending Office for Loans other than Base
Rate Loans:
Credit Suisse
633 West Fifth Street, 64th Floor
Los Angeles, CA 90071
Address for Notices:
Credit Suisse
633 Fifth Street, 64th Floor
Los Angeles, CA 90071
Attention: Rita Asa
Telex No.: 67227 (CREDSUIS)
Telecopier No.: 213-955-8245
Telephone No.: 213-955-8284
<PAGE>
Commitment THE DAI-ICHI KANGYO BANK, LTD.,
$20,000,000 CHICAGO BRANCH
By
Name:
Title:
Lending Office for Base Rate Loans:
The Dai-Ichi Kangyo Bank, Ltd., Chicago
Branch
10 South Wacker Drive, 26th floor
Chicago, Il 60606
Lending Office for Loans other than Base Rate
Loans:
The Dai-Ichi Kangyo Bank, Ltd., Chicago
Branch
10 South Wacker Drive, 26th floor
Chicago, Il 60606
Address for Notices:
The Dai-Ichi Kangyo Bank, Ltd., Chicago
Branch
10 South Wacker Drive, 26th floor
Chicago, Il 60606
Attention: John Sneed,
Kathy Oczko: Corporate Banking
Telecopier No.: 312-876-2011
Telephone No.: 312-715-6362
<PAGE>
Commitment DEUTSCHE BANK AG,
$70,000,000 NEW YORK AND/OR CAYMAN ISLANDS
BRANCHES
By
Name:
Title:
By
Name:
Title:
Lending Office for Base Rate Loans:
Deutsche Bank AG,
New York Branch
31 West 52nd Street
New York, New York 10019
Lending Office for Loans other than Base
Rate Loans:
Deutsche Bank AG
Cayman Islands Branch
31 West 52nd Street
New York, New York 10019
Address for Notices:
Deutsche Bank AG
New York and/or Cayman Islands Branches
31 West 52nd Street
New York, New York 10019
Attention: CFS, Cheryl Mandelbaum
Telex No.: 429166/DEUT BK NY
Telecopier No.: 212-474-7880
Telephone No.: 212-474-8426
<PAGE>
Commitment THE FUJI BANK, LIMITED,
$55,000,000 SAN FRANCISCO AGENCY
By
Name:
Title:
Lending Office for Base Rate Loans:
The Fuji Bank, Limited,
San Francisco Agency
601 California, Suite 500
San Francisco, CA 94108
Lending Office for Loans other than Base
Rate Loans:
The Fuji Bank, Limited,
San Francisco Agency
601 California, Suite 500
San Francisco, CA 94108
Address for Notices:
The Fuji Bank, Limited,
San Francisco Agency
601 California, Suite 500
San Francisco, CA 94108
Attention: Suzanne Stitt
Telex No.: 176087 FUJIBK SFO
Telecopier No.: 415-362-4613
Telephone No.: 415-296-5443
<PAGE>
Commitment THE INDUSTRIAL BANK OF JAPAN,
$50,000,000 LIMITED, LOS ANGELES AGENCY
By
Name:
Title:
Lending Office for Base Rate Loans:
The Industrial Bank of Japan, Limited,
Los Angeles Agency
350 South Grand Avenue, Suite 1500
Los Angeles, CA 90071
Lending Office for Loans other than Base
Rate Loans:
The Industrial Bank of Japan, Limited,
Los Angeles Agency
350 South Grand Avenue, Suite 1500
Los Angeles, CA 90071
Address for Notices:
The Industrial Bank of Japan, Limited,
Los Angeles Agency
350 South Grand Avenue, Suite 1500
Los Angeles, CA 90071
Attention: Charles Lilygren
Telex No.: 6831123 KOGIN LSA
Telecopier No.: 213-488-9840
Telephone No.: 213-893-6444
<PAGE>
Commitment NATIONSBANK OF TEXAS, N.A.
$70,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202
Lending Office for Loans other than Base
Rate Loans:
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202
Address for Notices:
NationsBank of Texas, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202
Attention: Greg Venker/Traci Vinson
Telecopier No.: 214-508-0944
Telephone No.: 214-508-0584
<PAGE>
Commitment FLEET BANK, N.A.
$25,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Fleet Bank, N.A.
175 Water Street - 28th Floor
New York, New York 10038
Lending Office for Loans other than Base
Rate Loans:
Fleet Bank, N.A.
175 Water Street - 28th Floor
New York, New York 10038
Address for Notices:
Fleet Bank, N.A.
175 Water Street - 28th Floor
New York, New York 10038
Attention: Stephanie Wilson-Flaherty
Telex No.: 12-7933
Telecopier No.: 212-602-3323
Telephone No.: 212-602-1931
<PAGE>
Commitment PNC BANK, NATIONAL ASSOCIATION
$55,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
PNC Bank, N.A.
