<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1996
REGISTRATION NO. 33-99462
POST-EFFECTIVE AMENDMENT
NO. 1 TO REGISTRATION
STATEMENT NO. 33-84844
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
FIRST DEPOSIT MASTER TRUST
(In which the Investor Certificates evidence undivided interests)
FIRST DEPOSIT NATIONAL BANK PROVIDIAN NATIONAL BANK
(Originators of the Trust described herein)
(Exact name of registrants as specified in their charters)
<TABLE>
<S> <C> <C> <C>
UNITED STATES 02-0118519 UNITED STATES 02-0443459
(State or other (IRS employer (State or other (IRS employer
jurisdiction of organization) identification number) jurisdiction of organization) identification number)
295 MAIN STREET 53 REGIONAL DRIVE
TILTON, NEW HAMPSHIRE 03276 CONCORD, NEW HAMPSHIRE 03301
(603) 286-4348 (603) 225-7407
</TABLE>
(Address, including zip code, and telephone number, including
area code, of each registrant's principal executive offices)
<TABLE>
<S> <C> <C>
MARY ELLEN RICHEY, ESQ.
PROVIDIAN BANCORP, INC.
(PRIOR TO JUNE 3, 1996) (ON OR AFTER JUNE 3, 1996)
88 KEARNY STREET 201 MISSION STREET
SAN FRANCISCO, CALIFORNIA SAN FRANCISCO, CA 94105
94108 (415) 543-0404
(415) 398-2893
</TABLE>
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
Gregory M. Shaw, Esq. Edward M. DeSear, Esq.
Cravath, Swaine & Moore Orrick, Herrington & Sutcliffe
Worldwide Plaza 666 Fifth Avenue
825 Eighth Avenue New York, New York 10103
New York, New York 10019
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE ON OR AFTER THE EFFECTIVE DATE OF THIS REGISTRATION
STATEMENT.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
OFFERING PRICE AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO PER OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED BE REGISTERED CERTIFICATE (1) PRICE (1) FEE (2)
Asset Backed Certificates................... $1,000,000,000 100% $1,000,000,000 $344,827.59
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) Previously paid. A filing fee of $65,800 was paid with respect to the
$329,000,000 remaining amount of certificates referred to below.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
IN ACCORDANCE WITH RULE 429 OF THE GENERAL RULES AND REGULATIONS UNDER THE
SECURITIES ACT OF 1933, THE PROSPECTUS INCLUDED HEREIN IS A COMBINED PROSPECTUS
WHICH ALSO RELATES TO $329,000,000 OF UNISSUED ASSET BACKED CERTIFICATES UNDER
THE REGISTRANT'S REGISTRATION STATEMENT ON FORM S-3 NO. 33-84844 AND THIS
REGISTRATION STATEMENT CONSTITUTES POST-EFFECTIVE AMENDMENT NO. 1 TO SUCH
REGISTRATION STATEMENT.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
P R O S P E C T U S
First Deposit Master Trust
Asset Backed Certificates
First Deposit National Bank
Seller and Servicer
Providian National Bank
Seller
-----------
First Deposit National Bank ("FDNB") and Providian National Bank ("PNB";
together with FDNB, the "Banks"), may sell from time to time one or more series
(each a "Series") of asset backed certificates (the "Certificates") evidencing
undivided interests in certain assets of First Deposit Master Trust (the
"Trust"). The Trust was formed pursuant to a Pooling and Servicing Agreement
(the "Pooling Agreement") among FDNB, as seller and servicer, PNB, as seller,
and Bankers Trust Company, as trustee (the "Trustee"). The property of the Trust
includes receivables (the "Receivables") generated from time to time in a
portfolio of consumer revolving credit card accounts and other consumer
revolving credit accounts (the "Accounts"), collections thereon and certain
other property, as more fully described herein and, with respect to any Series,
in an accompanying prospectus supplement (a "Prospectus Supplement") relating to
such Series.
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and described in the related
Prospectus Supplement. Each Series will consist of one or more classes of
Certificates (each a "Class"). Each Certificate will represent an undivided
interest in the Trust and the interest of the Certificateholders of each Class
or Series will include the right to receive a varying percentage of each month's
collections with respect to the Receivables at the times, in the manner and to
the extent described herein and, with respect to any Series offered hereby, in
the related Prospectus Supplement. Interest and principal payments with respect
to each Series offered hereby will be made as specified in the related
Prospectus Supplement. One or more Classes of a Series offered hereby may be
entitled to the benefits of a cash collateral account, letter of credit, surety
bond, insurance policy or other form of enhancement as specified in the
Prospectus Supplement relating to such Series. In addition, any Series offered
hereby may include one or more Classes which are subordinated in right and
priority to payment of principal of, and/or interest on, one or more other
Classes of such Series or another Series, in each case to the extent described
in the related Prospectus Supplement.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of, the
holders of the Certificates of any previously issued Series.
Potential investors should consider, among other things, the information set
forth in "Risk Factors" commencing on page 14 herein and in the related
Prospectus Supplement.
-------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF EITHER BANK OR ANY AFFILIATE OF
EITHER BANK. NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
--------------
Certificates may be sold by the Banks directly to purchasers, through agents
designated from time to time, through underwriting syndicates led by one or more
managing underwriters or through one or more underwriters acting alone. If
underwriters or agents are involved in the offering of the Certificates of any
Series offered hereby, the name of the managing underwriter or underwriters or
agents will be set forth in the related Prospectus Supplement. If an
underwriter, agent or dealer is involved in the offering of the Certificates of
any Series offered hereby, the underwriter's discount, agent's commission or
dealer's purchase price will be set forth in, or may be calculated from, the
related Prospectus Supplement, and the net proceeds to the Banks from such
offering will be the public offering price of such Certificates less such
discount in the case of an underwriter, the purchase price of such Certificates
less such commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other expenses
of the Banks associated with the issuance and distribution of such Certificates.
See "Plan of Distribution".
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES
OF ANY SERIES UNLESS ACCOMPANIED BY THE RELATED PROSPECTUS SUPPLEMENT.
THE DATE OF THIS PROSPECTUS IS , 199 .
<PAGE>
AVAILABLE INFORMATION
The Banks, as originators of the Trust, have filed a Registration Statement
under the Securities Act of 1933, as amended (the "Act"), with the Securities
and Exchange Commission (the "Commission") on behalf of the Trust with respect
to the Certificates offered hereby. This Prospectus, which forms a part of the
Registration Statement, omits certain information contained in such Registration
Statement pursuant to the rules and regulations of the Commission. For further
information, reference is made to the Registration Statement (including any
amendments thereof and exhibits thereto) and any reports and other documents
incorporated herein by reference as described below under "Incorporation of
Certain Documents by Reference", which are available for inspection without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New
York 10048; and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates.
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, Monthly Reports, which
contain unaudited information concerning the Trust and are prepared by the
Servicer, will be sent on behalf of the Trust to Cede & Co. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the
Certificates offered hereby, pursuant to the Pooling Agreement. See "Description
of the Certificates-- Reports" and "The Pooling Agreement Generally--Book-Entry
Registration" and "--Evidence as to Compliance". Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Pooling Agreement will not require the sending of,
and the Banks do not intend to send, any of their financial reports to holders
of interests in Certificates (the "Certificateholders") offered hereby. The
Servicer will file with the Commission such periodic reports with respect to the
Trust as are required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the Commission thereunder.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All reports and other documents filed by the Servicer, on behalf of the
Trust, pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be part hereof. The following documents
filed with the Commission by the Servicer, on behalf of the Trust, are
incorporated in this Prospectus by reference: the Trust's Annual Report on Form
10-K for the year ended December 31, 1995 and the Current Reports on Form 8-K
filed since December 31, 1995. Any statement contained herein or in a document
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained in any other subsequently filed document which also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any of
or all the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be directed to First
Deposit National Bank, in care of Providian Bancorp, Inc., 88 Kearny Street,
Suite 1900, San Francisco, CA 94108, attention: Senior Financial Officer.
Telephone requests for such copies should be directed to the Servicer (in care
of Providian Bancorp, Inc., attention: Senior Financial Officer) at (415)
398-2893. Providian Bancorp, Inc. expects to move its offices on or about June
3, 1996 and any requests for such copies after this date should be directed to
the new offices of Providian Bancorp, Inc. at 201 Mission Street, San Francisco,
CA 94105 (tel: (415) 543-0404).
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Glossary for the
location herein of the definitions of certain capitalized terms used herein.
Unless the context requires otherwise, capitalized terms used in this Prospectus
and in any accompanying Prospectus Supplement refer only to the particular
Series being offered by such Prospectus Supplement.
<TABLE>
<S> <C>
Trust........................... First Deposit Master Trust (the "Trust"). The Trust, as a
master trust, has issued other Series and is expected to
issue additional Series from time to time. The assets of
the Trust (the "Trust Assets") include a portfolio of
receivables (the "Receivables") arising under the
Accounts included in the Trust from time to time, funds
collected or to be collected from accountholders in
respect of the Receivables, the right to receive certain
Interchange attributable to accountholder charges for
merchandise and services in certain of the Accounts,
certain amounts recovered with respect to Accounts in
which the Receivables have been charged-off as
uncollectible, monies on deposit in certain accounts of
the Trust, any Participations included in the Trust,
funds collected or to be collected with respect to such
Participations and any Series Enhancement with respect to
a particular Series or Class. The term "Series
Enhancement" means, with respect to any Series or Class
of Certificates, any Credit Enhancement, guaranteed rate
agreement, maturity liquidity facility, tax protection
agreement, interest rate cap agreement, interest rate
swap agreement or other similar arrangement for the
benefit of Certificateholders of such Series or Class.
The Trust Assets are expected to change over the life of
the Trust as receivables in revolving credit card
accounts and other revolving credit accounts and related
assets are included in the Trust and as receivables in
accounts subject to the Trust are charged-off or removed.
See "The Trust" and "Description of the
Certificates--Addition of Trust Assets", "--Removal of
Accounts" and "--New Issuances".
Banks........................... First Deposit National Bank ("FDNB") and Providian
National Bank (formerly known as First Deposit National
Credit Card Bank) ("PNB"; together with FDNB, the
"Banks"), each a national banking association and an
indirect wholly-owned subsidiary of Providian Corporation
(formerly known as Capital Holding Corporation), are the
initial sellers of the Receivables and originators of the
Trust. Subject to certain conditions described herein
under "The Pooling Agreement Generally--The Banks'
Certificate; Additional Sellers", the Banks may designate
one or more affiliates of the Banks to sell Receivables
or Participations to the Trust from time to time.
Additional Sellers will generally have the same rights
and obligations as those of the Banks described herein.
Trustee......................... Bankers Trust Company (the "Trustee").
The Accounts.................... The Accounts consist of the Initial Accounts and any
Additional Accounts but will not include any Removed
Accounts. The Banks have conveyed to the Trust all
Receivables existing on a specified date prior to the
issuance of the first Series (the "Trust Cut-Off Date")
in certain consumer revolving credit card accounts and
other consumer revolving credit accounts (the "Initial
Accounts") and all Receivables arising in
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
the Initial Accounts from time to time thereafter until
the termination of the Trust. Since the Trust Cut-Off
Date, the Banks have conveyed to the Trust Receivables in
certain Additional Accounts in accordance with the
provisions of the Pooling Agreement. Pursuant to the
Pooling Agreement, the Banks expect (subject to certain
limitations and conditions), and in some circumstances
will be obligated, to designate Additional Accounts the
Receivables in which will be included in the Trust or, in
lieu thereof or in addition thereto, to include
Participations in the Trust. The Banks will convey to the
Trust all Receivables in Additional Accounts, whether
such Receivables are then existing or thereafter created.
The addition to the Trust of Receivables in Additional
Accounts (other than Automatic Additional Accounts) or
Participations will be subject to certain conditions,
including, among others, that (a) such addition will not
result in a Ratings Effect and (b) the Banks shall have
delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer to the
effect that, in the reasonable belief of the Banks, such
addition will not, based on the facts known to such
officer at the time of such certification, cause a Pay
Out Event to occur with respect to any Series. See
"Description of the Certificates--Addition of Trust
Assets".
Pursuant to the Pooling Agreement, each Bank will have the
right (subject to certain limitations and conditions) to
remove the Receivables in certain Accounts owned by it
from the Trust ("Removed Accounts"). See "Description of
the Certificates--Removal of Accounts".
The Receivables................. The Receivables consist of all amounts charged by
accountholders for merchandise and services and cash
advances ("Principal Receivables") and all related
periodic finance charges, cash advance fees, late charges
and any other fees and charges billed on the Accounts and
certain Interchange attributable to accountholder charges
for goods and services in certain of the Accounts
("Finance Charge Receivables"). The amount of Receivables
will fluctuate from day to day as new Receivables are
generated or added to the Trust and as existing
Receivables are collected, charged-off as uncollectible
or otherwise adjusted.
The Certificates................ The Certificates will be issued in Series, each of which
will consist of one or more Classes. The specific terms of
a Series or Class will be established as described herein
under "Description of the Certificates--New Issuances".
However, while the specific terms of any Series or Class
offered hereby will be described in the related
Prospectus Supplement, the terms of such Series or Class
will not be subject to prior review by, or consent of,
the holders of the Certificates of any previously issued
Series.
Unless otherwise specified in the related Prospectus
Supplement, the Certificates of a Series offered hereby
will be available for purchase in minimum denominations
of $1,000, and will only be available in book-entry form
except in certain limited circumstances as described
herein under "The Pooling Agreement Gener-
ally--Definitive Certificates". A portion of the Trust
Assets will be allocated among the Certificateholders of
a particular Series (the
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
"Certificateholders' Interest"), the Certificateholders
of other Series and the interest of the Banks and their
permitted transferees (the "Sellers' Interest"), as
described below. The aggregate principal amount of the
Certificateholders' Interest of a Series offered hereby
will, except as otherwise provided herein and in the
related Prospectus Supplement, remain fixed at the
aggregate initial principal amount of the Certificates of
such Series. The Certificateholders' Interest of a Series
will include the right to receive (but only to the extent
needed to make required payments under the Pooling
Agreement and the related Supplement and subject to any
reallocation of such amounts if the related Supplement so
provides) varying percentages of collections of Finance
Charge Receivables and Principal Receivables and will be
allocated a varying percentage of the Defaulted Amount
with respect to each Monthly Period. If the Certificates
of a Series offered hereby include more than one Class of
Certificates, the Trust Assets allocable to the
Certificateholders' Interest of such Series may be
further allocated among each Class in such Series as
described in the related Prospectus Supplement.
The Certificates of a Series will evidence undivided
interests in the Trust Assets allocated to the
Certificateholders' Interest of such Series. The
Certificates represent beneficial interests in the Trust
only and do not represent interests in or obligations of
either Bank or any affiliate of either Bank. Neither the
Certificates nor the Accounts, the Receivables or any
collections thereon are insured or guaranteed by the
Federal Deposit Insurance Corporation (the "FDIC") or any
other governmental agency or instrumentality.
The Sellers' Interest........... The Sellers' Interest at any time represents the right to
the Trust Assets in excess of the Certificateholders'
Interest of all Series then outstanding. The principal
amount of the Sellers' Interest will fluctuate as the
amount of the Principal Receivables held by the Trust
changes from time to time. In addition, the Banks intend
to cause the issuance of additional Series from time to
time and any such issuance will have the effect of
decreasing the Sellers' Interest to the extent of the
Invested Amount of such Series. See "Description of the
Certificates--New Issuances". A portion of the Sellers'
Interest may be sold separately in one or more public or
private transactions. See "The Pooling Agreement
Generally--The Banks' Certificate; Additional Sellers".
The Pooling Agreement provides that the Banks will be
required to make an Addition to the Trust in the event
that the Sellers' Interest is less than the Required
Sellers' Participation Amount on the last business day of
any Monthly Period. See "Description of the Certif-
icates--Addition of Trust Assets". The level of the
Required Sellers' Participation Amount, which may be
reduced subject to certain conditions described under
"Description of the Certificates--Addition of Trust
Assets", is intended to enable the Sellers' Interest to
absorb fluctuations in the amount of Principal
Receivables held by the Trust from time to time (due to,
among other things, seasonal purchase and payment habits
of accountholders or adjustments in the amount of
Principal Receivables because of rebates, refunds,
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
fraudulent charges or otherwise). See "Risk
Factors--Payments and Maturity" and "Description of the
Certificates--Defaulted Receivables; Rebates and
Fraudulent Charges".
Issuance of Additional Series... The Pooling Agreement authorizes the Trustee to issue
three types of certificates: (i) one or more Series of
Certificates, (ii) a certificate evidencing the Sellers'
Interest in the Trust, which initially is to be held by
the Banks and (iii) Supplemental Certificates to be held
by transferees of a portion of the certificate evidencing
the Sellers' Interest in the Trust. The certificate
evidencing the Sellers' Interest in the Trust and any
Supplemental Certificates are collectively referred to
herein as the "Banks' Certificate". The Pooling Agree-
ment provides that, pursuant to any one or more
supplements to the Pooling Agreement (each a
"Supplement"), the Banks may cause the Trustee to issue
one or more new Series and accordingly cause a reduction
in the Sellers' Interest represented by the Banks'
Certificate. Under the Pooling Agreement, the Banks may
define, with respect to any Series, the Principal Terms
of such Series. See "Description of the Certificates--New
Issuances". The Banks may offer any Series to the public
or other investors under a disclosure document (a
"Disclosure Document"), which will consist of a Pro-
spectus Supplement in the case of a Series offered
hereby, in transactions either registered under the
Securities Act or exempt from registration thereunder,
directly or through one or more underwriters or placement
agents, in fixed-price offerings or in negotiated
transactions or otherwise. See "Plan of Distribution".
The Banks expect to offer, from time to time, additional
Series issued by the Trust.
A new Series may only be issued upon satisfaction of the
conditions described herein under "Description of the
Certificates--New Issuances" including, among others,
that (a) such issuance will not result in a Ratings
Effect and (b) the Banks shall have delivered to the
Trustee and certain providers of Series Enhancement a
certificate of an authorized officer to the effect that,
in the reasonable belief of the Banks, such issuance will
not, based on the facts known to such officer at the time
of such certification, cause a Pay Out Event to occur
with respect to any Series.
Collections..................... All collections of Receivables will be allocated by the
Servicer between amounts collected on Principal
Receivables and on Finance Charge Receivables. The
Servicer will allocate between the Certificateholders'
Interest of each Series and the Sellers' Interest all
amounts collected with respect to Finance Charge
Receivables and Principal Receivables and the Defaulted
Amount with respect to each day during each Monthly
Period. Collections of Finance Charge Receivables and the
Defaulted Amount will be allocated to each Series at all
times based upon its Floating Allocation Percentage.
Collections of Principal Receivables will be allocated to
each Series at all times based upon its Principal
Allocation Percentage. The Floating Allocation Percentage
and the Principal Allocation Percentage with respect to
each Series will be determined as set forth in the
related Supplement and, with respect to each Series
offered hereby, in the related Prospectus Supplement.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Interest........................ Interest will accrue on the Invested Amount of the
Certificates of a Series or Class offered hereby at the
per annum rate either specified in or determined in the
manner specified in the related Prospectus Supplement.
Except as otherwise provided herein or in the related
Prospectus Supplement, collections of Finance Charge Re-
ceivables and certain other amounts allocable to the
Certificateholders' Interest of a Series offered hereby
will be used to make interest payments to
Certificateholders of such Series on each Interest
Payment Date with respect thereto, provided that if an
Early Amortization Period commences with respect to such
Series, thereafter interest will be distributed to such
Certificateholders monthly on each Special Payment Date.
If the Interest Payment Dates for a Series or Class occur
less frequently than monthly, such collections or other
amounts (or the portion thereof allocable to such Class)
will be deposited in one or more trust accounts (each an
"Interest Funding Account") and used to make interest
payments to Certificateholders of such Series or Class on
the following Interest Payment Date with respect thereto.
If a Series has more than one Class of Certificates, each
such Class may have a separate Interest Funding Account.
Principal....................... The principal of the Certificates of each Series offered
hereby will be scheduled to be paid either in full on an
expected date specified in the related Prospectus
Supplement (the "Expected Final Payment Date"), in which
case such Series will have an Accumulation Period as
described below under "--Accumulation Period", or in
installments commencing on a date specified in the
related Prospectus Supplement (the "Principal
Commencement Date"), in which case such Series will have
a Scheduled Amortization Period as described below under
"--Scheduled Amortization Period". If a Series has more
than one Class of Certificates, a different method of
paying principal, Expected Final Payment Date and/or
Principal Commencement Date may be assigned to each
Class. The payment of principal with respect to the
Certificates of a Series or Class may commence earlier
than the applicable Expected Final Payment Date or
Principal Commencement Date, and the final principal
payment with respect to the Certificates of a Series or
Class may be made later than the applicable Expected
Final Payment Date or other expected date, if a Pay Out
Event occurs with respect to such Series or Class or
under certain other circumstances described herein. See
"Special Considerations--Payments and Maturity" for a
description of factors that may affect the timing of
principal payments on Certificates.
Revolving Period................ The Certificates of each Series offered hereby will have a
revolving period (the "Revolving Period"), which will
commence at the close of business on a date specified in
the related Prospectus Supplement (the "Series Cut-Off
Date") and continue until the earlier of (a) the
commencement of the Early Amortization Period with
respect to such Series and (b) the date specified in the
related Prospectus Supplement as the end of the Revolving
Period with respect to such Series. During the Revolving
Period with respect to a Series offered hereby,
collections of Principal Receivables and
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certain other amounts otherwise allocable to the
Certificateholders' Interest of such Series will be
treated as Shared Principal Collections and will be
distributed to, or for the benefit of, the
Certificateholders of other Series or the Banks. See
"Description of the Certificates--Principal" and
"--Shared Principal Collections" and see "--Pay Out
Events" for a discussion of the events which might lead
to the termination of the Revolving Period with respect
to a Series prior to its scheduled ending date.
Accumulation Period............. If the related Prospectus Supplement so specifies, unless
an Early Amortization Period commences with respect to a
Series offered hereby, the Certificates of such Series
will have an accumulation period (the "Accumulation
Period"), which will commence at the close of business on
the date specified in such Prospectus Supplement and
continue until the earliest of (a) the commencement of
the Early Amortization Period with respect to such
Series, (b) payment in full of the Invested Amount of the
Certificates of such Series and (c) the Series
Termination Date with respect to such Series. During the
Accumulation Period with respect to a Series, collections
of Principal Receivables and certain other amounts
allocable to the Certificateholders' Interest of such
Series will be deposited on each Distribution Date in a
trust account established for the benefit of the
Certificateholders of such Series (a "Principal Funding
Account") and used to make principal distributions to the
Certificateholders of such Series when due. The
"Distribution Date" is the 15th day of each month (or if
such 15th day is not a business day, the next succeeding
business day). The amount to be deposited in the
Principal Funding Account for any Series offered hereby
on any Distribution Date may, but will not necessarily,
be limited to an amount (the "Controlled Deposit Amount")
equal to an amount specified in the related Prospectus
Supplement (the "Controlled Accumulation Amount") plus
any existing deficit controlled accumulation amount
arising from prior Distribution Dates. If a Series has
more than one Class of Certificates, each Class may have
a separate Principal Funding Account and Controlled
Accumulation Amount. In addition, the related Prospectus
Supplement may describe certain priorities among such
Classes with respect to deposits of principal into such
Principal Funding Accounts.
Scheduled Amortization Period... If the related Prospectus Supplement so specifies, unless
an Early Amortization Period commences with respect to a
Series offered hereby, the Certificates of such Series
will have an amortization period (the "Scheduled
Amortization Period"), which will commence at the close
of business on the date specified in such Prospectus
Supplement and continue until the earliest of (a) the
commencement of the Early Amortization Period with
respect to such Series, (b) payment in full of the
Invested Amount of the Certificates of such Series and
(c) the Series Termination Date with respect to such
Series. During the Scheduled Amortization Period with
respect to a Series, collections of Principal Receivables
and certain other amounts allocable to the
Certificateholders' Interest of such Series will be used
on each Distribution Date to make principal distributions
to Certificateholders of such Series or any
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Class of such Series then scheduled to receive such
distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on any
Distribution Date may, but will not necessarily, be
limited to an amount (the "Controlled Distribution
Amount") equal to an amount (the "Controlled Amortization
Amount") specified in the related Prospectus Supplement
plus any existing deficit controlled amortization amount
arising from prior Distribution Dates. If a Series has
more than one Class of Certificates, each Class may have
a separate Controlled Amortization Amount. In addition,
the related Prospectus Supplement may describe certain
priorities among such Classes with respect to such
distributions.
Early Amortization Period....... During the period from the day on which a Pay Out Event
has occurred with respect to a Series to the date on which
the Invested Amount of the Certificates of such Series
and the Enhancement Invested Amount, if any, with respect
to such Series have been paid in full or the related
Series Termination Date has occurred (the "Early
Amortization Period"), collections of Principal
Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including
Shared Principal Collections, if any, allocable to such
Series) will be distributed as principal payments to the
Certificateholders of such Series monthly on each
Distribution Date beginning with the first Special
Payment Date with respect to such Series. During the
Early Amortization Period with respect to a Series,
distributions of principal to Certificateholders will not
be subject to any Controlled Deposit Amount or Controlled
Distribution Amount. In addition, upon the commencement
of the Early Amortization Period with respect to a
Series, any funds on deposit in a Principal Funding
Account with respect to such Series will be paid to the
Certificateholders of the relevant Class or Series on the
first Special Payment Date with respect to such Series.
See "Description of the Certificates--Pay Out Events" for
a discussion of the events which might lead to the
commencement of the Early Amortization Period with
respect to a Series.
Shared Principal Collections.... To the extent that collections of Principal Receivables
and certain other amounts that are allocated to the
Certificateholders' Interest of any Series are not needed
to make payments to the Certificateholders of such Series
or required to be deposited in a Principal Funding
Account for such Series, such collections will be applied
to cover principal payments due to or for the benefit of
Certificateholders of another Series. Any such
reallocation will not result in a reduction in the
Invested Amount of the Series to which such collections
were initially allocated. See "Description of the
Certificates--Shared Principal Collections".
Special Funding Account......... If on any date the Sellers' Interest is less than or equal
to the Required Sellers' Participation Amount or the
amount of Principal Receivables in the Trust is less than
or equal to the Required Principal Balance, the Servicer
shall not distribute to the Banks any Shared Principal
Collections which otherwise would be distributed to the
Banks, but shall deposit such funds in the Special
Funding Account. Funds on deposit in the Special Funding
Account will be
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withdrawn and paid to the Banks on any Distribution Date
to the extent that, after giving effect to such payment,
the Sellers' Interest exceeds the Required Sellers'
Interest and the amount of Principal Receivables in the
Trust exceeds the Required Principal Balance on such
date; PROVIDED, HOWEVER, that if an Accumulation Period,
Scheduled Amortization Period or Early Amortization
Period commences with respect to any Series, any funds on
deposit in the Special Funding Account will be released
and treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the
benefit of such Series.
Sharing of Additional Finance
Charges........................ Subject to certain limitations described under
"Description of the Certificates--Sharing of Additional
Finance Charges", collections of Finance Charge
Receivables and certain other amounts allocable to the
Certificateholders' Interest of any Series which is
included in a Group in excess of the amounts necessary to
make required payments with respect to such Series
(including payments to the provider of any related Series
Enhancement) will be applied to cover any shortfalls with
respect to amounts payable from collections of Finance
Charge Receivables allocable to any other Series included
in such Group, in each case pro rata based upon the
amount of the shortfall, if any, with respect to such
other Series. See "Description of the
Certificates--Sharing of Additional Finance Charges".
Funding Period.................. The Prospectus Supplement relating to a Series of
Certificates may specify that for a period beginning on
the Series Issuance Date with respect to such Series and
ending on a specified date before the commencement of the
Scheduled Amortization Period or Accumulation Period with
respect to such Series (the "Funding Period"), the
aggregate amount of Principal Receivables in the Trust
allocable to such Series may be less than the aggregate
principal amount of the Certificates of such Series. If
so specified in the related Prospectus Supplement, the
amount of such difference will be held in a trust account
established with the Trustee for the benefit of
Certificateholders of such Series (the "Prefunding
Account") pending the transfer of additional Principal
Receivables to the Trust or pending the reduction of the
Certificateholders' Interests of other Series issued by
the Trust. The related Prospectus Supplement will specify
the initial Certificateholders' Interest on the Series
Issuance Date with respect to such Series, the aggregate
principal amount of the Certificates of such Series (the
"Initial Amount") and the date by which the
Certificateholders' Interest is expected to equal the
Initial Amount.
If so specified in the related Prospectus Supplement,
during the Funding Period, funds on deposit in the
Prefunding Account for a Series may or, under certain
circumstances, must be withdrawn and paid to the Sellers
to effect increases in the Certificateholders' Interest.
In the event that the Certificateholders' Interest does
not equal the Initial Amount by the end of the Funding
Period, any amount remaining in the Prefunding Account
and additional
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amounts specified, if any, in the related Prospectus
Supplement will be payable to the Certificateholders of
such Series in a manner and at such time as set forth in
the related Prospectus Supplement.
If so specified in the related Prospectus Supplement,
monies in the Prefunding Account with respect to any
Series will be invested by the Trustee in Eligible
Investments or will be subject to a guaranteed rate or
investment agreement or other similar arrangement, and
investment earnings and any applicable payment under any
such investment arrangement will be applied to pay
interest on the Certificates of such Series.
Credit Enhancement.............. The credit enhancement with respect to a Series offered
hereby (the "Credit Enhancement") may include a letter of
credit, a cash collateral account, a surety bond, an
insurance policy or any other form of credit enhancement
described in the related Prospectus Supplement. Credit
Enhancement may also be provided to a Class or Classes of
a Series by subordination provisions which require that
distributions of principal and/or interest be made with
respect to the Certificates of such Class or Classes
before distributions are made to one or more other
Classes of such Series.
The type, characteristics and amount of the Credit
Enhancement with respect to any Series will be determined
based on several factors, including the characteristics
of the Receivables and Accounts underlying or comprising
the Trust Assets as of the Series Issuance Date with
respect thereto, and will be established on the basis of
requirements of each applicable Rating Agency. The terms
of the Credit Enhancement with respect to any Series
offered hereby will be described in the related
Prospectus Supplement. See "Description of the
Certificates--Credit Enhancement" and "Special
Considerations--Limited Nature of Rating".
Servicing....................... The Servicer (initially, FDNB) will be responsible for
servicing, managing and making collections on the
Receivables. Subject to certain exceptions described
under "Description of the Certificates--Deposits in
Collection Account", the Servicer will deposit any
collections on the Receivables in a Monthly Period into
the Collection Account within two business days of the
Date of Processing (or, in the case of Interchange, no
later than the Distribution Date) to the extent such
collections are allocable to the Certificateholders'
Interest of any Series and are required to be deposited
into an account for the benefit of, or distributed to,
the Certificateholders of any Series or the issuer of any
Series Enhancement. On the earlier of (i) the second
business day following the Date of Processing and (ii)
the day on which the Servicer deposits any collections
into the Collection Account, subject to certain
exceptions described herein, the Servicer will pay to the
Banks their allocable portion of any collections then
held by the Servicer. The "Date of Processing" is the
business day a record of any transaction is first
recorded pursuant to the Servicer's data processing
procedures. On or about the third business day preceding
each Distribution Date (each, a "Determination Date"),
the
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Servicer will calculate the amounts to be allocated to
the Certificateholders of each Class or Series and the
Banks as described herein in respect of collections of
Receivables received with respect to the preceding
Monthly Period.
In certain limited circumstances, FDNB may resign or be
removed as Servicer, in which event either the Trustee
or, so long as it meets certain eligibility standards set
forth in the Pooling Agreement, a third-party servicer
may be appointed as successor servicer. (FDNB or any such
successor servicer is referred to herein as the "Ser-
vicer".) FDNB is permitted to delegate any of its duties
as Servicer to any of its affiliates and to certain
third-party service providers, but any such delegation
will not relieve the Servicer of its obligations under
the Pooling Agreement or any Supplement. The Servicer
will receive servicing fees payable with respect to each
Series offered hereby as servicing compensation from the
Trust. See "Description of the Certificates--Servicing
Compensation and Payment of Expenses".
Mandatory Reassignment and
Transfer of Certain
Receivables.................... Pursuant to the Pooling Agreement, as of each Series
Issuance Date (and on each date of addition) each Bank, in
its capacity as a seller, has severally made or will
severally make certain representations and warranties in
the Pooling Agreement with respect to the Accounts (or
Additional Accounts) owned by such Bank and the
Receivables (or Receivables in Additional Accounts)
transferred by such Bank to the Trust. If either Bank
breaches any such representation and warranty, under
certain circumstances and subject to certain conditions
described under "The Pooling Agreement Gen-
erally--Representations and Warranties", all Receivables
with respect to the affected Account will be reassigned
to such Bank. In addition, if either Bank breaches
certain other representations and warranties described
under "The Pooling Agreement Generally-- Representations
and Warranties", all the Receivables transferred by such
Bank to the Trust may be reassigned to such Bank. See
"The Pooling Agreement Generally--Representations and
Warranties".
FDNB will provide certain covenants in the Pooling
Agreement in its capacity as Servicer. If the Servicer
breaches any such covenant with respect to any
Receivable, subject to certain conditions described under
"The Pooling Agreement Generally--Servicer Covenants",
all Receivables with respect to the affected Account will
be assigned to the Servicer. In the event of a transfer
of servicing obligations to a successor servicer, such
successor servicer, rather than FDNB, would be
responsible for any subsequent failure to comply with the
Servicer's covenants.
Tax Status...................... Except to the extent otherwise provided in the related
Prospectus Supplement, in the opinion of special tax
counsel for the Banks and the Trust, the Certificates of
each Series offered hereby are properly characterized as
debt for federal income tax purposes and for California
and New Hampshire tax purposes. Each Certificateholder,
by acceptance of a Certificate of such a Series, will
agree to treat the Certificates of such Series as
indebtedness of the Banks
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for federal, state and local income and franchise tax
purposes. See "Tax Matters" for additional information
concerning the application of federal, California and New
Hampshire tax laws.
Income Tax Withholding.......... Interest on Certificates that are characterized as debt
and that are held by non-U.S. persons will be subject to
United States withholding tax unless the holder complies
with applicable IRS identification requirements. Interest
on Certificates that are characterized as debt and that
are held by U.S. persons will be subject to backup
withholding unless the holder complies with applicable
IRS identification requirements. See "Tax Matters".
ERISA Considerations............ Certificates of any Series offered hereby may be eligible
for purchase by Benefit Plans. See "ERISA Considerations".
Certificate Rating.............. Unless otherwise specified in the related Prospectus
Supplement, it will be a condition to the issuance of the
Certificates of each Series offered hereby that they be
rated in one of the four highest applicable rating
categories by at least one nationally recognized
statistical rating organization selected by the Banks
(the rating agency or agencies rating any Series, the
"Rating Agency"). The rating or ratings applicable to the
Certificates of each such Series will be as set forth in
the related Prospectus Supplement.
A security rating should be evaluated independently of
similar ratings of different types of securities. A
rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal
at any time by the assigning Rating Agency. Each rating
should be evaluated independently of any other rating.
See "Special Considerations--Limited Nature of Rating".
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RISK FACTORS
SECONDARY MARKET TRADING. It is anticipated that, to the extent permitted,
the underwriters of any Series of Certificates offered hereby will make a market
in such Certificates, but in no event will any such underwriter be under an
obligation to do so. There can be no assurance that a secondary market will
develop with respect to the Certificates of any Series offered hereby or, if
such a secondary market does develop, that it will provide Certificateholders
with liquidity of investment or that it will continue for the life of such
Certificates.
ISSUANCE OF ADDITIONAL SERIES. The Trust, as a master trust, has issued
other Series and is expected to issue additional Series from time to time. While
the terms of any Series will be specified in a Supplement, the provisions of a
Supplement and, therefore, the terms of any additional Series, will not be
subject to the prior review by, or consent of, holders of the Certificates of
any previously issued Series. Such terms may include methods for determining
applicable investor percentages and allocating collections, provisions creating
different or additional security or other Series Enhancements and any other
amendment or supplement to the Pooling Agreement which is made applicable only
to such Series. The obligation of the Trustee to issue any new Series is subject
to the following conditions, among others: (a) such issuance will not result in
any Rating Agency reducing or withdrawing its rating of the Certificates of any
outstanding Series (any such reduction or withdrawal is referred to herein as a
"Ratings Effect") and (b) each Bank shall have delivered to the Trustee and
certain providers of Series Enhancement a certificate of an authorized officer
to the effect that, in the reasonable belief of such Bank, such issuance will
not, based on the facts known to such officer at the time of such certification,
cause a Pay Out Event to occur with respect to any Series. There can be no
assurance, however, that the terms of any Series might not have an impact on the
timing or amount of payments received by a Certificateholder of another Series.
See "Description of the Certificates--New Issuances".
ADDITION OF TRUST ASSETS. The Banks expect, and in some cases will be
obligated, to designate Additional Accounts, the Receivables in which will be
conveyed to the Trust. Such Additional Accounts may include accounts originated
using criteria different from those which were applied to the Initial Accounts
because such accounts were originated at a later date or were part of a
portfolio of accounts which were not part of the First Deposit Portfolio as of
the Trust Cut-Off Date or which were acquired from another institution.
Moreover, Additional Accounts designated at any time may not be accounts of the
same type as those previously included in the Trust. See "The Pooling Agreement
Generally--Representations and Warranties". Consequently, there can be no
assurance that such Additional Accounts will be of the same credit quality as
the Initial Accounts or the Additional Accounts previously included in the
Trust. In addition, such Additional Accounts may consist of revolving credit
card accounts or other revolving credit accounts which have different terms than
the Initial Accounts and the Additional Accounts previously included in the
Trust, including lower periodic finance charges and other fees and charges,
which may have the effect of reducing the average yield on the portfolio of
Accounts included in the Trust. The designation of Additional Accounts will be
subject to the satisfaction of certain conditions described herein under
"Description of the Certificates--Addition of Trust Assets", including that (a)
such addition will not result in a Ratings Effect and (b) the Bank designating
such Additional Accounts shall have delivered to the Trustee and certain
providers of Series Enhancement a certificate of an authorized officer to the
effect that, in the reasonable belief of such Bank, such addition will not,
based on the facts known to such officer at the time of such certification, at
the time of its occurrence cause a Pay Out Event to occur with respect to any
Series. Since the Trust Cut-Off Date, the Banks have conveyed to the Trust
Receivables in Additional Accounts in accordance with the terms of the Pooling
Agreement. See "Description of the Certificates--Addition of Trust Assets".
CERTAIN LEGAL ASPECTS. While the Banks have sold and will sell Receivables
to the Trust, a court could treat such a transaction as an assignment of
collateral as security for the benefit of the Certificateholders of the
outstanding Series. Each Bank warrants in the Pooling Agreement that the
transfer of Receivables by it to the Trust is either a sale of such Receivables
to the Trust or the grant to the Trust of a security interest in such
Receivables. Each Bank will take certain actions under applicable state law to
perfect the Trust's interest in the Receivables transferred to the Trust by such
Bank and, in the Pooling Agreement, each Bank
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warrants that, if the transfer by such Bank to the Trust is a grant to the Trust
of a security interest in the applicable Receivables, the Trust will have a
first priority perfected security interest therein and, with certain exceptions
and for certain limited periods of time, in the proceeds thereof (subject, in
each case, to certain potential tax liens referred to under "The Pooling
Agreement Generally--Representation and Warranties"). Nevertheless, if the
transfer of Receivables by a Bank to the Trust is deemed to create a security
interest therein under the California or New Hampshire Uniform Commercial Code
(the "UCC"), a tax or government lien or other nonconsensual lien on property of
such Bank arising before Receivables come into existence may have priority over
the Trust's interest in such Receivables and, if the FDIC were appointed
receiver of such Bank, the receiver's administrative expenses may also have
priority over the Trust's interest in such Receivables. In addition, while FDNB
is the Servicer, cash collections held by FDNB may, subject to certain
conditions, be commingled and used for the benefit of FDNB prior to the date on
which such collections are required to be deposited in the Collection Account as
described under "Description of the Certificates--Deposits in Collection
Account" and, in the event of the insolvency or receivership of FDNB or, in
certain circumstances, the lapse of certain time periods, the Trust may not have
a perfected interest in such collections.