55 S. Lake Avenue, Suite 650
Pasadena, California 91101
Lending Office for Loans other than Base
Rate Loans:
PNC Bank, N.A.
55 S. Lake Avenue, Suite 650
Pasadena, California 91101
Address for Notices:
PNC Bank, N.A.
55 S. Lake Avenue, Suite 650
Pasadena, California 91101
Attention: Jeffry P. White
Pamela J. Fox
Telecopier No.: 818-568-0653
Telephone No.: 818-568-9326
<PAGE>
Commitment SANWA BANK, LIMITED
$20,000,000 ATLANTA AGENCY
By
Name:
Title:
Lending Office for Base Rate Loans:
The Sanwa Bank, Limited
Atlanta Agency
133 Peachtree Street NE, Suite 4950
Atlanta, Georgia 30303
Lending Office for Loans other than Base
Rate Loans:
The Sanwa Bank, Limited
Atlanta Agency
133 Peachtree Street NE, Suite 4950
Atlanta, Georgia 30303
Address for Notices:
The Sanwa Bank, Limited
Atlanta Agency
133 Peachtree Street NE, Suite 4950
Atlanta, Georgia 30303
Attention: Raymond Hamilton
Kristy Mayo
Telex No.: 4611830 SANWALT
Telecopier No.: 404-589-1629
Telephone No.: 404-586-8805
<PAGE>
Commitment FLEET NATIONAL BANK
$15,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Lending Office for Loans other than Base
Rate Loans:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Address for Notices:
Fleet National Bank
777 Main Street
Hartford, Connecticut 06115
Attention: David Albanesi/
Robert Meditz
Insurance Industry Dept.
Telecopier No.: 860-986-1094
Telephone No.: 860-986-5600
<PAGE>
ADDITIONAL LENDERS
Commitment BANK OF NOVA SCOTIA
$20,000,000
By
Name:
Title:
Lending Office for Base Rate and LIBOR
Loans:
Bank of Nova Scotia
600 Peachtree St., NE
Suite 2700
Atlanta, GA 30308
Lending Office for Competitive Bid Loans:
Bank of Nova Scotia
1 Liberty Plaza
New York, NY 10006
Address for Notices:
Bank of Nova Scotia
600 Peachtree St., NE
Suite 2700
Atlanta, GA 30308
and
Chicago Representative Office
Suite 3700
181 W. Madison St.
Chicago, IL 60602
Attention: J.T. Legista
Barbara Siatczynski
Telex: ITT 241791
Telecopier No.: 312-201-4108
404-888-8998
Telephone No.: 312-201-4113
404-877-1562
<PAGE>
Commitment BANKERS TRUST COMPANY
$35,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Bankers Trust Company
130 Liberty St. - 14th Fl.
New York, N.Y. 10017
Lending Office for Loans other than Base
Rate Loans:
Bankers Trust Company
130 Liberty St. - 14th Fl.
New York, N.Y. 10017
Address for Notices:
Bankers Trust Company
130 Liberty St. - 14th Fl.
New York, N.Y. 10017
Attention: James Morgan/
Cindy Berge O'Keefe
Telecopier No.: 212-250-7351
Telephone No.: 212-250-7466
<PAGE>
Commitment THE FIRST NATIONAL BANK OF
$35,000,000 CHICAGO
By
Name:
Title:
Lending Office for Base Rate Loans:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0085, 1-16
Chicago, IL 60670-00085
Lending Office for Loans other than Base Rate
Loans:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0085, 1-16
Chicago, IL 60670-00085
Address for Notices:
The First National Bank of Chicago
One First National Plaza
Mail Suite 0085, 1-16
Chicago, IL 60670-00085
Attention: Paul T. Schultz/Lillian A. Arroyo
Telecopier No.: 312-732-4033
Telephone No.: 312-732-7074/2279
<PAGE>
Commitment MELLON BANK, N.A.
$35,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
23rd Floor/Loan Administration
Pittsburgh, PA 15259
Lending Office for Loans other than Base
Rate Loans:
Mellon Bank, N.A.
Three Mellon Bank Center
23rd Floor/Loan Administration
Pittsburgh, PA 15259
Address for Notices:
Mellon Bank, N.A.