If the FDIC were appointed receiver of either of the Banks or if certain
other events relating to the bankruptcy, insolvency or receivership of either of
the Banks were to occur (an "Insolvency Event"), then a Pay Out Event would
occur with respect to each Series and, pursuant to the terms of the Pooling
Agreement, new Principal Receivables would not be transferred to the Trust and
the Trustee would sell the Receivables (unless each other holder of the Banks'
Certificate, Certificateholders holding Certificates of each Series or, if a
Series includes more than one Class, each Class of such Series evidencing more
than 50% of the aggregate unpaid principal amount of each such Series or Class
and, to the extent provided in the Supplement for any Series, any Credit
Enhancer instruct otherwise), thereby causing early termination of the Trust and
a loss to the Certificateholders of a particular Series if the sum of (a) the
portion of the proceeds of such sale allocable to such Certificateholders and
(b) the proceeds of any collections on the Receivables in the Collection Account
allocated to the Certificateholders' Interest of such Series is insufficient to
pay such Certificateholders in full. To the extent the Banks grant a security
interest in the Receivables to the Trust, and such security interest is validly
perfected before the occurrence of an Insolvency Event and is not taken in
contemplation of insolvency or with the intent to hinder, delay or defraud the
relevant Bank or its creditors, based upon opinions issued by the general
counsel of the FDIC and a related policy statement issued by the FDIC addressing
the enforceability against the FDIC, as conservator or receiver for a depository
institution, of a security interest in collateral granted by such depository
institution, such security interest should not be subject to avoidance, and
payments to the Trust with respect to the Receivables should not be subject to
recovery, by the FDIC. However, such opinions and policy statement are not
binding on the FDIC and, if the FDIC were to assert a contrary position, certain
provisions of the FDIA which, at the request of the FDIC, have been applied in
lawsuits to avoid security interests in collateral granted by depository
institutions, would permit the FDIC to avoid such security interest, thereby
resulting in possible delays and reductions in payments to the
Certificateholders of all outstanding Series. In addition, federal law governing
receiverships of federally-insured depository institutions would be interpreted
to require compliance with certain claims procedures if a receiver were
appointed for either of the Banks before the Trustee could collect, sell,
dispose of or otherwise liquidate the Receivables, which could delay or possibly
reduce payments on the Certificates of all outstanding Series. Upon the
occurrence of an Insolvency Event, if no Pay Out Event other than such
Insolvency Event exists, the FDIC may have the power to continue to require the
Banks to transfer new Principal Receivables to the Trust and to prevent the
early sale, liquidation or disposition of the Receivables and the commencement
of an Early Amortization Period. In the event of a Servicer Default, if a
conservator, receiver or liquidator is appointed for the Servicer, and no
Servicer Default other than such conservatorship, receivership, liquidation or
insolvency of the Servicer exists, the conservator, receiver or liquidator may
have the power to prevent either the Trustee or the Certificateholders from
appointing a successor Servicer. See "Certain Legal Aspects of the
Receivables--Transfer of Receivables" and "--Certain Matters Relating to
Receivership".
The Accounts and Receivables are subject to numerous federal and state
consumer protection laws which impose requirements on the making, enforcement
and collection of consumer loans. The United
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States Congress and the states may enact laws and amendments to existing laws to
further regulate the credit card and consumer revolving loan industry or to
reduce finance charges or other fees or charges applicable to credit card and
other consumer revolving loan accounts. Such laws, as well as any new laws or
rulings which may be adopted, may adversely affect the Servicer's ability to
collect on the Receivables or maintain the current level of periodic finance
charges and other fees and charges with respect to the Accounts. In addition,
failure by the Servicer to comply with such requirements could adversely affect
the Servicer's ability to enforce the Receivables. In October 1987, November
1991 and March 1994 members of Congress attempted unsuccessfully to limit the
maximum annual percentage rate that may be assessed on credit card accounts. In
addition, on May 5, 1992, two members of the House Banking Committee asked the
United States General Accounting Office (the "GAO") to undertake a study of
competition in the credit card industry and particularly to address how a
government-imposed limit on credit card interest rates could affect credit
availability. In Spring 1994, the GAO released its study on competitive pricing
and disclosure in the credit card industry. The GAO did not recommend that
Congress enact legislation capping interest rates on credit cards, but did
recommend monitoring of the industry. The Banks cannot predict what action, if
any, will be taken by Congress as a result thereof. If federal legislation were
enacted which contained an interest rate cap substantially lower than the annual
percentage rates currently assessed on the Accounts, it is possible that the
Portfolio Yield would be reduced and therefore a Pay Out Event could occur with
respect to the Certificates of each Series. See "Description of the
Certificates--Pay Out Events". In addition, during recent years, there has been
increased consumer awareness with respect to the level of finance charges and
fees and other practices of credit card issuers and other consumer revolving
loan providers. As a result of these developments and other factors, there can
be no assurance as to whether any federal or state legislation will be
promulgated which would impose additional limitations on the monthly periodic
finance charges or other fees or charges relating to the Accounts.
Since October 1991, a number of lawsuits and administrative actions have
been filed in several states against out-of-state banks (both federally-insured
state-chartered banks and federally-insured national banks) which issue credit
cards. These actions challenge various fees and charges (such as late fees,
over-the-limit fees, returned check charges and annual membership fees) assessed
against residents of the states in which such suits were filed, based on
restrictions or prohibitions under such states' laws alleged to be applicable to
the out-of-state credit card issuers. To date, neither Bank has been named as a
defendant in any such suit. There can be no assurance that either Bank will not
be named as a defendant in future lawsuits or administrative actions challenging
the fees and charges which it assesses accountholders. In October 1991, a
federal district court upheld a Massachusetts law that bars banks from assessing
late payment fees on credit card accounts of residents of that state in a
proceeding involving Greenwood Trust (the issuer of the Discover Card). However,
in August 1992 the U.S. Court of Appeals reversed the federal district court on
the grounds that the Massachusetts law was pre-empted by applicable federal law
and in January 1993 the United States Supreme Court declined to review the
ruling by the court of appeals. In 1992, the California Supreme Court refused to
review a lower court's determination that the practice by Wells Fargo Bank of
charging its cardholders over-the-limit and late payment fees violated
California laws that require banks to limit such charges to their costs. In July
1993, a California trial court held in a class action against First Interstate
Bank that First Interstate Bank's credit card late payment and over-the-limit
fees exceeded the amount allowed under a California statute on liquidated
damages, and awarded damages of approximately $14 million to the plaintiff
class. First Interstate Bank appealed the decision. The California Court of
Appeals upheld the determination that the fees were excessive, but reduced the
judgment to approximately $5 million. The Supreme Courts of California, Colorado
and New Jersey have also recently handed down decisions in similar actions. The
California and Colorado Supreme Courts opined that federal law governed late
fees and found for the respective defendant banks, while the New Jersey Supreme
Court found that late payment fees are not interest, and that, therefore, state
law is not preempted by federal law with respect to such late fees. On January
19, 1996, the United States Supreme Court accepted an appeal of the California
Supreme Court decision which found that the charge in question was governed by
federal law and was therefore proper. Such actions and similar actions which may
be brought in other states as a result of such actions, if resolved adversely to
bank credit card issuers and other consumer revolving loan providers, could have
the effect of limiting certain charges, other than periodic finance charges,
that could be assessed on
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credit card or other consumer revolving credit accounts of residents of such
states and could require credit card issuers and other consumer revolving loan
providers such as the Banks to pay refunds and civil penalties with respect to
charges previously imposed on accountholders in such states. Consequently, such
actions could have an adverse impact on the Banks' credit card and other
consumer revolving loan operations. One potential effect of any such litigation
involving the Banks, if successful, would be to reduce the Portfolio Yield. If
such a reduction occurs, a Pay Out Event could occur with respect to the
Certificates of each Series. See "Certain Legal Aspects of the
Receivables--Consumer Protection Laws".
Pursuant to the Pooling Agreement, if a Receivable fails to comply in all
material respects with applicable requirements of law, subject to certain
conditions described under "The Pooling Agreement Generally--Representations and
Warranties", all Receivables in the affected Account will be reassigned to the
Bank that is the owner of such Account or, in some circumstances, to the
Servicer. On the Series Issuance Date with respect to each Series and on each
date of addition, each Bank has made and (with respect to future Series and
designations of Additional Accounts) will make certain representations and
warranties relating to the validity and enforceability of the Accounts owned by
such Bank and the related Receivables. The sole remedy if any such
representation or warranty is breached is that, subject to certain conditions
described herein under "The Pooling Agreement Generally--Representations and
Warranties", the interest of Certificateholders of all Series in the Receivables
affected thereby will be reassigned to the Bank that is the owner of the related
Account or assigned to the Servicer, as the case may be. In addition, in the
event of the breach of certain representations and warranties, each Bank may be
obligated to accept the reassignment of all the Receivables transferred by it to
the Trust, which reassignment will constitute the sole remedy available to
Certificateholders with respect to any such breach. See "The Pooling Agreement
Generally-- Representations and Warranties" and "--Servicer Covenants" and
"Certain Legal Aspects of the Receivables--Consumer Protection Laws".
PAYMENTS AND MATURITY. The Receivables may be paid at any time and there is
no assurance that there will be new Receivables created in the Accounts, that
Receivables will be added to the Trust or that any particular pattern of
accountholder repayments will occur. The actual rate of accumulation of
principal with respect to a Series in a Principal Funding Account during an
Accumulation Period and the rate of distribution of principal with respect to a
Series during a Scheduled Amortization Period or Early Amortization Period will
depend on, among other factors, the rate of accountholder repayments, the timing
of the receipt of repayments and the rate of default by accountholders. As a
result, no assurance can be given that the Invested Amount of a Series of
Certificates will be paid on the Expected Final Payment Date, if any, with
respect to such Series or that payments of principal during the Scheduled
Amortization Period with respect to a Series of Certificates will equal the
Controlled Amortization Amount, if any, with respect to such Series or will
follow any expected pattern. Accountholder monthly payment rates with respect to
the Accounts are dependent upon a variety of factors, including seasonal
purchasing and payment habits of accountholders, the availability of other
sources of credit, general economic conditions, tax laws and the terms of the
Accounts (which are subject to change by the Banks). No assurance can be given
as to the accountholder payment rates which will actually occur in any future
period.
A decline in the amount of Receivables in the Accounts for any reason
(including, the decision by accountholders to use competing sources of credit,
an economic downturn or other factors) could result in the occurrence of a Pay
Out Event with respect to a Series and the commencement of an Early Amortization
Period with respect to such Series. The Pooling Agreement provides that the
Banks will be required to make an Addition to the Trust in the event that either
(a) the Sellers' Interest is not maintained at a minimum level equal to the
Required Sellers' Percentage of the sum of (i) the aggregate amount of Principal
Receivables and (ii) the aggregate principal amount on deposit in the Special
Funding Account (the "Required Sellers' Participation Amount") or (b) the amount
of Principal Receivables in the Trust is not maintained at a minimum level equal
to the excess of (i) the sum of the initial Invested Amounts of each Series then
outstanding (provided that certain Series may be excluded from such calculation
if the issuance of such Series will not result in a Ratings Effect) over (ii)
the aggregate principal amount on deposit in the Special Funding Account and any
Principal Funding Account (the "Required Principal Balance"). The "Required
Sellers' Percentage" is equal to 5% but may be reduced under certain
circumstances described under
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"Description of the Certificates--Addition of Trust Assets". In the event that
the Banks fail to make such Addition within five business days of the day on
which they are required to make such Addition pursuant to the Pooling Agreement,
as described under "Description of the Certificates--Addition of Trust Assets",
a Pay Out Event will occur with respect to all outstanding Series.
LIMITED NATURE OF RATING. Any rating assigned to the Certificates of a
Series or a Class by a Rating Agency will reflect such Rating Agency's
assessment of the likelihood that Certificateholders of such Series or Class
will receive the payments of interest and principal required to be made under
the Pooling Agreement and the related Supplement and will be based primarily on
the value of the Receivables in the Trust and the availability of any Series
Enhancement with respect to such Series or Class. However, any such rating will
not, unless otherwise specified in the related Prospectus Supplement with
respect to any Class or Series offered hereby, address the likelihood that the
principal of, or interest on, any Certificates of such Class or Series will be
paid on a scheduled date. In addition, any such rating will not address the
possibility of the occurrence of a Pay Out Event with respect to such Class or
Series or the possibility of the imposition of United States withholding tax
with respect to non-U.S. Certificateholders. Further, the available amount of
any Credit Enhancement or other Series Enhancement with respect to any such
Series or Class will be limited and will be subject to reduction from time to
time as described in the related Prospectus Supplement. The rating of the
Certificates of a Class or Series will not be a recommendation to purchase, hold
or sell such Certificates, and such rating will not comment as to the
marketability of such Certificates, any market price or suitability for a
particular investor. There is no assurance that any rating will remain for any
given period of time or that any rating will not be lowered or withdrawn
entirely by a Rating Agency if in such Rating Agency's judgment circumstances so
warrant.
BOOK-ENTRY REGISTRATION. Unless otherwise stated in the related Prospectus
Supplement, the Certificates of each Series offered hereby initially will be
represented by one or more certificates registered in the name of Cede, the
nominee for DTC, and will not be registered in the names of the
Certificateholders or their nominees. Consequently, unless and until Definitive
Certificates are issued, Certificateholders will not be recognized by the
Trustee as "Certificateholders" (as such term is used in the Pooling Agreement
and any Supplement). Hence, until such time, Certificateholders will only be
able to exercise the rights of Certificateholders indirectly through DTC, CEDEL
or Euroclear and their respective participating organizations. See "The Pooling
Agreement Generally--Book Entry Registration" and "--Definitive Certificates".
SOCIAL, LEGAL, ECONOMIC AND OTHER FACTORS. Changes in credit use and
payment patterns by accountholders result from a variety of economic, legal and
social factors. Economic factors include the rate of inflation, unemployment
levels and relative interest rates. The use of incentive programs (e.g., gift
awards for credit usage) may affect credit use. The Banks are unable to
determine whether or to what extent changes in applicable laws or other economic
or social factors will affect credit use or repayment patterns.
COMPETITION IN THE CREDIT CARD AND CONSUMER REVOLVING LOAN INDUSTRY. The
credit card and consumer revolving loan industry is highly competitive and
operates in a legal and regulatory environment increasingly focused on the cost
of services charged to consumers. There is increased use of advertising, target
marketing, pricing competition and incentive programs. Other consumer credit
providers seek to enter, or expand their share of, the market. In addition,
certain credit card issuers and other revolving credit providers assess periodic
finance charges or other fees or charges at rates lower than the rate currently
being assessed on most of the Accounts. The Banks may also solicit existing
accountholders to open other revolving credit card accounts or revolving credit
accounts which offer certain benefits not available under the Accounts,
including lower periodic finance charges or reduced late charges and other fees
or charges. If accountholders choose to utilize competing sources of credit, the
rate at which new Receivables are generated in the Accounts may be reduced and
certain purchase and payment patterns with respect to the Receivables may be
affected. The Trust will be dependent upon the Banks' continued ability to
generate new Receivables. If the rate at which new Receivables are generated
declines significantly and the Banks do not add Additional Accounts to the
Trust, a Pay Out Event could occur with respect to each Series.
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Recently, other credit card issuers have announced changes in the terms of
certain of their VISA and MasterCard(1) credit cards, including lowering the
fixed annual percentage rate charged on balances or converting the annual
percentage rate charged on balances from a fixed per annum rate to a variable
rate. In addition, other credit card issuers have recently announced "tiered" or
"risk adjusted" rates under which the annual percentage rate for the issuer's
most credit worthy customers would be lowered.
In 1992, a jury in federal court in Utah held that the VISA association
violated antitrust laws when it denied membership in VISA to a subsidiary of
Sears, Roebuck and Co., on the basis that another Sears subsidiary is the issuer
of the Discover credit card, a competitor of the VISA credit card. In September
1994, the U.S. Court of Appeals reversed the trial court's decision upholding
the verdict, holding that VISA's conduct did not violate the antitrust laws. The
U.S. Court of Appeals denied Dean Witter, Discover & Co.'s motion for a
rehearing EN BANC and, on June 19, 1995, the United States Supreme Court refused
to review the decision of the Court of Appeals. While the United States Supreme
Court refused to review the Court of Appeals decision with regard to Dean
Witter, Discover & Co.'s antitrust claims, the case is continuing on Dean
Witter, Discover & Co.'s state law claims and VISA's counterclaims. A final
decision against VISA could result in increased competition among issuers of
VISA and MasterCard credit cards and thereby have adverse consequences for
members of the VISA and MasterCard associations, such as the Banks.
THE ABILITY OF THE BANKS TO CHANGE TERMS OF THE ACCOUNTS. Pursuant to the
Pooling Agreement, the Banks do not transfer to the Trust the Accounts but only
the Receivables arising in the Accounts. As owners of the Accounts, the Banks
will have the right to determine the periodic finance charge, the fees and the
other charges which will be applicable from time to time to the Accounts, to
alter the minimum monthly payment required under the Accounts and to change
various other terms with respect to the Accounts. A decrease in the periodic
finance charge or other fees or charges applicable to the Accounts would
decrease the effective yield on the Accounts and could result in the occurrence
of a Pay Out Event with respect to a Series and the commencement of an Early
Amortization Period with respect to such Series, as well as decreased protection
to Certificateholders against charged-off Accounts. Under the Pooling Agreement,
each Bank has agreed that, unless required by law or unless, in its sole
discretion, such Bank deems it necessary to maintain on a competitive basis its
lending business, it will not reduce the annual percentage rate of the monthly
periodic finance charge assessed on the Receivables or reduce other fees on the
Accounts, if as a result of such reduction, either its reasonable expectation is
that such reduction will, based on the facts known at such time, cause a Pay Out
Event to occur with respect to a Series or such reduction is not applied to any
comparable segment of consumer revolving credit accounts owned by such Bank
which have characteristics the same as or substantially similar to the Accounts.
In addition, each Bank, subject to compliance with applicable laws, may in its
sole discretion change the other terms of its Accounts, if such change is made
applicable to any comparable segment of consumer revolving credit accounts owned
by the Bank which have characteristics the same as, or substantially similar to,
such Accounts. Except as specified above, there are no restrictions on the
Banks' ability to change the terms of the Accounts. There can be no assurance
that changes in applicable law, changes in the marketplace, including recent
announcements by other credit card issuers lowering annual percentage rates, or
prudent business practice might not result in a determination by the Banks to
decrease customer finance charges or otherwise take actions which would change
any Account terms. See "--Competition in the Credit Card and Consumer Revolving
Loan Industry". In servicing the Accounts, the Servicer is required to apply its
usual and customary servicing procedures for servicing receivables comparable to
the Receivables and to act in accordance with the Banks' written policies and
procedures relating to the operation of their consumer revolving lending
business (the "Lending Guidelines").
CONTROL. Subject to certain exceptions, the Certificateholders of each
Series may take certain actions, or direct certain actions to be taken, under
the Pooling Agreement or the related Supplement. However, under certain
circumstances, the consent or approval of a specified percentage of the
aggregate unpaid principal amount of the Certificates of all outstanding Series
will be required to direct certain actions,
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(1) VISA and MasterCard are registered trademarks of VISA U.S.A. Inc. and
MasterCard International Incorporated, respectively.
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including requiring the appointment of a successor Servicer following a Servicer
Default, amending the Pooling Agreement under certain circumstances and
directing a reassignment of the entire portfolio of Accounts. In addition,
following the occurrence of an Insolvency Event with respect to a Bank, the
Trust Assets will be liquidated unless the holders of Certificates evidencing
more than 50% of the aggregate unpaid principal amount of each Series or, if a
Series includes more than one Class, each Class of such Series (along with each
other holder of the Banks' Certificate and, to the extent provided in the
Supplement for any Series, any Credit Enhancer) direct the Trustee not to sell
or otherwise liquidate the Receivables. Further, in certain cases (including
with respect to certain amendments described under "The Pooling Agreement
Generally--Amendments"), when determining whether the required percentage of
Certificateholders of a Series have given their approval or consent, all the
Certificateholders of such Series will be treated as a single class (whether or
not such Series includes more than one Class). Accordingly, one or more Classes
of Certificateholders may have the power to determine whether any such action is
taken without regard to the position or interests of other Classes of
Certificateholders relating to such action.
THE BANKS' CREDIT CARD AND CONSUMER LENDING BUSINESS
BUSINESS OVERVIEW
Each of the Banks is a national banking association and a wholly-owned
subsidiary of Providian Bancorp, Inc., which is in turn a wholly-owned
subsidiary of Providian Corporation. The Banks and their affiliates are engaged
in secured and unsecured consumer lending nationwide and related businesses,
principally through direct mail and telemarketing. The Banks' receivables
portfolio consists primarily of unsecured consumer loans for which the credit
extension vehicle is a check or credit card. Although the Banks are members of
both VISA U.S.A. Inc. and MasterCard International Incorporated, they have
historically originated and serviced primarily VISA accounts. FDNB also has a
non-credit card revolving credit product ("Capital Cash"(2)), and home loan,
secured credit card and insurance premium financing products. Accounts opened
under the secured credit card, home loan and insurance premium financing
programs are not included in the First Deposit Portfolio discussed herein.
The portfolio of unsecured consumer credit accounts under management by the
Banks or their affiliates is referred to herein as the "First Deposit
Portfolio". Primary servicing for the First Deposit Portfolio is provided by
Providian National Bancorp, a wholly-owned subsidiary of Providian Bancorp, Inc.
Based on the total balances in the First Deposit Portfolio, the Banks are among
the largest credit card issuers in the United States.
Receivables transferred and to be transferred by the Banks to the Trust
pursuant to the Pooling Agreement are generated from transactions made and cash
advances obtained by accountholders under certain credit card accounts and
certain Capital Cash accounts. The credit card receivables currently in the
Trust were predominantly generated under the VISA U.S.A. Inc. program. Capital
Cash is an open-end revolving line of credit with a predetermined credit line
accessible primarily through checks and is designed for those individuals who
prefer using checks rather than credit cards. Its credit approval process and
product features are substantially similar to those used by the Banks for credit
cards. All credit card and Capital Cash accounts in the First Deposit Portfolio
(other than certain accounts purchased from third party originators, which are
not currently included in the Trust Portfolio) were originated using the Banks'
account opening procedures. Certain of the accounts were originated by First
Deposit Savings Bank, a former affiliate of the Banks.
Each of the Banks uses substantially similar account origination,
acquisition and servicing procedures. The Banks primarily use their affiliate,
Providian National Bancorp, and third party vendors in the process of
originating and servicing the accounts. Account set-up, telemarketing, customer
service, collection activities and certain data processing services are
performed primarily at operations centers located in the San Francisco Bay area.
Other data processing functions are handled by Total System Services, Inc.
("Total System"), a Columbus, Georgia-based company. Total System is the
nation's second largest credit card
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(2) Capital Cash is a registered servicemark of Providian Bancorp, Inc.
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processing company. Total System is responsible for processing merchants' credit
slips (drafts), issuing and encoding cards and authorizing accountholder
purchases for merchants. Total System also sends monthly billing statements,
stores customer data files, updates master files daily and provides master file
tapes each month. The credit card and Capital Cash accounts owned by the Banks
were principally generated through direct mail solicitations sent to a
pre-screened list of prospective accountholders, followed by credit verification
and telemarketing support. The Banks' underwriting, telemarketing, customer
service and collection procedures, described below, are subject to refinement
and change as the competitive environment, industry practice, legal requirements
or the Banks' business objectives may require. In addition, the Banks or their
affiliates may acquire accounts originated by third parties from time to time in
the future.
UNDERWRITING PROCEDURES
The Banks' credit screening process begins with a "prescreening" review
which identifies consumers who are likely to be approved for a credit card or
Capital Cash account with a high credit line. These consumers generally receive
direct mail solicitations or solicitations by telephone. In order to establish
the amount of the customer's credit line, responses from applicants are subject
to a "back-end" verification process in which an applicant's credit information
is reviewed a second time, updated and verified against criteria established by
each Bank's loan committee.
In the prescreening process, the Banks provide a set of credit criteria
directly, or indirectly through a third party, to credit bureaus. The bureaus
screen their databases and generate a list of names with the desired attributes.
The list is further refined by applying an additional set of targeting criteria
which have been derived by the Banks from a statistical modeling of previous
response patterns and charge-off experience. This final list is then
statistically verified by the Banks to ensure that the list complies with the
criteria supplied.
Those persons who receive the solicitations must respond in writing or by
telephone to initiate the back-end verification process. Once the response is
received and current credit bureau reports obtained, the applicant's credit
history and other attributes are checked against the originating Bank's
underwriting criteria. In November 1991, the Federal Financial Institutions
Examination Council adopted a policy statement that requires a firm offer of
credit be made to each person who meets prescreening criteria. As a result, the
Banks provide each person who responds to a prescreened solicitation within the
time period specified in the solicitation an opportunity to accept a line of
credit with a credit limit of at least $300. Each applicant whose credit history
and other attributes meet all of the underwriting criteria is offered a higher
line of credit. Each of the Initial Accounts and the Additional Accounts
previously designated pursuant to the Pooling Agreement were opened with credit
lines in excess of $300.
Each accountholder is subject to an agreement governing the terms and
conditions of the account. Pursuant to such lending agreement, the Bank that
owns the account reserves the right to change or terminate any terms,
conditions, services or features of the account (including increasing or
decreasing monthly periodic charges, other charges or minimum payments). By
their terms, the lending agreements are governed by New Hampshire law. Credit
limits are adjusted periodically based upon the relevant Bank's continuing
evaluation of an accountholder's credit behavior.
In 1991, PNB acquired a portfolio of MasterCard accounts. Those accounts
were originally opened using criteria established by the institution from which
the accounts were purchased and were selected by PNB based on a credit scoring
formula acceptable to PNB. None of the receivables in such acquired accounts are
currently included in the Receivables transferred to the Trust, although they
may be added to the Trust at some time in the future. Other portfolios of
consumer revolving credit accounts may be purchased by the Banks from other
institutions and added to the Trust from time to time, using credit screening
procedures and criteria acceptable to the acquiring Bank.
TELEMARKETING AND CUSTOMER SERVICE
The Banks believe that customer contact must be quickly established to take
advantage of additional marketing opportunities, verify application information
and assist in the collections process. Customer service is currently available
to most customers 24 hours a day, seven days a week (excluding certain
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holidays). Customer service representatives have on-line access to the
customer's account history in order to immediately resolve most questions. When
charges are in dispute, each Bank's current policy is to note on the
accountholder's monthly billing statements that such portion of the balance is
in dispute, and such portion will not accrue finance charges pending resolution
of the dispute. Multiple tracking and reporting systems are employed to ensure
that service standards are achieved and maintained.
COLLECTION EFFORTS
Efforts to collect delinquent consumer credit receivables are made by the
Banks or their affiliates as well as attorneys retained in different states.
Current collection practices are characterized by quick intervention upon any
missed payments, automated calling systems which improve the efficiency of
contacting customers and close monitoring of delinquencies and charge-offs.
Current collection policy consists principally of the following. Statements
are sent monthly and accountholders have approximately 30 days after the
statement date to remit payments before an account is considered past-due. Risk
assessment and segmentation models are used to determine when to contact
accountholders by telephone after an account becomes past due, with an emphasis
on early intervention for those accounts with the highest risk. Arrangements may
be made with accountholders to extend or change payment schedules. If an
accountholder either refuses to make a promise to pay, or breaks a promise to
pay, collection efforts are promptly escalated to a more experienced collector,
or referred to the legal collections unit for review. No new charges are
authorized after an account is past due for 30 days and after two negative
events (such as a refusal to pay or a broken promise to pay) the account is
closed. At that point, the only objective is to collect the outstanding balance.
No more than 180 days after a payment delinquency (210 days after the date of
the billing statement), unless the accountholder cures the default by making a
partial payment which qualifies under the relevant Bank's standards, the
principal balance of the account is written off. Related interest and late fee
charges are written off as a reversal of interest income. Account balances for
deceased account obligors are written off when verification of no estate is
obtained, or 180 days after the delinquency, whichever is earlier. Account
balances for bankrupt accountholders generally are written off immediately upon
verification regardless of the account's delinquency status. Since
accountholders for whom a Bank receives notice of a bankruptcy filing are
sometimes current in their payment up to the time of notification, these
accounts may be charged off without having been delinquent.
INTERCHANGE
Members participating in the VISA and MasterCard associations receive
certain fees ("Interchange") as partial compensation for taking credit risk,
absorbing fraud losses, funding receivables and servicing accountholders for a
limited period prior to initial billing. Under the VISA and MasterCard systems,
Interchange in connection with accountholder charges for merchandise and
services is passed from the banks that clear the transactions for merchants to
the credit card-issuing banks. Interchange ranges from approximately 1% to 2% of
the transaction amount, although VISA and MasterCard may from time to time
change the amount of Interchange reimbursed to banks issuing their credit cards.
Interchange paid to the Banks will be allocated to the Trust with respect to
each Monthly Period on the basis of (i) the Interchange for all accounts in the
First Deposit Portfolio and (ii) the percentage equivalent of the ratio that the
amount of accountholder charges for merchandise and services for the Accounts
bears to the total amount of accountholder charges for merchandise and services
for all accounts in the First Deposit Portfolio, in each case for such Monthly
Period. The Banks will be required, pursuant to the terms of the Pooling
Agreement, to transfer to the Trust for the benefit of Certificateholders the
aforementioned percentage of the Interchange. This percentage is an estimate of
the actual Interchange paid to the Banks from time to time in respect of the
Accounts and may be more or less than the actual amount of Interchange so paid.
Interchange transferred to the Trust will be included in Finance Charge
Receivables pursuant to the Pooling Agreement for purposes of determining the
amount of Finance Charge Receivables and allocating collections and payments
thereof to the Certificateholders. Unless otherwise specified in the related
Supplement, Interchange attributable to the Accounts as determined above will
also be included in Finance Charge Receivables for purposes of calculating the
Portfolio Yield.
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THE ACCOUNTS
GENERAL
The Receivables arise in certain Eligible Accounts (the "Trust Portfolio")
selected by the Banks from the First Deposit Portfolio as described below.
The Banks' accounts are grouped into "rollouts" for purposes of
administrative convenience. A rollout represents a group of accounts established
from replies to a specific solicitation program. Each rollout has a discrete set
of targeting criteria corresponding to it. Product solicitations for a
particular rollout are made within a discrete period, normally two to four weeks
in length. The Accounts presently included in the Trust consist of all the
accounts contained in certain rollouts designated by each of the Banks,
including Accounts for which Receivables have been charged off as uncollectible
prior to their addition to the Trust in accordance with the Banks' normal
servicing policies. Receivables in charged-off Accounts are deemed to have a
zero balance and the Trust owns only the right to receive recoveries with
respect to such Receivables.
Although the characteristics (including loss experience) of a particular
rollout may differ from those of the First Deposit Portfolio as a whole, the
Banks have selected the Accounts presently included in the Trust by rollouts
with the objective of obtaining a representative cross-section of the available
Eligible Accounts in the First Deposit Portfolio. The Banks believe that,
collectively, the Accounts presently included in the Trust are representative of
the Accounts in the First Deposit Portfolio.
Each Bank has transferred and will transfer to the Trust all Receivables
existing in each Account owned by it on the date of transfer to the Trust and
all Receivables generated in such Accounts after such date. All monthly
calculations with respect to such Accounts are computed based on activity
occurring during a calendar month (each a "Monthly Period"). Pursuant to the
Pooling Agreement, the Banks severally have the right, and in certain cases the
obligation (subject to certain limitations and conditions described below), to
designate from time to time additional qualifying VISA or MasterCard consumer
revolving credit card accounts, Capital Cash accounts and other consumer
revolving credit accounts owned by the designating Bank to be included as
Accounts and to convey to the Trust all Receivables in such Additional Accounts,
whether such Receivables are then existing or thereafter created. These Accounts
must be Eligible Accounts as of the date the relevant Bank designates such
accounts as Additional Accounts. Since the Trust Cut-Off Date, the Banks have
conveyed to the Trust Receivables in certain Additional Accounts in accordance
with the provisions of the Pooling Agreement. In addition, as of the Trust
Cut-Off Date (or as of the addition date) and on the date any new Receivables
are created, each Bank will represent and warrant to the Trust that each of the
Receivables in any Account or Additional Account owned by such Bank which is
conveyed to the Trust on such day meets the eligibility requirements specified
in the Pooling Agreement. See "The Pooling Agreement Generally--Representations
and Warranties". However, there can be no assurance that all the Accounts will
continue to meet the applicable eligibility requirements throughout the life of
the Trust.
Subject to certain limitations and restrictions, each Bank may also
designate certain Accounts owned by it the Receivables in which will be removed
from the Trust. In such case, the Receivables in the Removed Accounts will be
reassigned to such Bank. Throughout the term of the Trust, the Trust Portfolio
will consist of the Initial Accounts, plus any Additional Accounts, and minus
any Removed Accounts.
Additional Accounts designated after the date hereof may be accounts of a
different type from those previously included in the Trust. Therefore there can
be no assurance that such Additional Accounts will be of the same credit quality
as the Initial Accounts or the Additional Accounts the Receivables in which have
been conveyed previously to the Trust. Moreover, such Additional Accounts may
contain Receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts described below. Such Additional
Accounts may also be subject to different credit limits, balances and ages.
Consequently, there can be no assurance that the Accounts will continue to have
the characteristics described herein as Additional Accounts are added. In
addition, the inclusion in the Trust of Additional Accounts with lower periodic
finance charges may have the effect of reducing the Portfolio Yield. The Banks
intend to file with the Commission, on behalf of the Trust, a Current Report on
Form 8-K with respect to any addition of accounts which would have a material
effect on the composition of the Accounts.
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BILLING AND PAYMENTS
The following is information with respect to the billing and payment
characteristics generally applicable to the accounts owned by the Banks.
Monthly billing statements are sent by the Banks to active accountholders.
All the accounts currently require a minimum monthly payment, generally equal to
at least 2% of the new balance shown on the statement, plus any amount that is
past-due and any amount by which the new balance exceeds the accountholder's
credit limit. The payment due will not be less than $15.00 (unless the new
balance is less than $15.00, in which case the payment due will be the amount of
the new balance).
Finance charges are posted to the accounts at the end of each monthly
billing cycle. A daily finance charge is calculated by multiplying the daily
balance on the account by the applicable daily periodic rate. For the majority
of accounts, there is no grace period during which accountholders may avoid
monthly periodic charges on purchases or cash advances.
The daily balance is figured by taking the previous day's balance (including
the daily finance charge) and adding all debits and subtracting all credits for
the current day. The average daily balance can be figured by adding each day's
balance (including the daily finance charge) and dividing by the number of days
in the billing cycle. This average daily balance can be multiplied by the number
of days in the billing cycle and the daily periodic rate to determine the total
finance charge for the billing cycle.
The annual percentage rates for cash advances and purchases are fixed or
variable and generally range from 10.9% to 21.9%. The majority of balances that
have a fixed rate have an annual percentage rate of 21.9%. Some accountholders
are offered a reduced annual percentage rate for an introductory period and the
annual percentage rate on some accounts may be lower or higher than those
generally offered by the Banks. For an additional fee, certain accountholders
have subscribed to a credit protection feature pursuant to which the
accountholder's obligation to make payments and the accrual of finance charges
will be suspended in limited circumstances.
The Banks typically charge accounts certain additional fees, generally
ranging up to $18.00, including: (i) a late fee, if the relevant Bank does not
receive the required minimum monthly payment by the statement cycle date (five
days after the payment due date shown on the monthly billing statement); (ii) a
returned payment check fee, for each accountholder check received by the
relevant Bank and not paid by the accountholder's bank; (iii) an over-limit fee
(excepting Capital Cash accounts), if the new balance of an account exceeds the
accountholder's stated credit limit before addition of a new finance charge or
other fees on the billing date; and (iv) for most accounts, a returned check fee
for any check written on the account that the relevant Bank returns unpaid. Any
of these fees may be waived or modified at any time.
The Banks generally do not charge an annual fee on an accountholder's
account. However, a substantial number of accountholders obtain an initial cash
advance or transfer existing balances at the time the account is opened. The
Banks reserve the right to modify the terms of any account to charge an annual
fee or other types of fees.
Payments by accountholders to the Banks on the accounts are processed and
applied first to finance charges, then to any fees billed to the account, then
to principal, and then to any unbilled principal. Any excess creates a credit
balance. Finance charges are billed as of the last day of an account's billing
cycle. Principal receivables are posted daily. Any payments applied to principal
will generally be applied to principal receivables relating to purchases, and
then to principal receivables relating to cash advances.
Annual percentage rates, fees and other charges may increase or decrease
from current levels. The lending agreements governing the accounts permit the
Banks to change the foregoing rates and terms at any time after an applicable
notice period. There can be no assurance that annual percentage rates, fees and
other charges will remain at current levels in the future. See "Risk
Factors--The Ability of the Banks to Change Terms of the Accounts".
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THE BANKS
Each of the Banks is a wholly-owned subsidiary of Providian Bancorp, Inc.
(formerly known as First Deposit Corporation) which is in turn a wholly-owned
subsidiary of Providian Corporation (formerly known as Capital Holding
Corporation), a publicly owned consumer financial services company which is
principally engaged in the insurance, investment management and banking
businesses. FDNB is a national bank regulated by the Office of the Comptroller
of the Currency. Under the Competitive Equality Banking Act passed in August
1987, FDNB operates under the non-transferable grandfather rights provided its
owners. PNB is a nationally chartered credit card bank regulated by the Office
of the Comptroller of the Currency. Under the Bank Holding Company Act, PNB is
authorized to engage only in credit card operations.
The principal executive offices of FDNB are located at 295 Main Street,
Tilton, New Hampshire 03276, the principal executive offices of PNB are located
at 53 Regional Drive, Concord, New Hampshire 03301, and the principal executive
offices of Providian Bancorp, Inc. are located at 88 Kearny Street, San
Francisco, California 94108. Providian Bancorp, Inc. expects to move its offices
on or about June 3, 1996 to 201 Mission Street, San Francisco, California 94105.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the net
proceeds from the sale of the Certificates of any Series offered hereby will be
paid to the Banks and will be used for the Banks' general corporate purposes.
THE TRUST
The Trust, as a master trust, previously has issued other Series and is
expected to issue additional Series from time to time. The Trust has not engaged
and will not engage in any business activity other than acquiring and holding
Trust Assets and proceeds therefrom, issuing Series of Certificates and the
Banks' Certificate and making payments thereon and related activities. As a
consequence, the Trust does not and is not expected to have any source of
capital resources other than the Trust Assets. The Trust is administered in
accordance with the laws of the State of New York.
The Banks have conveyed to the Trust, without recourse, their respective
interests in all Receivables arising under the Accounts. The Trust Assets
consist of the Receivables, all monies due or to become due thereunder, the
proceeds of the Receivables, and certain Interchange attributable to
accountholder charges for goods and services in certain of the Accounts, all
monies on deposit in the Collection Account and in certain accounts maintained
for the benefit of the Certificateholders, any Participations included in the
Trust, funds collected or to be collected with respect to such Participations
and any Series Enhancements. The Trust Assets are expected to change over the
life of the Trust as revolving credit card accounts, other revolving credit
accounts and related assets become subject to the Trust and as Accounts are
closed, charged off or removed and are no longer subject to the Trust. Pursuant
to the Pooling Agreement, the Banks will have the right (subject to certain
limitations and conditions), and in some circumstances will be obligated, to
designate as Trust Assets Receivables arising in Additional Accounts or, in lieu
thereof or in addition thereto, Participations. See "Description of the
Certificates--Addition of Trust Assets". In addition, the Banks will have the
right to remove from the Trust Receivables arising in designated Accounts as
described herein under "Description of the Certificates--Removal of Accounts".
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DESCRIPTION OF THE CERTIFICATES
GENERAL
The Certificates of a Series will be issued pursuant to the Pooling
Agreement, and a Supplement thereto relating to such Certificates, among the
Banks, as sellers of their respective interests in the Receivables, FDNB, as
servicer of the Accounts, and the Trustee; the Pooling Agreement and each
Supplement with respect to any Series offered hereby will be substantially in
the form filed as exhibits to the Registration Statement of which this
Prospectus is a part. See "Description of the Certificates--New Issuances". The
Trustee will provide a copy of the Pooling Agreement (without exhibits or
schedules), including any Supplements, to Certificateholders upon written
request. The following summary describes certain terms generally applicable to
the Certificates of each Series and is qualified in its entirety by reference to
the Pooling Agreement and the applicable Supplement.
The Certificates of each Series offered hereby will initially be represented
by one or more certificates registered in the name of the nominee of DTC
(together with any successor depository selected by the Banks, the
"Depository"), except as set forth below. Unless otherwise specified in the
related Prospectus Supplement, the Certificates of each Series offered hereby
will be available for purchase in minimum denominations of $1,000 and in
integral multiples thereof in book-entry form. The Banks have been informed by
DTC that DTC's nominee will be Cede. See "The Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates".
The Certificates of each Series offered hereby will evidence undivided
interests in the Trust Assets allocated to the Certificateholders' Interest of
such Series, representing the right to receive from such Trust Assets funds up
to (but not in excess of) the amounts required to make payments of interest and
principal with respect thereto as described in the related Prospectus
Supplement.
INTEREST
Interest will accrue on the Invested Amount of the Certificates of a Series
or Class offered hereby at the per annum rate either specified in or determined
in the manner specified in the related Prospectus Supplement. Except as
otherwise provided herein or in the related Prospectus Supplement, collections
of Finance Charge Receivables and certain other amounts allocable to the
Certificateholders' Interest of a Series offered hereby will be used to make
interest payments to Certificateholders of such Series on each Interest Payment
Date specified with respect thereto in the related Prospectus Supplement,
provided that if an Early Amortization Period commences with respect to such
Series, thereafter interest will be distributed to such Certificateholders
monthly on each Special Payment Date. If the Interest Payment Dates for a Series
or Class occur less frequently than monthly, such collections or other amounts
(or the portion thereof allocable to such Class) will be deposited in one or
more Interest Funding Accounts and used to make interest payments to
Certificateholders of such Series or Class on the following Interest Payment
Date. If a Series has more than one Class of Certificates, each such Class may
have a separate Interest Funding Account. Funds on deposit in an Interest
Funding Account will be invested in Eligible Investments. Any earnings (net of
losses and investment expenses) on funds in an Interest Funding Account will be
paid to, or at the direction of, the Banks except as otherwise specified in any
Supplement. Interest with respect to the Certificates of each Series offered
hereby will accrue and be calculated on the basis described in the related
Prospectus Supplement.