Three Mellon Bank Center
23rd Floor/Loan Administration
Pittsburgh, PA 15259
and:
300 South Grand Ave., Suite 3800
Los Angeles, CA 90071
Attention: Sean C. Gannon/Damon Carr
Telecopier No.: 412-236-2028
Telephone No.: 213-680-7280
412-234-1872
<PAGE>
Commitment ROYAL BANK OF CANADA
$20,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
Royal Bank of Canada
Financial Square, 23rd Floor
New York, NY 10005-3531
Lending Office for Loans other than Base
Rate Loans:
Royal Bank of Canada
Financial Square, 23rd Floor
New York, NY 10005-3531
Address for Notices:
Royal Bank of Canada
Financial Square, 23rd Floor
New York, NY 10005-3531
Attention: Manager, Credit Administration
Telex No.: MCI-62519 (Royal Bank)
Telecopier No.: 212-428-2372
Telephone No.: 212-428-6311
and:
Royal Bank of Canada
Financial Square, 24th Floor
New York, NY 10005-3531
Attention: Gary R. Overton, Senior Manager
Telecopier No.: 212-809-7468
Telephone No.: 212-428-6277
<PAGE>
Commitment THE SAKURA BANK, LIMITED
$20,000,000
By
Name:
Title:
Lending Office for Base Rate Loans:
The Sakura Bank, Limited
277 Park Ave., 45th Floor
New York, NY 10172
Lending Office for Loans other than Base
Rate Loans:
The Sakura Bank, Limited
277 Park Ave., 45th Floor
New York, NY 10172
Address for Notices:
The Sakura Bank, Limited
277 Park Ave., 45th Floor
New York, NY 10172
Attention: Rebecca Sell
Telecopier No.: 212-888-7651
Telephone No.: 212-756-6817
<PAGE>
Commitment SWISS BANK CORPORATION
$20,000,000 NEW YORK BRANCH
By
Name:
Title:
Lending Office for Base Rate Loans:
Swiss Bank Corporation
New York Branch
P.O. Box 395
Church St. Station
New York, NY 10008
Lending Office for Loans other than Base
Rate Loans:
Swiss Bank Corporation
New York Branch
P.O. Box 395
Church St. Station
New York, NY 10008
Address for Notices:
Swiss Bank Corporation
New York Branch
P.O. Box 395
Church St. Station
New York, NY 10008
Attention: Dominick Schiavo
Telecopier No.: 212-574-3888
Telephone No.: 212-574-3072
<PAGE>
Commitment MORGAN GUARANTY TRUST COMPANY
$35,000,000 OF NEW YORK
By
Name:
Title:
Lending Office for Base Rate Loans:
Morgan Guaranty Trust Company
of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Lending Office for Loans other than Base
Rate Loans:
Morgan Guaranty Trust Company
of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Address for Notices:
Morgan Guaranty Trust Company
of New York
c/o J.P. Morgan Services Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attention: Robert S. Kearns
Telex No.: 177425 (MEDEL UT)
Telecopier No.: 302-634-1092
Telephone No.: 302-634-4203
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PROVIDIAN CORPORATION AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<DEBT-HELD-FOR-SALE> 10,704 <F1>
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 5,552 <F2>
<REAL-ESTATE> 71 <F3>
<TOTAL-INVEST> 20,577
<CASH> 830
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 1,534
<TOTAL-ASSETS> 26,824 <F4>
<POLICY-LOSSES> 9,706 <F5>
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 6,702
<NOTES-PAYABLE> 796
0
100 <F6>
<COMMON> 115
<OTHER-SE> 2,666 <F7>
<TOTAL-LIABILITY-AND-EQUITY> 26,824 <F8>
606
<INVESTMENT-INCOME> 936
<INVESTMENT-GAINS> (1)
<OTHER-INCOME> 222 <F9>
<BENEFITS> 863 <F10>
<UNDERWRITING-AMORTIZATION> 149 <F11>
<UNDERWRITING-OTHER> 399 <F12>
<INCOME-PRETAX> 293
<INCOME-TAX> 88
<INCOME-CONTINUING> 202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
<FN>
<F1>Includes Equity securities of $467.
<F2>Includes Commercial and Residential mortgage loans.
<F3>Included in Other investments in the Consolidated Statements of Financial
Condition.
<F4>Includes Consumer Loans of $3,180.
<F5>Includes Benefit reserves and other policy liabilities.
<F6>Consists of Cumulative Monthly Income Preferred Stock issued by subsidiary.
<F7>Includes Additional paid-in capital, Net unrealized investment gain,
Retained earnings, Common stock held in treasury and Unearned restricted stock.
<F8>Includes Savings Deposits of $2,303.
<F9>Includes Consumer loan servicing fees of $121.
<F10>Includes Benefits and claims and Increase in benefit and contract reserves.
<F11>Includes Amortization of deferred policy and loan acquistion costs, value
of insurance in force purchased and goodwill.
<F12>Includes Commissions, net and General, administrative and other expenses,
net.
</FN>