PRINCIPAL
The Certificates of each Series will have a Revolving Period during which
collections of Principal Receivables and certain other amounts otherwise
allocable to the Certificateholders' Interest of such Series will be treated as
Shared Principal Collections and will be distributed to, or for the benefit of,
the Certificateholders of other Series or the Banks. Unless an Early
Amortization Period commences with respect to a Series, following the Revolving
Period with respect to such Series, such Series will have either an Accumulation
Period or a Scheduled Amortization Period.
During the Accumulation Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be deposited on
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each Distribution Date in a Principal Funding Account and used to make principal
distributions to the Certificateholders of such Series when due. The amount to
be deposited in a Principal Funding Account for any Series offered hereby on any
Distribution Date may, but will not necessarily, be limited to a Controlled
Deposit Amount equal to a Controlled Accumulation Amount specified in the
related Prospectus Settlement plus any existing deficit controlled accumulation
amount arising from prior Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a separate Principal Funding Account
and Controlled Accumulation Amount. In addition, the related Prospectus
Supplement may describe certain priorities among such Classes with respect to
deposits of principal into such Principal Funding Accounts.
During the Scheduled Amortization Period, if any, with respect to a Series,
collections of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be used on each Distribution
Date to make principal distributions to any Class of Certificateholders then
scheduled to receive such distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on any Distribution Date may,
but will not necessarily, be limited to a Controlled Distribution Amount equal
to a Controlled Amortization Amount specified in the related Prospectus
Supplement plus any existing deficit controlled amortization amount arising from
prior Distribution Dates. If a Series has more than one Class of Certificates,
each Class may have a separate Controlled Amortization Amount. In addition, the
related Prospectus Supplement may describe certain priorities among such Classes
with respect to such distributions.
During the Early Amortization Period with respect to a Series, collections
of Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as principal
payments to the applicable Certificateholders monthly on each Distribution Date
beginning with the first Special Payment Date. During the Early Amortization
Period with respect to a Series, distributions of principal to
Certificateholders of such Series will not be subject to any Controlled Deposit
Amount or Controlled Distribution Amount. In addition, upon the commencement of
the Early Amortization Period, any funds on deposit in a Principal Funding
Account with respect to such Series will be paid to the Certificateholders of
the relevant Class or Series on the first Special Payment Date. See "Series
Provisions--Pay Out Events" for a discussion of the events which might lead to
the commencement of the Early Amortization Period with respect to a Series.
Funds on deposit in any Principal Funding Account established with respect
to a Class or Series offered hereby will be invested in Eligible Investments and
may be subject to a guarantee or guaranteed investment contract or other
mechanism specified in the related Prospectus Supplement intended to assure a
minimum rate of return on the investment of such funds. In order to enhance the
likelihood of the payment in full of the principal amount of a Class of
Certificates offered hereby at the end of an Accumulation Period with respect
thereto, such Class may be subject to a maturity liquidity facility or other
similar mechanism specified in the relevant Prospectus Supplement.
ADDITION OF TRUST ASSETS
If, as of the close of business on the last business day of any Monthly
Period, either (a) the Sellers' Interest is less than the Required Sellers'
Participation Amount or (b) the amount of Principal Receivables in the Trust is
less than the Required Principal Balance, the Banks shall, on or prior to the
close of business on the 10th business day following such day, unless the
Sellers' Interest equals or exceeds the Required Sellers' Participation Amount
or the amount of Principal Receivables in the Trust equals or exceeds the
Required Principal Balance, as the case may be, as of the close of business on
any day after the last business day of such Monthly Period and prior to such
10th day, make an Addition to the Trust such that, after giving effect to such
Addition, the Sellers' Interest is at least equal to the Required Sellers'
Participation Amount and the amount of Principal Receivables in the Trust is at
least equal to the Required Principal Balance. An "Addition" will consist of (i)
receivables arising in Eligible Accounts owned by a Bank or (ii) participations
representing undivided interests in a pool of assets primarily consisting of
revolving credit card accounts or other revolving credit accounts owned by a
Bank or any affiliate thereof and collections thereon ("Participations"). The
addition of Participations to the Trust pursuant to this paragraph will be
effected by an amendment to the Pooling Agreement which will not require the
consent of Certificateholders. The Banks
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may, upon 30 days' prior notice to the Trustee, the Rating Agency and certain
providers of Series Enhancement, reduce the Required Sellers' Percentage,
PROVIDED that (a) such reduction will not result in a Ratings Effect and (b)
each Bank shall have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer to the effect that, in the
reasonable belief of such Bank, such reduction will not, based on the facts
known to such officer at the time of such certification, cause a Pay Out Event
to occur with respect to any Series; and PROVIDED FURTHER that the Required
Sellers' Percentage shall never be less than 2%. In addition, the Banks may from
time to time, at their sole discretion, subject to the conditions described
below, voluntarily make an Addition to the Trust.
Each Bank may designate, from time to time, at its sole discretion, Eligible
Accounts to be included as Accounts ("Automatic Additional Accounts"), subject
to the limitations specified in this paragraph. If the aggregate number of
Automatic Additional Accounts designated to be included as Accounts plus the
number of Accounts added pursuant to the preceding paragraph without prior
review by the Rating Agency with respect to any of the three consecutive Monthly
Periods beginning in January, April, July and October of each calendar year
would exceed 15% of the number of Accounts as of the first day of the calendar
year during which such Monthly Periods commence or the number of such Accounts
designated during any twelve-month period would exceed 20% of the number of
Accounts as of the first day of such twelve-month period (the "Aggregate
Additional Limit"), then no Automatic Additional Accounts may be added during
such periods without the consent of the Rating Agency. On or before each
Distribution Date, the Banks shall have delivered to the Trustee, the Rating
Agency and certain providers of Series Enhancement an opinion of counsel with
respect to the Automatic Additional Accounts included as Accounts during the
preceding Monthly Period confirming the validity and perfection of each transfer
of such Automatic Additional Accounts. If such opinion of counsel with respect
to any Automatic Additional Accounts is not so received, the ability of the
Banks to designate Automatic Additional Accounts will be suspended until such
time as the Rating Agency otherwise consents in writing. The addition to the
Trust of Receivables in Automatic Additional Accounts will be subject to the
further condition that revolving credit card accounts or other revolving credit
accounts either (i) not originated by a Bank or any affiliate of a Bank or (ii)
of a type not included in the Accounts at the time of their addition may only be
designated as Automatic Additional Accounts upon compliance with the conditions
described below with respect to Additions. Automatic Additional Accounts and
Accounts relating to any Addition are collectively referred to herein as
"Additional Accounts".
In connection with an Addition, the Banks will convey to the Trust the
Receivables arising in Additional Accounts and Participations subject to the
following conditions, among others (provided that the following conditions
(other than the delivery of a written assignment and a computer file or
microfiche list as described in clause (b)) shall not apply to the transfer to
the Trust of Receivables in Automatic Additional Accounts): (a) on or before the
tenth business day immediately preceding such Addition, each Bank which owns any
such Additional Account or is transferring any such Participation to the Trust
shall have given the Trustee, the Servicer, the Rating Agency and certain
providers of Series Enhancement written notice that the Receivables arising in
the Additional Accounts or Participations will be included as Trust Assets; (b)
on or before the date on which any such Receivables are added to the Trust, each
such Bank shall have delivered to the Trustee a written assignment and a
computer file or microfiche list containing a true and complete list of the
related Additional Accounts specifying for each such Account its account number,
the aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account; (c) in the case of an
Addition other than a required Addition, the Trustee shall have received
confirmation from the Rating Agency that such Addition will not result in a
Ratings Effect; (d) in the case of a required Addition which exceeds the
Aggregate Additional Limit, the Banks shall have provided the Rating Agency with
15 days, prior written notice and the Rating Agency shall not have notified the
Banks that such addition would result in a Ratings Effect; and (e) prior to or
on the date any such Receivables or Participations are added to the Trust, each
such Bank shall have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer stating that any related
Additional Accounts are Eligible Accounts and that such Bank reasonably believes
that (i) such Addition will not, based on the facts known to such officer at the
time of such certification, cause a Pay Out Event to occur with respect to any
Series and (ii) in the case of Additional Accounts, no selection procedure was
utilized by such
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Bank which would result in a selection of Additional Accounts (from the
available Eligible Accounts owned by such Bank) that would be materially adverse
to the interests of the Certificateholders of any Series as of the date of the
addition.
The Banks may direct that the Principal Receivables in the Additional
Accounts be treated as Principal Receivables outstanding on the last day of the
Monthly Period preceding the Monthly Period in which the Addition is made for
purposes of calculating Floating Allocation Percentages and Principal Allocation
Percentages for the Monthly Period of such Addition. Such direction may be made
on the date of addition subject to the condition that all collections with
respect to the Additional Accounts for the period from the last day of the
preceding Monthly Period through the date of addition must be deposited in the
collection Account on the date of addition. Following any such Addition, the
Servicer will allocate collections for the balance of such Monthly Period,
including the collections deposited on the date of addition, to the
Certificateholders' Interest of each Series and the Sellers' Interest so that
each interest receives the same allocations of Finance Charge Receivables,
Principal Receivables and Defaulted Amounts that it would have received if such
Additional Accounts had been included in the Trust for the entire Monthly Period
in which the Addition occurred.
Affiliates of the Banks may originate or acquire portfolios of revolving
credit card accounts or other revolving credit accounts the receivables in which
may be participated to the Banks and sold to the Trust. Such a sale of
receivables to the Trust will be subject to the conditions described above
relating to Additions.
Additional Accounts or Participations may include accounts originated using
criteria different from those which were applied to the Initial Accounts because
such accounts were originated at a later date or were part of a portfolio of
revolving credit card accounts or other revolving credit accounts which were not
part of the First Deposit Portfolio as of the Trust Cut-Off Date or which were
acquired from another institution. Moreover, Additional Accounts and accounts
included in Participations may not be accounts of the same type previously
included in the Trust. See "The Pooling Agreement Generally--Representations and
Warranties". Consequently, there can be no assurance that such Additional
Accounts or Participations will be of the same credit quality or have the same
payment characteristics as the Initial Accounts or the Additional Accounts
previously included in the Trust.
Additional Accounts of a type different than the Initial Accounts may
contain Receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts which have been designated as
Finance Charge Receivables and Principal Receivables herein and Participations
may be added to the Trust as Additions. In either case, the Servicer will
designate the portions of funds collected or to be collected in respect of such
Receivables or Participations to be treated for purposes of the Pooling
Agreement as Principal Receivables and Finance Charge Receivables.
REMOVAL OF ACCOUNTS
On any day of any Monthly Period each Bank shall have the right to require
the reassignment to it or its designee of all the Trust's right, title and
interest in, to and under the Receivables then existing and thereafter created,
all monies due or to become due and all amounts received with respect thereto
and all proceeds thereof in or with respect to the Removed Accounts owned and
designated by such Bank, upon satisfaction of the following conditions: (a) on
or before the fifth business day (the "Removal Notice Date") immediately
preceding the date upon which the Receivables in such Accounts are to be removed
from the Trust, such Bank shall have given the Trustee, the Servicer, the Rating
Agency and certain providers of Series Enhancement written notice of such
removal specifying the date for removal of the Removed Accounts (the "Removal
Date"); (b) on or prior to the date that is ten business days after the Removal
Date, such Bank shall have delivered to the Trustee a computer file or
microfiche list containing a true and complete list of the Removed Accounts
specifying for each such Account, as of the Removal Notice Date, its account
number, the aggregate amount outstanding in such Account and the aggregate
amount of Principal Receivables outstanding in such Account; (c) such Bank shall
have represented and warranted as of each Removal Date that the list of Removed
Accounts delivered pursuant to clause (b) above, as of the Removal Date, is true
and complete in all material respects; (d) the Trustee shall have received
confirmation from the Rating Agency that such removal will not result in a
Ratings Effect; (e) such Bank shall have delivered to the Trustee
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and certain providers of Series Enhancement a certificate of an authorized
officer, dated the Removal Date, to the effect that such Bank reasonably
believes that (i) such removal will not, based on the facts known to such
officer at the time of such certification, cause a Pay Out Event to occur with
respect to any Series and (ii) no selection procedure was utilized by such Bank
which would result in a selection of Removed Accounts that would be materially
adverse to the interests of the Certificateholders of any Series as of the
Removal Date; and (f) as of the Removal Notice Date, either (i) the Receivables
in the Accounts owned by such Bank are not more than 15% delinquent by estimated
principal amount and the weighted average delinquency of such Receivables is not
more than 60 days or (ii) the Receivables in the Accounts owned by such Bank are
not more than 7% delinquent by estimated principal amount and the weighted
average delinquency of such Receivables does not exceed 90 days.
Upon satisfaction of the above conditions, the Trustee shall execute and
deliver to the relevant Bank a written reassignment and shall be deemed to sell,
transfer, assign, set over and otherwise convey to such Bank or its designee,
without recourse, representation or warranty, all the right, title and interest
of the Trust in and to the Receivables arising in the Removed Accounts, all
monies due and to become due and all amounts received with respect thereto and
all proceeds thereof.
NEW ISSUANCES
The Pooling Agreement provides that, pursuant to any one or more
Supplements, the Banks may direct the Trustee to issue from time to time new
Series subject to the conditions described below (each such issuance a "New
Issuance"). Each New Issuance will have the effect of decreasing the Sellers'
Interest to the extent of the Invested Amount of such new Series. Under the
Pooling Agreement, the Banks may designate, with respect to any newly issued
Series: (i) its name or designation; (ii) its initial principal amount (or
method for calculating such amount) and its invested amount in the Trust (the
"Invested Amount"); (iii) its certificate rate (or formula for the determination
thereof); (iv) the interest payment date or dates (the "Interest Payment Dates")
and the date or dates from which interest shall accrue; (v) the method for
allocating collections to Certificateholders of such Series; (vi) any bank
accounts to be used by such Series and the terms governing the operation of any
such bank accounts; (vii) the percentage used to calculate monthly servicing
fees; (viii) the provider and terms of any form of Series Enhancement with
respect thereto; (ix) the terms on which the Certificates of such Series may be
repurchased or remarketed to other investors; (x) the Series Termination Date;
(xi) the number of Classes of Certificates of such Series, and if such Series
consists of more than one Class, the rights and priorities of each such Class;
(xii) the extent to which the Certificates of such Series will be issuable in
temporary or permanent global form (and, in such case, the depositary for such
global certificate or certificates, the terms and conditions, if any, upon which
such global certificate may be exchanged, in whole or in part, for definitive
certificates, and the manner in which any interest payable on a global
certificate will be paid); (xiii) whether the Certificates of such Series may be
issued in bearer form and any limitations imposed thereon; (xiv) the priority of
such Series with respect to any other Series; (xv) the Group, if any, in which
such Series will be included; and (xvi) any other relevant terms (all such
terms, the "Principal Terms" of such Series). None of the Banks, the Servicer,
the Trustee or the Trust is required or intends to obtain the consent of any
Certificateholder of any outstanding Series to issue any additional Series. The
Banks may offer any Series to the public under a Prospectus Supplement or other
Disclosure Document in transactions either registered under the Act or exempt
from registration thereunder directly, through one or more underwriters or
placement agents, in fixed-price offerings or in negotiated transactions or
otherwise. See "Plan of Distribution". Any such Series may be issued in fully
registered or book-entry form in minimum denominations determined by the Banks.
The Banks intend to offer, from time to time, additional Series.
The Pooling Agreement provides that the Banks may designate Principal Terms
such that each Series has an Accumulation Period or a Scheduled Amortization
Period which may have a different length and begin on a different date than such
periods for any other Series. Further, one or more Series may be in their
Accumulation Period or Scheduled Amortization Period while other Series are not.
Collections of Principal Receivables otherwise allocable to a Series which is
not amortizing or accumulating principal will be treated as Shared Principal
Collections and reallocated to a Series which is amortizing or accumulating
principal. Moreover, each Series may have the benefits of Series Enhancements
issued by enhancement providers
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different from the providers of Series Enhancement with respect to any other
Series. Under the Pooling Agreement, the Trustee shall hold any such Series
Enhancement only on behalf of the Series to which such Series Enhancement
relates. With respect to each such Series Enhancement, the Banks may deliver a
different form of Series Enhancement agreement. The Banks also have the option
under the Pooling Agreement to vary among Series the terms upon which a Series
may be repurchased by the Banks or remarketed to other investors. There is no
limit to the number of New Issuances that the Banks may cause under the Pooling
Agreement. The Trust will terminate only as provided in the Pooling Agreement.
There can be no assurance that the terms of any Series might not have an impact
on the timing and amount of payments received by a Certificateholder of another
Series.
Under the Pooling Agreement and pursuant to a Supplement, a New Issuance may
only occur upon the satisfaction of certain conditions provided in the Pooling
Agreement. The obligation of the Trustee to authenticate the Certificates of
such new Series and to execute and deliver the related Supplement is subject to
the satisfaction of the following conditions: (a) on or before the fifth
business day immediately preceding the date upon which the New Issuance is to
occur, the Banks shall have given the Trustee, the Servicer, the Rating Agency
and certain providers of Series Enhancement written notice of such New Issuance
and the date upon which the New Issuance is to occur; (b) the Banks shall have
delivered to the Trustee the related Supplement, in form satisfactory to the
Trustee, executed by each party to the Pooling Agreement other than the Trustee;
(c) the Banks shall have delivered to the Trustee any related Series Enhancement
agreement executed by each of the parties to such agreement; (d) the Trustee
shall have received confirmation from the Rating Agency that such New Issuance
will not result in a Ratings Effect; (e) the Banks shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer, dated the date upon which the New Issuance is to occur, to
the effect that the Banks reasonably believe that such issuance will not, based
on the facts known to such officer at the time of such certification, cause a
Pay Out Event to occur with respect to any Series; (f) the Banks shall have
delivered to the Trustee, the Rating Agency and certain providers of Series
Enhancement an opinion of counsel acceptable to the Trustee that for federal
income tax purposes (x) following such New Issuance the Trust will not be deemed
to be an association (or publicly traded partnership) taxable as a corporation,
(y) such New Issuance will not affect the tax characterization as debt of
Certificates of any outstanding Series or Class that were characterized as debt
at the time of their issuance and (z) such New Issuance will not cause or
constitute an event in which gain or loss would be recognized by any
Certificateholders or the Trust (an opinion of counsel to the effect referred to
in clauses (x), (y) and (z) with respect to any action is referred to herein as
a "Tax Opinion"); (g) the Banks' remaining interest in Principal Receivables
shall not be less than 2% of the total amount of Principal Receivables, in each
case as of the date upon which the New Issuance is to occur after giving effect
to such issuance; (h) the sum of the Invested Amounts to be used in calculating
the Floating Allocation Percentages of all outstanding Series shall not exceed
the amount of Principal Receivables to be used in calculating such Floating
Allocation Percentages, in each case as of the date of the New Issuance and
after giving effect to such New Issuance; and (i) any other conditions specified
in any Supplement. Upon satisfaction of the above conditions, the Trustee shall
execute the Supplement and issue to the Banks the Certificates of such new
Series for execution and redelivery to the Trustee for authentication.
COLLECTION ACCOUNT
The Servicer maintains for the benefit of the Certificateholders of each
Series, in the name of the Trustee, on behalf of the Trust, an Eligible Deposit
Account bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Certificateholders of each Series (the
"Collection Account"). "Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust account with the
corporate trust department of a depository institution organized under the laws
of the United States or any one of the states thereof, including the District of
Columbia (or any domestic branch of a foreign bank), and acting as a trustee for
funds deposited in such account, so long as any of the securities of such
depository institution shall have a credit rating from the Rating Agency in one
of its generic credit rating categories which signifies investment grade.
"Eligible Institution" means a depository institution (which may be the Trustee)
organized under the laws of the United States or any one of the states thereof
which at all times (a) has either (i) a long-term unsecured debt rating of A2 or
better by
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Moody's Investors Service, Inc. ("Moody's") or (ii) a certificate of deposit
rating of P-1 by Moody's, (b) has either (i) a long-term unsecured debt rating
of AAA by Standard & Poor's Corporation ("Standard & Poor's") or (ii) a
certificate of deposit rating of A-1+ by Standard & Poor's and (c) is a member
of the FDIC. The Collection Account is currently maintained with Bankers Trust
Company. If at any time the Collection Account ceases to be an Eligible Deposit
Account, the Collection Account shall be moved so that it will again be
qualified as an Eligible Deposit Account. Funds in the Collection Account
generally will be invested in (i) obligations fully guaranteed by the United
States of America, (ii) demand deposits, time deposits or certificates of
deposit of depository institutions or trust companies, the commercial paper, if
any, of which has the highest rating from the Rating Agency, (iii) commercial
paper (or other short-term obligations) having, at the time of the Trust's
investment therein, a rating in the highest rating category from the Rating
Agency, (iv) demand deposits, time deposits and certificates of deposit which
are fully insured by the FDIC, (v) notes or bankers' acceptances issued by any
depository institution or trust company described in (ii) above, (vi) money
market funds which have the highest rating from, or have otherwise been approved
in writing by, the Rating Agency, (vii) time deposits with an entity, the
commercial paper of which has the highest rating from the Rating Agency and
(viii) any other investments approved in writing by the Rating Agency
(collectively, "Eligible Investments"). Such funds may be invested in debt
obligations of Providian Bancorp, Inc. or its affiliates so long as such
obligations qualify as Eligible Investments. Any earnings (net of losses and
investment expenses) on funds in the Collection Account will be treated as
collections of Finance Charge Receivables with respect to the last day of the
related Monthly Period except as otherwise specified in any Supplement. The
Servicer will have the revocable power to withdraw funds from the Collection
Account and to instruct the Trustee to make withdrawals and payments from the
Collection Account for the purpose of carrying out its duties under the Pooling
Agreement and any Supplement. The Paying Agent shall have the revocable power to
withdraw funds from the Collection Account for the purpose of making
distributions to the Certificateholders. The Paying Agent shall initially be the
Trustee.
ALLOCATION PERCENTAGES
Pursuant to the Pooling Agreement, the Servicer will allocate among the
Certificateholders' Interest of each Series and the Sellers' Interest all
amounts collected with respect to Finance Charge Receivables and Principal
Receivables and the Defaulted Amount with respect to each day during any Monthly
Period as follows:
(a) collections of Finance Charge Receivables and the Defaulted Amount
will at all times be allocated to the Certificateholders' Interest of
a Series based on the Floating Allocation Percentage of such Series; and
(b) collections of Principal Receivables will at all times be allocated
to the Certificateholders' Interest of such Series based on the
Principal Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in the
related Supplement and, with respect to each Series offered hereby, in the
related Prospectus Supplement. Amounts not allocated to the Certificateholders'
Interest of any Series as described above will be allocated to the Sellers'
Interest.
DEPOSITS IN COLLECTION ACCOUNT
For as long as (i) FDNB remains the Servicer under the Pooling Agreement and
(ii) either (x) FDNB, as the Servicer, provides to the Trustee a letter of
credit covering collection risk of the Servicer acceptable to the Rating Agency
(as evidenced by a letter from the Rating Agency to the effect that no Ratings
Effect would occur) or (y) FDNB, if the Collection Account is maintained with
FDNB, has and maintains a certificate of deposit rating of at least A-1 and P-1
(or their equivalent) by the Rating Agency, FDNB may use for its own benefit all
collections received with respect to the Receivables in each Monthly Period
until the business day preceding the related Distribution Date, at which time
FDNB will deposit all such collections, to the extent described below, into the
Collection Account, and the Servicer will make the deposits and payments to the
accounts and parties described herein and in the related Prospectus Supplement
on the date of such deposit. However, if FDNB is no longer the Servicer or fails
to maintain the required letter of credit covering collection risk or the
required certificate of deposit rating, the Servicer will
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make such deposits, as described below, not later than two business days after
the Date of Processing, except in the case of collections consisting of
Interchange, which will be deposited not later than each Distribution Date.
Whether the Servicer is required to make deposits of collections pursuant to the
first or the second preceding sentence, (i) the Servicer will only be required
to deposit collections into the Collection Account up to the aggregate amount of
collections required to be deposited into an account established for any Series
or, without duplication, distributed on the related Distribution Date or Payment
Date to Certificateholders of any Series or to the issuer of any Series
Enhancement pursuant to the terms of any Supplement or Series Enhancement
agreement and (ii) if at any time prior to such Distribution Date or Payment
Date the amount of collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer will
be permitted to withdraw such excess from the Collection Account. Unless
otherwise agreed by the Rating Agency, if at any time FDNB or another eligible
affiliate of Providian Bancorp, Inc. is not the Servicer, the Collection Account
will be moved from FDNB, if then maintained there.
On the earlier of (i) the second business day after the Date of Processing
and (ii) the day on which the Servicer deposits any collections into the
Collection Account, the Servicer will pay to the Banks (a) the Banks' allocable
portion of collections on Principal Receivables, provided that the Sellers'
Interest in Principal Receivables on such day (after giving effect to any new
Receivables transferred to the Trust on such day) is greater than zero; and (b)
the Banks' allocable portion of collections on Finance Charge Receivables,
except in the case of collections consisting of Interchange, the Banks'
allocable portion of which will be retained by the Banks. Any amount not
allocated to the Banks because the Sellers' Interest in Principal Receivables is
zero will be held in the Collection Account unallocated ("Unallocated Principal
Collections") until the Sellers' Interest in Principal Receivables is greater
than zero (at which time such amount will be allocated to the Banks) or until an
Accumulation Period, Scheduled Amortization Period or Early Amortization Period
commences for any Series (after which such amount will be treated as Shared
Principal Collections to the extent needed to cover principal payments due to or
for the benefit of such Series).
SHARED PRINCIPAL COLLECTIONS
Collections on Principal Receivables for any Monthly Period allocated to the
Certificateholders' Interest of any Series offered hereby will first be used to
cover certain amounts described in the related Prospectus Supplement (including
any required deposits into a Principal Funding Account or required distributions
to Certificateholders of such Series). The Servicer will determine the amount of
collections of Principal Receivables for any Monthly Period (plus certain other
amounts described in the related Prospectus Supplement) allocated to such Series
remaining after covering such required deposits and distributions and any
similar amount remaining for any other Series (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections to
cover any principal distributions to Certificateholders and deposits to
Principal Funding Accounts for any Series which are either scheduled or
permitted and which have not been covered out of the investor principal
collections and certain other amounts for such Series ("Principal Shortfalls").
If Principal Shortfalls exceed Shared Principal Collections for any Monthly
Period, Shared Principal Collections will be allocated pro rata among the
applicable Series based on the respective Principal Shortfalls of such Series.
To the extent that Shared Principal Collections exceed Principal Shortfalls, the
balance will be allocated to the Banks, PROVIDED that (a) such Shared Principal
Collections will be distributed to the Banks only to the extent that the
Sellers' Interest in Principal Receivables is greater than zero (see "--Deposits
in Collection Account") and (b) in certain circumstances described below under
"--Special Funding Account", such Shared Principal Collections will be deposited
in the Special Funding Account. Any such reallocation of collections on
Principal Receivables will not result in a reduction in the Invested Amount of
the Series to which such collections were initially allocated. There can be no
assurance that there will be any Shared Principal Collections with respect to
any Monthly Period.
SPECIAL FUNDING ACCOUNT
If, on any date, the Sellers' Interest is less than or equal to the Required
Sellers' Participation Amount or the amount of Principal Receivables in the
Trust is less than or equal to the Required Principal Balance, the Servicer
shall not distribute to the Banks any Shared Principal Collections that
otherwise would be distributed to the Banks, but shall deposit such funds in an
Eligible Deposit Account established and
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maintained by the Servicer for the benefit of the Certificateholders of each
Series, in the name of the Trustee, on behalf of the Trust, and bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Certificateholders of each Series (the "Special Funding
Account"). Funds on deposit in the Special Funding Account will be withdrawn and
paid to the Banks on any Distribution Date to the extent that, after giving
effect to such payment, the Sellers' Interest exceeds the Required Sellers'
Participation Amount and the amount of Principal Receivables in the Trust
exceeds the Required Principal Balance on such date; PROVIDED, HOWEVER, that if
an Accumulation Period, Scheduled Amortization Period or Early Amortization
Period commences with respect to any Series, any funds on deposit in the Special
Funding Account will be released from the Special Funding Account, deposited in
the Collection Account and treated as Shared Principal Collections to the extent
needed to cover principal payments due to or for the benefit of such Series.
Funds on deposit in the Special Funding Account will be invested by the
Trustee, at the direction of the Servicer, in Eligible Investments. Any earnings
(net of losses and investment expenses) earned on amounts on deposit in the
Special Funding Account during any Monthly Period will be withdrawn from the
Special Funding Account and treated as collections of Finance Charge Receivables
with respect to such Monthly Period.
SHARING OF ADDITIONAL FINANCE CHARGES
Any Series offered hereby may be included in a group of Series (a "Group").
Each Series in a specific Group will be entitled to share Additional Finance
Charges in the manner, and to the extent, described below with each other
Series, if any, in such Group. The Prospectus Supplement with respect to a
Series offered hereby will specify whether such Series will be included in a
Group and whether any previously issued Series have been included in such Group.
Subsequently issued Series may also be included in such Group. Collections of
Finance Charge Receivables and certain other amounts allocable to the
Certificateholders' Interest of any Series which is included in a Group in
excess of the amounts necessary to make required payments with respect to such
Series (including payments to the provider of any related Series Enhancement)
that are payable out of collections of Finance Charge Receivables ("Additional
Finance Charges") will be applied to cover any shortfalls with respect to
amounts payable from collections of Finance Charge Receivables allocable to any
other Series included in such Group, pro rata based upon the amount of the
shortfall, if any, with respect to each other Series in such Group; PROVIDED,
HOWEVER, that the sharing of Additional Finance Charges among Series in any
Group will continue only until such time, if any, at which a Bank shall deliver
to the Trustee a certificate of an authorized officer to the effect that, in the
reasonable belief of such Bank, the continued sharing of Additional Finance
Charges among Series in any Group would have adverse regulatory implications
with respect to such Bank. Following the delivery by a Bank of any such
certificate to the Trustee there will not be any further sharing of Additional
Finance Charges among the Series in any Group. In all cases, any Additional
Finance Charges remaining after covering shortfalls with respect to all
outstanding Series in a Group will be paid to the Banks. While any Series
offered hereby may be included in a Group, there can be no assurance that (i)
any other Series will be included in such Group, (ii) there will be any
Additional Finance Charges with respect to such Group for any Monthly Period or
(iii) a Bank will not at any time deliver a certificate as described above.
While the Banks believe that, based upon applicable rules and regulations as
currently in effect, the sharing of Additional Finance Charges among Series in a
Group will not have adverse regulatory implications for them, there can be no
assurance that this will continue to be true in the future.
FUNDING PERIOD
For any Series, the related Prospectus Supplement may specify that during a
Funding Period, an amount (the "Prefunding Account Balance") will be held in a
Prefunding Account pending the transfer of additional Receivables to the Trust
or pending the reduction of the Certificateholders' Interest of other Series
issued by the Trust. The related Prospectus Supplement will specify the initial
Certificateholders' Interest with respect to such Series, the Initial Amount and
the date by which the Certificateholders' Interest is expected to equal the
Initial Amount.
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If so specified in the related Prospectus Supplement, during the Funding
Period, funds on deposit in the Prefunding Account for a Series may or, under
certain circumstances, must be withdrawn and paid to the Sellers to effect
increases in the Certificateholders' Interest. In the event that the
Certificateholders' Interest does not for any reason equal the Initial Amount by
the end of the Funding Period, any amount remaining in the Prefunding Account
and any additional amounts, if any, specified in the related Prospectus
Supplement will be payable to the Certificateholders of such Series in the
manner and at such time as set forth in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the
Prefunding Account will be invested by the Trustee in Eligible Investments or
will be subject to a guaranteed rate or investment agreement or other similar
arrangement, and, in connection with each Distribution Date during the Funding
Period, investment earnings on funds in the Prefunding Account during the
related Monthly Period will be withdrawn from the Prefunding Account and
deposited, together with any applicable payment under a guaranteed rate or
investment agreement or other similar arrangement, into the Collection Account
for distribution in respect of interest on the Certificates of the related
Series in the manner specified in the related Prospectus Supplement.
DEFAULTED RECEIVABLES; REBATES AND FRAUDULENT CHARGES
"Defaulted Receivables" for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for such Monthly Period minus (b) the
sum of (i) the amount of any Defaulted Receivables included in any Account the
Receivables in which either Bank or the Servicer becomes obligated to accept
reassignment or assignment during such Monthly Period (unless an Insolvency
Event has occurred with respect to such Bank or the Servicer, in which event the
amount of such Defaulted Receivables will not be added to the sum so
subtracted), (ii) the aggregate amount of recoveries received in such Monthly
Period with respect to both Finance Charge Receivables and Principal Receivables
previously charged-off as uncollectible and (iii) the excess, if any, for the
immediately preceding Monthly Period of the sum computed pursuant to this clause
(b) over the amount of Principal Receivables which became Defaulted Receivables
in such Monthly Period. Receivables in any Account will be charged-off as
uncollectible in accordance with the Lending Guidelines and the Servicer's
customary and usual policies and procedures for servicing revolving credit card
and other revolving credit account receivables comparable to the Receivables.
The current policy of the Banks is to charge off the receivables in an account
when that account becomes 180 days delinquent (210 days after the date of the
related billing statement), unless the accountholder cures such default by
making a partial payment which satisfies the criteria for curing delinquencies
set forth in the Lending Guidelines of the relevant Bank, or, if the relevant
Bank receives notice that an accountholder has filed for bankruptcy or has had a
bankruptcy petition filed against it, such Bank will generally charge off the
receivables in such account immediately upon verification of such filing
regardless of the state of delinquency.
If the Servicer adjusts downward the amount of any Principal Receivable
(other than Ineligible Receivables which have been, or are to be, reassigned to
a Bank) because of a rebate, refund, counterclaim, defense, error, fraudulent
charge or counterfeit charge to a cardholder or such Principal Receivable was
created in respect of merchandise which was refused or returned by a cardholder,
or if the Servicer otherwise adjusts downward the amount of any Principal
Receivable without receiving collections therefor or charging off such amount as
uncollectible, the amount of the Principal Receivables in the Trust with respect
to the Monthly Period in which such adjustment takes place will be reduced by
the amount of the adjustment. Furthermore, in the event that the exclusion of
any such Receivables would cause the Sellers' Interest in Principal Receivables
at such time to be a negative number, the Bank which transferred such Principal
Receivables to the Trust shall be required to pay an amount equal to such
deficiency into the Collection Account (each such payment an "Adjustment
Payment" with respect to such Distribution Date). Any such Adjustment Payment
will be treated as a portion of Shared Principal Collections as described under
"--Shared Principal Collections".
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CREDIT ENHANCEMENT
GENERAL. For any Series, Credit Enhancement may be provided with respect to
one or more Classes thereof. Credit Enhancement with respect to one or more
Classes of a Series offered hereby may include a letter of credit, the
establishment of a cash collateral account, a surety bond, an insurance policy
or another form of credit enhancement described in the related Prospectus
Supplement, or any combination of the foregoing. Credit Enhancement may also be
provided to a Class or Classes of a Series by subordination provisions which
require that distributions of principal and/or interest be made with respect to
the Certificates of such Class or Classes before distributions are made to one
or more Classes of such Series. If so specified in the related Prospectus
Supplement, any form of Credit Enhancement may be structured so as to be
available to more than one Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is intended to
enhance the likelihood of receipt by Certificateholders of such Class of the
full amount of principal and interest with respect thereto and to decrease the
likelihood that such Certificateholders will experience losses. However, unless
otherwise specified in the Prospectus Supplement for a Series offered hereby,
the Credit Enhancement, if any, with respect thereto will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance of the Certificates and interest thereon. If losses occur
which exceed the amount covered by the Credit Enhancement or which are not
covered by the Credit Enhancement, Certificateholders will bear their allocable
share of deficiencies. In addition, if specific Credit Enhancement is provided
for the benefit of more than one Class or Series, Certificateholders of any such
Class or Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
the related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment thereunder
not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which such
Credit Enhancement may be terminated or replaced and (d) any material provisions
of any agreement relating to such Credit Enhancement. Additionally, in certain
cases, the related Prospectus Supplement may set forth certain information with
respect to the provider of any third-party Credit Enhancement (the "Credit
Enhancer"), including (i) a brief description of its principal business
activities, (ii) its principal place of business, place of incorporation and/or
the jurisdiction under which it is chartered or licensed to do business, (iii)
if applicable, the identity of regulatory agencies which exercise primary
jurisdiction over the conduct of its business and (iv) its total assets, and its
stockholders' or policyholders' surplus, if applicable, as of a date specified
in the Prospectus Supplement. If so described in the related Prospectus
Supplement, Credit Enhancement with respect to a Series offered hereby may be
available to pay principal of the Certificates of such Series following the
occurrence of certain Pay Out Events with respect to such Series. In such event,
the Credit Enhancer will have an interest in certain cash flows in respect of
the Receivables to the extent described in such Prospectus Supplement (the
"Enhancement Invested Amount") and may be entitled to the benefit of the
Trustee's security interest in the Receivables, in each case subordinated to the
interest of the Certificateholders of such Series.
SUBORDINATION. If so specified in the related Prospectus Supplement, one or
more Classes of a Series offered hereby may be subordinated to one or more other
Classes of such Series. If so specified in the related Prospectus Supplement,
the rights of the holders of the subordinated Certificates to receive
distributions of principal and/or interest on any Payment Date will be
subordinated to such rights of the holders of the Certificates which are senior
to such subordinated Certificates to the extent set forth in the related
Prospectus Supplement. The related Prospectus Supplement will also set forth
information concerning the amount of subordination of a Class or Classes of
subordinated Certificates in a Series, the circumstances in which such
subordination will be applicable, the manner, if any, in which the amount of
subordination will decrease over time, and the conditions under which amounts
available from payments that would otherwise be made to holders of such
subordinated Certificates will be distributed to holders of Certificates which
are
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senior to such subordinated Certificates. The amount of subordination will
decrease whenever amounts otherwise payable to the holders of subordinated
Certificates are paid to the holders of the Certificates which are senior to
such subordinated Certificates.
LETTER OF CREDIT. If so specified in the related Prospectus Supplement, a
letter of credit with respect to a Series or Class of Certificates offered
hereby may be issued by a bank or financial institution specified in the related
Prospectus Supplement (the "L/C Issuer"). Subject to the terms and conditions
specified in the related Prospectus Supplement, an L/C Issuer will be obligated
to honor drawings under a letter of credit in an aggregate dollar amount (which
may be fixed or may be reduced as described in the related Prospectus
Supplement), net of unreimbursed payments thereunder, equal to the amount
described in the related Prospectus Supplement. The amount available under a
letter of credit will be reduced to the extent of the unreimbursed payments
thereunder.
CASH COLLATERAL ACCOUNT. If specified in the related Prospectus Supplement,
the Certificates of any Class or Series offered hereby may have the benefit of a
cash collateral account. A cash collateral account with respect to a Class or
Series will be funded on the Series Issuance Date with respect thereto and the
funds on deposit therein will be invested in Eligible Investments. The amount
available to be withdrawn from a cash collateral account will be the lesser of
the amount on deposit in the cash collateral account and an amount specified in
the related Prospectus Supplement. The related Prospectus Supplement will set
forth the circumstances under which such withdrawals will be made from the Cash
Collateral Account.
SURETY BOND OR INSURANCE POLICY. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates offered
hereby may be provided by one or more insurance companies. Such insurance will
guarantee, with respect to one or more Classes of the related Series,
distributions of interest or principal in the manner and amount specified in the
related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of Certificates
offered hereby to assure distributions of interest or principal with respect to
such Series or Class of Certificates in the manner and amount specified in the
related Prospectus Supplement.
SPREAD ACCOUNT. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from the
Trust Assets into an account (the "Spread Account") intended to assure the
subsequent distributions of interest and principal on the Certificates of such
Class or Series in the manner specified in the related Prospectus Supplement.
OTHER SERIES ENHANCEMENT
For any Series or for any Class of any Series, there may be, in addition to
Credit Enhancement, other Series Enhancement in the form of a guaranteed rate
agreement, maturity liquidity facility, tax protection agreement, interest rate
cap agreement, interest rate swap agreement or other similar arrangement for the
benefit of Certificateholders of such Series or Class.
PAY OUT EVENTS
As described above, the Revolving Period with respect to a Series will
continue until the commencement of the Accumulation Period or the Scheduled
Amortization Period with respect thereto, which will continue until the Invested
Amount of such Series shall have been paid in full or the Series Termination
Date with respect to such Series occurs, unless a Pay Out Event occurs with
respect to such Series prior to any of such dates. Except as otherwise provided
in the related Prospectus Supplement with respect to any Series offered hereby,
a "Pay Out Event" with respect to a Series refers to any of the following events
and any other events specified as such in the related Prospectus Supplement:
(a) failure on the part of either of the Banks (i) to make any payment or
deposit required under the Pooling Agreement or the Supplement
relating to such Series within five business days after the date such
payment or deposit is required to be made or (ii) to observe or perform any
other covenants or
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agreements of the Banks set forth in the Pooling Agreement or such
Supplement, which failure has a material adverse effect on the
Certificateholders of such Series and which continues unremedied for a
period of 60 days after written notice; PROVIDED that no such 60-day cure
period shall apply in the case of a failure by a Seller to perform its
agreement to accept reassignment of Receivables which were the subject of a
breached representation or warranty as described in the first paragraph
under the heading "The Pooling Agreement Generally--Representations and
Warranties" and that only a five day cure period shall apply in the case of
a failure by a Seller to observe its covenant not to grant a security
interest or otherwise intentionally create a lien on the Receivables;
(b) any representation or warranty made by the Banks in the Pooling
Agreement or the Supplement with respect to such Series or any
information required to be given by the Banks to the Trustee to identify the
Accounts proves to have been incorrect in any material respect when made and
continues to be incorrect in any material respect for a period of 60 days
after written notice and as a result of which the interests of the
Certificateholders of such Series are materially and adversely affected;
PROVIDED, HOWEVER, that a Pay Out Event shall not be deemed to occur
thereunder if the relevant Bank has repurchased the related Receivables or
all such Receivables, if applicable, during such period in accordance with
the provisions of the Pooling Agreement;
(c) the occurrence of an Insolvency Event relating to either of the
Banks;
(d) a failure by a Bank to make an Addition to the Trust within five
business days after the day on which it is required to make such
Addition pursuant to the Pooling Agreement;
(e) the Trust becomes an "investment company" within the meaning of the
Investment Company Act of 1940, as amended;
(f) the average of the Portfolio Yields for any three consecutive Monthly
Periods is less than the average of the Base Rates with respect to
such Series for such Monthly Periods; the terms "Base Rate" and "Portfolio
Yield" with respect to a Series offered hereby will have the meanings set
forth in the related Prospectus Supplement;
(g) the occurrence of any Servicer Default; or
(h) either of the Banks becomes unable for any reason to transfer
Receivables to the Trust in accordance with the Pooling Agreement.
In the case of any event described in (a), (b) or (g), a Pay Out Event with
respect to any Series will be deemed to have occurred only if, after the
applicable grace period described in such clauses, if any, either the Trustee or
Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of the Certificates of any Series to which
such event relates by written notice to the Banks and the Servicer (and the
Trustee, if given by the Certificateholders) declare that a Pay Out Event has
occurred as of the date of such notice. See "Risk Factors--Control". In the case
of any event described in clause (c), (d), (e) or (h), a Pay Out Event with
respect to all Series will be deemed to have occurred without any notice or
other action on the part of the Trustee or the Certificateholders of any Series
immediately upon the occurrence of such event. In the case of the event
described in clause (f), a Pay Out Event with respect to the related Series will
be deemed to have occurred without any notice or other action on the part of the
Trustee or the Certificateholders immediately upon the Determination Date
following the occurrence of such event. The Early Amortization Period with
respect to a Series will commence on the day on which a Pay Out Event occurs
with respect thereto. Monthly distributions of principal to the
Certificateholders of such Series will begin on the Distribution Date in the
Monthly Period following the Monthly Period in which such Pay Out Event occurs
(such Distribution Date and each following Distribution Date with respect to
such Series, a "Special Payment Date"). Any amounts on deposit in a Principal
Funding Account or an Interest Funding Account with respect to such Series at
such time will be distributed on such first Special Payment Date to the
Certificateholders of such Series. If a Series has more than one Class of
Certificates, each Class may have different Pay Out Events which, in the case of
any Series of Certificates offered hereby, will be described in the related
Prospectus Supplement.
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In addition to the consequences of a Pay Out Event discussed above, if an
Insolvency Event occurs, pursuant to the Pooling Agreement, on the day of such
Insolvency Event, the Banks will immediately cease to transfer Principal
Receivables to the Trust and promptly give notice to the Trustee of such
Insolvency Event. Under the terms of the Pooling Agreement, within 15 days the
Trustee will publish a notice of the occurrence of the Insolvency Event stating
that the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables in a commercially reasonable manner and on commercially reasonable
terms unless within 90 days from the date such notice is published each other
holder of the Banks' Certificate and the holders of Certificates of each Series
or, if a Series includes more than one Class, each Class of such Series
evidencing more than 50% of the aggregate unpaid principal amount of each such
Series or Class (and, in the case of any Series with respect to which there is
an Enhancement Invested Amount, any Credit Enhancer with respect thereto)
instruct the Trustee not to dispose of or liquidate the Receivables and to
continue transferring Principal Receivables as before such Insolvency Event. The
proceeds from any such sale, disposition or liquidation of the Receivables will
be deposited in the Collection Account and allocated as described in the Pooling
Agreement and each Series Supplement. If the sum of (a) the portion of such
proceeds allocated to the Certificateholders' Interest of any Series and (b) the
proceeds of any collections on the Receivables in the Collection Account
allocated to the Certificateholders' Interest of such Series is not sufficient
to pay the Invested Amount of the Certificates of such Series in full, such
Certificateholders will incur a loss.
SERVICING COMPENSATION AND PAYMENT OF EXPENSES
The Servicer's compensation for its servicing activities and reimbursement
for its expenses for any Monthly Period will be a servicing fee (the "Servicing
Fee") payable monthly on each Distribution Date in an amount equal to
one-twelfth of the product of (a) the weighted average of the applicable
servicing fee percentages with respect to each Series outstanding (based upon
the applicable servicing fee percentage for each Series and the amount of
Receivables serviced on behalf of each Series) and (b) the amount of Principal
Receivables in the Trust on the last day of the prior Monthly Period. The
Servicing Fee will be allocated among the Sellers' Interest, the
Certificateholders' Interests of each Series and, after the Certificates of a
Series have been paid in full, the interest represented by the Enhancement
Investment Amount, if any, with respect to such Series. The share of the
Servicing Fee allocable to the Certificateholders' Interest, which includes the
Enhancement Invested Amount, if any, of a Series offered hereby with respect to
any Distribution Date shall be equal to one-twelfth of the product of (A) the
servicing fee percentage specified in the related Prospectus Supplement with
respect to such Series (the "Series Servicing Fee Percentage") and (B) the sum
of the Invested Amount with respect to such Series (less the amount, if any, on
deposit in any Principal Funding Account with respect to such Series and the
amount, if any, on deposit in the Special Funding Account allocable to such
Series) and the Enhancement Invested Amount, if any, with respect to such Series
as of the last day of the prior Monthly Period (the "Monthly Investor Servicing
Fee"). The portion of the Servicing Fee not so allocated to the
Certificateholders' Interest of a Series shall be paid by the Banks and in no
event shall the Trust, the Trustee or the Certificateholders of any Series be
liable for the share of the Servicing Fee to be paid by the Banks. Unless
otherwise provided in any Supplement, in the case of the first Distribution Date
with respect to any Series, the Monthly Investor Servicing Fee shall accrue from
the Series Issuance Date with respect to such Series. The Monthly Investor
Servicing Fee with respect to a Series will be funded from collections of
Finance Charge Receivables allocable to such Series, and will be paid on the
Distribution Date with respect to each Monthly Period from the Collection
Account (unless such amount has been netted against deposits by the Servicer to
the Collection Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, expenses related to the enforcement of the Receivables, payment of
the fees and disbursements of the Trustee and independent accountants and other
fees which are not expressly stated in the Pooling Agreement to be payable by
the Trust, the Certificateholders of a Series or the Banks (other than Federal,
state, local and foreign income, franchise or other taxes based on income, if
any, or any interest or penalties with respect thereto, imposed upon the Trust).
In the event that FDNB is acting as Servicer and fails to pay the fees and
disbursements of the Trustee, the Trustee will be entitled to receive the
portion of the Servicing Fee that is equal to such unpaid amounts. In no event
will the
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Certificateholders of a Series be liable to the Trustee for the Servicer's
failure to pay such amounts, and any such amounts so paid to the Trustee will be
treated as paid to the Servicer for all other purposes of the Pooling Agreement.
RECORD DATE
Payments on the Certificates of a Series offered hereby will be made as
described herein and in the relevant Prospectus Supplement to the
Certificateholders in whose names the Certificates were registered (expected to
be Cede, as nominee of DTC) at the close of business on the last day of the
calendar month preceding the date of such payment (each a "Record Date").
However, the final payment on the Certificates of a Series offered hereby will
be made only upon presentation and surrender of such Certificates. Distributions
will be made to DTC in immediately available funds. See "The Pooling Agreement
Generally--Book-Entry Registration".
OPTIONAL TERMINATION; FINAL PAYMENT OF PRINCIPAL
Unless otherwise specified in the Prospectus Supplement with respect to any
Series offered hereby, on any day occurring on or after the day that the sum of
the Invested Amount of the Certificates of a Series and the Enhancement Invested
Amount, if any, with respect to such Series is reduced to 5% or less of the
initial Invested Amount of the Certificates of such Series, the Banks will have
the option to repurchase the Certificateholders' Interest of such Series. The
purchase price will be equal to the sum of the Invested Amount of such Series
(less the amount, if any, on deposit in any Principal Funding Account with
respect to such Series), plus the Enhancement Invested Amount, if any, with
respect to such Series, plus accrued and unpaid interest on the unpaid principal
amount of the Certificates (and accrued and unpaid interest with respect to
interest amounts that were due but not paid on a prior Payment Date) through (a)
if the day on which such repurchase occurs is a Distribution Date, the day
preceding such Distribution Date or (b) if the day on which such repurchase
occurs is not a Distribution Date, the day preceding the Distribution Date
following such day, at the applicable certificate rate. Following any such
repurchase, the Certificateholders of such Series will have no further rights
with respect to the Receivables. In the event that the Banks fail for any reason
to deposit the aggregate purchase price for the Certificateholders' Interest of
a Series offered hereby, payments would continue to be made to the
Certificateholders of such Series as described herein and in the related
Prospectus Supplement.
In any event, the last payment of principal and interest on the Certificates
of a Series offered hereby will be due and payable not later than the date (the
"Series Termination Date") specified in the related Prospectus Supplement. In
the event that the Invested Amount of the Certificates of such Series is greater
than zero on the Series Termination Date (or a Distribution Date prior thereto
specified in the related Prospectus Supplement), the Trustee may, subject to any
conditions specified in such Prospectus Supplement, sell or cause to be sold
interests in the Principal Receivables or certain Principal Receivables,
together in each case with related Finance Charge Receivables, as specified in
such Prospectus Supplement, in an amount equal to the sum of the Invested Amount
and the Enhancement Invested Amount, if any, with respect to such Series. The
net proceeds of any such sale will be deposited in the Collection Account and
allocated to the Certificateholders of such Series, as provided in such
Prospectus Supplement.
REPORTS
No later than the third business day prior to each Distribution Date, the
Servicer will forward to the Trustee, the Paying Agent, the Rating Agency and
certain providers of Series Enhancement with respect to a Series a statement
(the "Monthly Report") prepared by the Servicer setting forth certain
information with respect to the Trust and the Certificates of such Series
(unless otherwise indicated), including: (a) the aggregate amount of Principal
Receivables and Finance Charge Receivables in the Trust as of the end of such
Monthly Period; (b) the Invested Amount with respect to such Series (and, if
such Series includes more than one Class, each such Class); (c) the Floating
Allocation Percentage and, during any Accumulation Period, Scheduled
Amortization Period or Early Amortization Period with respect to such Series,
the Principal Allocation Percentage with respect to such Series; (d) the amount
of collections of Principal Receivables and Finance Charge Receivables processed
during the related Monthly Period and the portion thereof allocated to the
Certificateholders' Interest of such Series; (e) the aggregate outstanding
balance of Accounts which
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were 30, 60 and 90 days or more delinquent as of the end of such Monthly Period;
(f) the Defaulted Amount with respect to such Monthly Period and the portion
thereof allocated to the Certificateholders' Interest of such Series; (g) the
amount, if any, of charge-offs with respect to the Certificateholders' Interest
of such Series for such Monthly Period; (h) the Monthly Investor Servicing Fee
with respect to such Series for such Monthly Period; and (i) the available
amount of Credit Enhancement with respect to such Series for such Distribution
Date.
With respect to each Interest Payment Date or Special Payment Date (each, a
"Payment Date"), as the case may be, the Monthly Report with respect to any
Series will include the following additional information with respect to the
Certificates of such Series: (a) the total amount distributed; (b) the amount of
such distribution allocable to principal on the Certificates; (c) the amount of
such distribution allocable to interest on the Certificates; and (d) the amount,
if any, by which the unpaid principal balance of the Certificates exceeds the
Invested Amount of such Series as of the Record Date with respect to such
Payment Date. On each Distribution Date, the Paying Agent, on behalf of the
Trustee, will forward to each Certificateholder of record a copy of the Monthly
Report.
On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was a Certificateholder of record a
statement containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the applicable
portion thereof during which such person was a Certificateholder, together with
such other customary information as is necessary to enable the
Certificateholders to prepare their tax returns. See "Tax Matters".
LIST OF INVESTOR CERTIFICATEHOLDERS
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder or group of Certificateholders of
record holding Certificates evidencing not less than 10% of the aggregate unpaid
principal amount of the Certificates of a Series or all outstanding Series, as
the case may be, the Trustee will afford such Certificateholders access during
normal business hours to the current list of Certificateholders of such Series
or all outstanding Series, as the case may be, for purposes of communicating
with other Certificateholders with respect to their rights under the Pooling
Agreement or any Supplement or Certificates. See "The Pooling Agreement
Generally--Book-Entry Registration" and "--Definitive Certificates".
The Pooling Agreement does not provide for any annual or other meetings of
Certificateholders.
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THE POOLING AGREEMENT GENERALLY
BOOK-ENTRY REGISTRATION
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold Certificates of a Series offered hereby through DTC
(in the United States) or CEDEL or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a certificate
representing such person's interest in the Certificates. Unless and until
Definitive Certificates are issued under the limited circumstances described
below, all references herein to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from its Participants, and all references
herein to distributions, notices, reports and statements to Certificateholders
shall refer to distributions, notices, reports and statements to Cede, as the
registered holder of the Certificates, for distribution to Certificateholders in
accordance with DTC procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and Euroclear's
names on the books of their respective Depositaries which in turn will hold such
positions in customers' securities accounts in the Depositaries' names on the
books of DTC. Citibank, N.A. ("Citibank"), will act as depositary for CEDEL and
Morgan Guaranty Trust Company of New York ("Morgan") will act as depositary for
Euroclear (in such capacities, the "Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between CEDEL Participants and Euroclear
Participants will occur in the ordinary way in accordance with their applicable
rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear participants, on the other, will be effected in DTC in accordance with
DTC rules on behalf of the relevant European international clearing system by
its Depositary; however, such cross-market transactions will require delivery of
instructions to the relevant European international clearing system by the
counterparty in such system in accordance with its rules and procedures and
within its established deadlines (European time). The relevant European
international clearing system will, if the transaction meets its settlement
requirements, deliver instructions to its Depositary to take action to effect
final settlement on its behalf by delivering or receiving securities in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in CEDEL or
Euroclear as a result of a transaction with a DTC participant will be made
during subsequent securities settlement processing and dated the business day
following the DTC settlement date. Such credits or any transactions in such
securities settled during such processing will be reported to the relevant
Euroclear or CEDEL participant on such business day. Cash received in CEDEL or
Euroclear as a result of sales of securities by or through a CEDEL Participant
or a Euroclear Participant to a DTC participant will be received with value on
the DTC settlement date but will be available in the relevant CEDEL or Euroclear
cash account only as of the business day following settlement in DTC. For
information with respect to tax documentation procedures relating to the
Certificates, see "Tax Matters--Federal Income Tax Consequences--Non-United
States Investors".
DTC is a limited-purpose trust company organized under the laws of the State
of New York, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the UCC and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participating organizations ("Participants") and facilitate
the clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and may include certain other
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organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants").
Certificateholders that are not Participants or Indirect Participants but
desire to purchase, sell or otherwise transfer ownership of, or other interests
in, Certificates may do so only through Participants and Indirect Participants.
In addition, Certificateholders will receive all distributions of principal of
and interest on the Certificates from the Paying Agent or the Trustee through
DTC and its Participants. Under a book-entry format, Certificateholders will
receive payments after the related Payment Date because, while payments are
required to be forwarded to Cede, as nominee for DTC, on each such date, DTC
will forward such payments to its Participants which thereafter will be required
to forward them to Indirect Participants or Certificateholders. It is
anticipated that the only "Certificateholder" (as such term is used in the
Pooling Agreement and the Supplements) will be Cede, as nominee of DTC, and that
Certificateholders will not be recognized by the Trustee as "Certificateholders"
under the Pooling Agreement and the Supplements. Certificateholders will only be
permitted to exercise the rights of Certificateholders under the Pooling
Agreement and the Supplements indirectly through DTC and its Participants which
in turn will exercise their rights through DTC.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers among Participants
on whose behalf it acts with respect to the Certificates and is required to
receive and transmit distributions of principal of and interest on the
Certificates. Participants and Indirect Participants with which
Certificateholders have accounts with respect to the Certificates similarly are
required to make book-entry transfers and receive and transmit such payments on
behalf of their respective Certificateholders.
Because DTC can only act on behalf of Participants, which in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Certificateholder to pledge Certificates to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
Certificates, may be limited due to the lack of a physical certificate for such
Certificates.
DTC has advised the Banks that it will take any action permitted to be taken
by a Certificateholder under the Pooling Agreement or the Supplements only at
the direction of one or more Participants to whose account with DTC the
Certificates are credited. Additionally, DTC has advised the Banks that it will
take such actions with respect to specified percentages of the
Certificateholders' Interest only at the direction of and on behalf of
Participants whose holdings include undivided interests that satisfy such
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that such actions are taken on behalf of
Participants whose holdings include such undivided interests.
CEDEL Bank, societe anonyme ("CEDEL") is incorporated under the laws of
Luxembourg as a professional depository. CEDEL holds securities for its
participating organizations ("CEDEL Participants") and facilitates the clearance
and settlement of securities transactions between CEDEL Participants through
electronic book-entry changes in accounts of CEDEL Participants, thereby
eliminating the need for physical movement of certificates. Transactions may be
settled in CEDEL in any of 28 currencies, including United States dollars. CEDEL
provides to its Participants, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. CEDEL interfaces with domestic markets in
several countries. As a professional depository, CEDEL is subject to regulation
by the Luxembourg Monetary Institute. CEDEL Participants are recognized
financial institutions around the world including underwriters, securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations and may include any underwriters, agents or dealers with
respect to a Series of Certificates offered hereby. Indirect access to CEDEL is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a CEDEL
Participant, either directly or indirectly.
The Euroclear System was created in 1968 to hold securities for participants
of the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
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movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 27 currencies,
including United States dollars. The Euroclear System includes various other
services, including securities lending and borrowing, and interfaces with
domestic markets in several countries generally similar to the arrangements for
cross-market transfers with DTC described above. The Euroclear System is
operated by Morgan Guaranty Trust Company of New York, Brussels, Belgium office
(the "Euroclear Operator" or "Euroclear"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "Cooperative").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include any underwriters,
agents or dealers with respect to a Series of Certificates offered hereby.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawals of
securities and cash from the Euroclear System and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants, and has no record
of or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or Euroclear
will be credited to the cash accounts of CEDEL Participants or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. Such distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Tax Matters". CEDEL or the Euroclear Operator, as the case may be, will
take any other action permitted to be taken by a Certificateholder under the
Pooling Agreement or the relevant Supplement on behalf of a CEDEL Participant or
Euroclear Participant only in accordance with its relevant rules and procedures
and subject to its Depositary's ability to effect such actions on its behalf
through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures in
order to facilitate transfers of Certificates among participants of DTC, CEDEL
and Euroclear, they are under no obligation to perform or continue to perform
such procedures and such procedures may be discontinued at any time.
DEFINITIVE CERTIFICATES
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series offered hereby will be issued in fully registered,
certificated form to Certificateholders or their respective nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i) the
Banks advise the Trustee in writing that DTC is no longer willing or able to
discharge properly its responsibilities as Depository with respect to the
Certificates, and the Trustee or the Banks are unable to locate a qualified
successor, (ii) the Banks, at their option, elect to terminate the book-entry
system through DTC or (iii) after the occurrence of a Servicer Default,
Certificateholders evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates of any Class of such Series advise the
Trustee and DTC through Participants in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in the best
interests of the Certificateholders.
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Upon the occurrence of any of the events described in the immediately
preceding paragraph, DTC is required to notify all Participants of the
availability through DTC of Definitive Certificates. Upon surrender by DTC of
the definitive certificates representing the Certificates and instructions for
re-registration, the Trustee will issue such Certificates in the form of
Definitive Certificates, and thereafter the Trustee will recognize the holders
of such Definitive Certificates as "Certificateholders" under the Pooling
Agreement and the relevant Supplement ("Holders").
If Definitive Certificates are issued, distribution of principal and
interest on the Definitive Certificates will be made by the Paying Agent or the
Trustee directly to the Holders in whose names the Definitive Certificates were
registered on the related Record Date in accordance with the procedures set
forth herein and in the Pooling Agreement and the relevant Supplement.
Distributions will be made by check mailed to the address of each Holder as it
appears on the register maintained by the Trustee, except that the final payment
on any Definitive Certificate will be made only upon presentation and surrender
of such Definitive Certificate on the date for such final payment at such office
or agency as is specified in the notice of final distribution to Holders. The
Trustee will provide such notice to Holders not later than the fifth day of the
month of the final distribution.
Definitive Certificates will be transferable and exchangeable at the offices
of the Transfer Agent and Registrar, which shall initially be the Trustee. No
service charge will be imposed for any registration of transfer or exchange, but
the Transfer Agent and Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge imposed in connection therewith.
THE BANKS' CERTIFICATE; ADDITIONAL SELLERS
The Pooling Agreement provides that the Banks may exchange a portion of the
certificate evidencing the Banks' interest in the Trust for one or more
additional certificates (each, a "Supplemental Certificate") for transfer or
assignment to a person designated by the Banks upon the execution and delivery
of a supplement to the Pooling Agreement (which supplement shall be subject to
the amendment section of the Pooling Agreement to the extent that it amends any
of the terms of the Pooling Agreement; see "--Amendments"); PROVIDED that (a)
such transfer will not result in a Ratings Effect, (b) the Banks' and any
Additional Sellers remaining interest in Principal Receivables shall not be less
in the aggregate than 2% of the total amount of Principal Receivables, in each
case as of the date of, and after giving effect to, such exchange and (c) prior
to such exchange, the Banks shall have delivered to the Trustee a Tax Opinion
with respect to the transfer or assignment of such Supplemental Certificate. Any
transfer or assignment of a Supplemental Certificate is subject to the
conditions set forth in clauses (a) and (c) of the preceding sentence. The Banks
may also transfer a portion of the Certificate evidencing the Banks' interest in
the Trust to certain affiliates provided that the condition set forth in clause
(c) of the second preceding sentence has been satisfied.
The Banks may designate affiliates of the Banks which may be banks, finance
companies or similar organizations to be included as sellers ("Additional
Sellers") under the Pooling Agreement (by means of an amendment to the Pooling
Agreement which will not require the consent of any Certificateholder; see
"--Amendments") and, in connection with the designation of an Additional Seller,
the Banks shall surrender the Banks' Certificate to the Trustee in exchange for
a newly issued Banks' Certificate modified to reflect such Additional Seller's
interest in the Sellers' Interest; PROVIDED, HOWEVER, that (a) the conditions
set forth in clauses (a) and (c) in the preceding paragraph with respect to a
transfer of a Supplemental Certificate shall have been satisfied with respect to
such designation and issuance and (b) any applicable conditions described in
"Description of the Certificates--Addition of Trust Assets" shall have been
satisfied with respect to the transfer of Receivables or Participations by any
Additional Seller to the Trust. Following the inclusion of an Additional Seller,
the Additional Seller will be treated in the same manner as a Bank and each
Additional Seller generally will have the same obligations and rights as a Bank
described herein.
TERMINATION OF TRUST
Unless the Banks instruct the Trustee otherwise, the Trust will only
terminate on the earlier to occur of (a) the day following the day on which the
aggregate Invested Amounts and Enhancement Invested Amounts of all Series is
zero (provided that the Banks shall have delivered a written notice to the
Trustee electing to terminate the Trust), (b) June 1, 2014, or (c) if the
Receivables are sold, disposed of or liquidated
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following the occurrence of an Insolvency Event as described under "Description
of the Certificates--Pay Out Events", immediately following such sale,
disposition or liquidation (the "Trust Termination Date"). Upon termination of
the Trust, all right, title and interest in the Receivables and other funds of
the Trust (other than amounts in accounts maintained by the Trust for the final
payment of principal and interest to Certificateholders) will be conveyed and
transferred to the Banks.
CONVEYANCE OF RECEIVABLES
Pursuant to the Pooling Agreement, the Banks have sold and assigned and will
sell and assign to the Trust their respective interests in all Receivables in
the Initial Accounts outstanding as of the Trust Cut-Off Date, and all
Receivables in the Additional Accounts as of the applicable additional cut-off
date, all Receivables thereafter created under the Accounts and the proceeds of
all of the foregoing.
In connection with the transfer of any Receivables to the Trust, the Banks
are required to indicate in their computer records that the Receivables have
been conveyed to the Trust. In addition, the Banks have provided or will provide
to the Trustee a computer file or a microfiche list containing a true and
complete list showing for each Initial Account, as of the Trust Cut-Off Date,
and for each Additional Account, as of the applicable additional cut-off date
(i) its account number and (ii) the aggregate amount outstanding and the
aggregate amount of Principal Receivables in such Account. FDNB, as initial
Servicer, will retain and will not deliver to the Trustee any other records or
agreements relating to the Accounts or the Receivables. Except as set forth
above, the records and agreements relating to the Accounts and the Receivables
will not be segregated from those relating to other revolving credit accounts
and receivables, and the physical documentation relating to the Accounts or
Receivables will not be stamped or marked to reflect the transfer of Receivables
to the Trust. The Banks have filed and are required to file UCC financing
statements with respect to the sale of the Receivables to the Trust meeting the
requirements of applicable state law. See "Special Considerations" and "Certain
Legal Aspects of the Receivables".
REPRESENTATIONS AND WARRANTIES
As of the issuance date for a Series offered hereby (the "Series Issuance
Date") specified in the related Prospectus Supplement, each Bank will severally
make representations and warranties to the Trust relating to the Accounts owned
by it and the Receivables transferred by it to the Trust to the effect, among
other things, that (a) as of the Trust Cut-Off Date (or as of the date of
addition) each Account or each Additional Account was an Eligible Account, (b)
as of the Trust Cut-Off Date (or as of the date of addition), each of the
Receivables in any Account or Additional Account which is conveyed to the Trust
on such day is an Eligible Receivable and (c) thereafter, as of the date of
creation of any new Receivable, such Receivable is an Eligible Receivable. If a
Bank breaches any representation and warranty described in this paragraph, such
breach remains uncured for 60 days, or such longer period as may be agreed to by
the Trustee, after the earlier to occur of the discovery of such breach by such
Bank or receipt of written notice of such breach by such Bank, and as a result
of such breach any Receivables in the related Account become Defaulted
Receivables or the Trust's rights in, to or under such Receivables or the
proceeds of such Receivables are impaired or such proceeds are not available for
any reason to the Trust free and clear of any lien, then the Certificateholders'
Interest in all Receivables with respect to the affected Account ("Ineligible
Receivables") will be reassigned to such Bank on the terms and conditions set
forth below and such Account shall no longer be included as an Account;
PROVIDED, HOWEVER, that such Receivables will not be deemed to be Ineligible
Receivables and will not be reassigned to such Bank if, on any day prior to the
end of such 60-day or longer period, (i) the relevant representation and
warranty shall be true and correct in all material respects as if made on such
day and (ii) such Bank shall have delivered to the Trustee a certificate of an
authorized officer describing the nature of such breach and the manner in which
the relevant representation and warranty became true and correct.
An Ineligible Receivable shall be reassigned to the relevant Bank on or
before the end of the Monthly Period in which such reassignment obligation
arises by such Bank directing the Servicer to deduct the portion of such
Ineligible Receivable which is a Principal Receivable from the aggregate amount
of the Principal Receivables used to calculate the Sellers' Interest. In the
event that the exclusion of an Ineligible Receivable from the calculation of the
Sellers' Interest would cause the Sellers' Interest to be a negative number, on
the Distribution Date following the Monthly Period in which such reassignment
obligation
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arises, the related Bank will make a deposit into the Collection Account in
immediately available funds in an amount equal to the amount by which the
Sellers' Interest would be reduced below zero. Any deposit into the Collection
Account in connection with the reassignment of an Ineligible Receivable (the
amount of any such deposit being referred to herein as a "Transfer Deposit
Amount") shall be considered a payment in full of the Ineligible Receivable. The
reassignment of any Ineligible Receivable to a Bank is the sole remedy
respecting any breach of the representations and warranties described in the
preceding paragraph with respect to such Receivable available to
Certificateholders of any Series (or the Trustee on behalf of such
Certificateholders) or any provider of Series Enhancement. Any such Transfer
Deposit Amount will be treated as a portion of Shared Principal Collections as
described under "Description of the Certificates-- Shared Principal
Collections".
Each Bank will also make representations and warranties to the Trust to the
effect, among other things, that as of each Series Issuance Date (a) it is a
national banking association validly existing under the laws of the United
States, it has the authority to consummate the transactions contemplated by the
Pooling Agreement and the related Supplement and each of the Pooling Agreement
and the related Supplement constitutes a valid, binding and enforceable
agreement of such Bank and (b) the Pooling Agreement constitutes a valid sale,
transfer and assignment to the Trust of all right, title and interest of such
Bank in the Receivables, whether then existing or thereafter created and the
proceeds thereof (including proceeds in any of the accounts established for the
benefit of the Certificateholders) or the grant of a first priority perfected
security interest under the UCC as in effect in California and New Hampshire in
such Receivables and the proceeds thereof (including proceeds in any of the
accounts established for the benefit of the Certificateholders), which is
effective as to each Receivable then existing on the Series Issuance Date or, as
to each Receivable arising thereafter, upon the creation thereof and until
termination of the Trust. In the event that the breach of any of the
representations and warranties described in this paragraph has a material
adverse effect on the Certificateholders' Interest of all Series in the
Receivables transferred to the Trust by such Bank, either the Trustee or the
holders of Certificates evidencing not less than 50% of the aggregate unpaid
principal amount of the Certificates of all Series, by written notice to such
Bank and the Servicer (and to the Trustee if given by the holders of the
requisite percentage of Certificates of all Series), may direct such Bank to
accept the reassignment of the Receivables transferred by it to the Trust within
60 days of such notice, or within such longer period specified in such notice;
PROVIDED, HOWEVER, that such Receivables will not be reassigned to such Bank if,
on any day prior to the end of such 60-day or longer period, (i) the relevant
representation and warranty shall be true and correct in all material respects
as if made on such day and (ii) such Bank shall have delivered to the Trustee a
certificate of an authorized officer describing the nature of such breach and
the manner in which the relevant representation and warranty became true and
correct. Such Bank will be obligated to accept the reassignment of such
Receivables on the Distribution Date following the Monthly Period in which such
reassignment obligation arises. The price for such reassignment will generally
be equal to the product of (x) the aggregate Invested Amounts and Enhancement
Invested Amounts of all Series on the Distribution Date on which the purchase is
scheduled to be made plus accrued and unpaid interest on the unpaid principal
amount of all Series and any interest amounts that were due but not paid on a
prior date and interest on such overdue interest amounts (if the applicable
Supplement so provides) at the applicable certificate rates through the day
preceding such Distribution Date and (y) a fraction, the numerator of which is
equal to the aggregate amount of Principal Receivables in the Trust on such
Distribution Date which were transferred to the Trust by such Bank and the
denominator of which is equal to the aggregate amount of Principal Receivables
in the Trust on such day. The payment of such reassignment price, in immediately
available funds, will be considered a payment in full of such Receivables and
the principal portion of such funds and the interest portion of such funds will
be deposited into the Special Funding Account and the Collection Account,
respectively. If the Trustee or the requisite percentage of holders of
Certificates of all Series gives a notice as provided above, the obligation of
such Bank to make any such deposit will constitute the sole remedy respecting a
breach of the representations and warranties available to Certificateholders of
all Series (or the Trustee on behalf of such Certificateholders) or any provider
of Series Enhancement.
An "Eligible Account" is defined to mean a revolving credit card account or
other revolving credit account owned by one of the Banks which as of the Trust
Cut-Off Date with respect to an Initial Account or
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as of the addition date with respect to an Additional Account: (a) is payable in
United States dollars; (b) except as provided below, has not been identified as
an account the credit cards or checks, if any, with respect to which have been
reported to such Bank as having been lost or stolen; (c) has an accountholder
who has provided, as his or her billing address at the date such account was
opened, an address located in the United States or its territories or
possessions or a military address; (d) has an accountholder who has not been
identified by such Bank as an employee of such Bank or any affiliate; (e) has
not been, and does not have any receivables which have been, sold, pledged,
assigned or otherwise conveyed to any person (except pursuant to the Pooling
Agreement); (f) except as provided below, does not have any receivables which
are Defaulted Receivables; and (g) except as provided below, does not have any
receivables which have been identified as having been incurred as a result of
fraudulent use of any related credit card or check. Eligible Accounts may
include accounts, the receivables of which have been written off, or with
respect to which the related Bank believes the related accountholder is
bankrupt, or as to which certain receivables have been identified by the
accountholder as having been incurred as a result of fraudulent use of any
credit cards or checks, or as to which any credit cards or checks have been
reported to such Bank as lost or stolen; PROVIDED, that (a) the balance of all
receivables in such accounts is reflected on the books and records of such Bank
(and is treated for purposes of the Pooling Agreement) as "zero", and (b)
charging or check writing privileges with respect to all such accounts have been
canceled in accordance with the Lending Guidelines of such Bank and will not be
reinstated by such Bank or the Servicer.
An "Eligible Receivable" is defined to mean each Receivable (a) which has
arisen under an Eligible Account; (b) which was created in compliance with the
Lending Guidelines and all requirements of law applicable to the relevant Bank,
the failure to comply with which would have a material adverse effect on
Certificateholders, and pursuant to a lending agreement which complies with all
requirements of law applicable to such Bank, the failure to comply with which
would have a material adverse effect on Certificateholders; (c) with respect to
which all consents, licenses, approvals or authorizations of, or registrations
with, any governmental authority required to be obtained or given by such Bank
in connection with the creation of such Receivable or the execution, delivery
and performance by such Bank of the related lending agreement have been duly
obtained or given and are in full force and effect as of the date of the
creation of such Receivable; (d) as to which, at the time of its transfer to the
Trust, the Banks or the Trust will have good and marketable title free and clear
of all liens and security interests (other than any lien for municipal or other
local taxes if such taxes are not then due and payable or if the relevant Bank
is then contesting the validity thereof in good faith by appropriate proceedings
and has set aside on its books adequate reserves with respect thereto); (e)
which has been the subject of either a valid transfer and assignment from the
Banks to the Trust of all the Banks' right, title and interest therein or the
grant of a first priority perfected security interest therein (and in the
proceeds thereof), effective until the termination of the Trust; (f) which at
and after the time of transfer to the Trust is the legal, valid and binding
payment obligation of the accountholder thereof, legally enforceable against
such accountholder in accordance with its terms (with certain bankruptcy and
equity-related exceptions); (g) which constitutes either an "account" or a
"general intangible" under Article 9 of the UCC as then in effect in the states
of California and New Hampshire; (h) which, at the time of its transfer to the
Trust, has not been waived or modified except as permitted by the Pooling
Agreement; (i) which, at the time of its transfer to the Trust, is not subject
to any right of rescission, setoff, counterclaim or other defense of the
accountholder (including the defense of usury), other than certain bankruptcy
and equity-related defenses and adjustments permitted by the Pooling Agreement
to be made by the Servicer; (j) as to which such Bank has satisfied all
obligations to be fulfilled at the time it is transferred to the Trust; and (k)
as to which such Bank has not taken any action which, or failed to take any
action the omission of which, would, at the time of its transfer to the Trust,
to impair the rights of the Trust or Certificateholders therein.
It is not required or anticipated that the Trustee will make any initial or
periodic general examination of any documents or records related to the
Receivables or the Accounts for the purpose of establishing the presence or
absence of defects, compliance with the Banks' representations and warranties or
for any other purpose. In addition, it is not anticipated or required that the
Trustee will make any initial or periodic general examination of the Servicer
for the purpose of establishing the compliance by the Servicer with its
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representations or warranties or the performance by the Servicer of its
obligations under the Pooling Agreement or for any other purpose. The Servicer,
however, will deliver to the Trustee on or before March 31 of each calendar year
an opinion of counsel with respect to the validity of the interest of the Trust
in and to the Receivables and certain other components of the Trust.
INDEMNIFICATION
The Pooling Agreement provides that the Servicer will indemnify the Trust
and the Trustee from and against any loss, liability, expense, damage or injury
suffered or sustained arising out of the Servicer's actions or omissions with
respect to the Trust pursuant to the Pooling Agreement.
Under the Pooling Agreement, the Banks have agreed to be liable directly to
an injured party for the entire amount of any losses, claims, damages or
liabilities (other than those incurred by a Certificateholder in the capacity of
an investor in the Certificates of any Series) arising out of or based on the
arrangement created by the Pooling Agreement (to the extent that the Trust
assets remaining after the Investor Certificateholders and certain providers of
Series Enhancement have been paid in full are insufficient to pay such losses,
claims, damages, or liabilities) as though such agreement created a partnership
under the New York Uniform Partnership Act in which the Banks were general
partners. In the event of a Service Transfer, the successor Servicer will
indemnify and hold harmless the Banks for any losses, claims, damages and
liabilities of the Banks as described in this paragraph arising from the actions
or omissions of such successor Servicer.
Except as provided in the preceding paragraph, the Pooling Agreement
provides that none of the Banks, the Servicer or any of their directors,
officers, employees or agents will be under any other liability to the Trust,
the Trustee, the holders of Certificates of any Series, any provider of Series
Enhancement or any other person for any action taken, or for refraining from
taking any action, in good faith pursuant to the Pooling Agreement. However,
none of the Banks, the Servicer or any of their directors, officers, employees
or agents will be protected against any liability which would otherwise be
imposed by reason of willful misfeasance, bad faith or gross negligence of any
such person in the performance of their duties or by reason of reckless
disregard of their obligations and duties thereunder.
In addition, the Pooling Agreement provides that the Servicer is not under
any obligation to appear in, prosecute or defend any legal action which is not
incidental to its servicing responsibilities under the Pooling Agreement. The
Servicer may, in its sole discretion, undertake any such legal action which it
may deem necessary or desirable for the benefit of holders of Certificates of
any Series with respect to the Pooling Agreement and the rights and duties of
the parties thereto and the interest of such Certificateholders thereunder.
COLLECTION AND OTHER SERVICING PROCEDURES
Pursuant to the Pooling Agreement, the Servicer is responsible for
servicing, collecting, enforcing and administering the Receivables in accordance
with its customary and usual procedures for servicing receivables comparable to
the Receivables and the Lending Guidelines.
Servicing activities to be performed by the Servicer include collecting and
recording payments, communicating with accountholders, investigating payment
delinquencies, evaluating the increase of credit limits and the issuance of
credit cards, providing billing and tax records, if any, to accountholders and
maintaining internal records with respect to each Account. Managerial and
custodial services performed by the Servicer on behalf of the Trust include
providing assistance in any inspections of the documents and records relating to
the Accounts and Receivables by the Trustee pursuant to the Pooling Agreement,
maintaining the agreements, documents and files relating to the Accounts and
Receivables as custodian for the Trust and providing related data processing and
reporting services for Certificateholders of any Series and on behalf of the
Trustee.
Pursuant to the Pooling Agreement, FDNB, as Servicer, has the right to
delegate any of its responsibilities and obligations as Servicer to any of its
affiliates and to certain third-party service providers that agrees to conduct
such duties in accordance with the Pooling Agreement and the Lending Guidelines.
FDNB currently contracts with Total System and intends to continue to contract
with Total System (and possibly one or more other third-party service providers)
to perform certain of its servicing activities as described under
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"The Banks' Credit Card and Consumer Lending Business--Business Overview".
Notwithstanding any such delegation to any entity, the Servicer will continue to
be liable for all of its obligations under the Pooling Agreement.
SERVICER COVENANTS
In the Pooling Agreement, the Servicer has covenanted as to each Receivable
and related Account that: (a) it will duly fulfill all obligations on its part
to be fulfilled under or in connection with the Receivable or Account, and will
maintain in effect all qualifications required in order to service the
Receivable or Account the failure to comply with which would have a material
adverse effect on the Certificateholders or any provider of Series Enhancement;
(b) it will not permit any rescission or cancellation of the Receivable except
as ordered by a court of competent jurisdiction or other governmental authority
or in the ordinary course of business and in accordance with the Lending
Guidelines; (c) it will do nothing to substantially impair the rights of the
Certificateholders in the Receivables or Accounts; (d) it will not reschedule,
revise or defer payments due on the Receivable except in accordance with the
Lending Guidelines; and (e) except in connection with its enforcement or
collection of an Account, it will take no action to cause any Receivables to be
evidenced by any instruments (as defined in the UCC) and if any Receivable is so
evidenced, it shall be reassigned or assigned to the Servicer as provided below.
Under the terms of the Pooling Agreement, in the event any of the
representations, warranties or covenants of the Servicer contained in clauses
(a) through (e) above with respect to any Receivable or the related Account is
breached, such breach is not cured within 60 days (or such longer period, not in
excess of 150 days, as may be agreed to by the Trustee) of the earlier to occur
of the discovery of such event by the Servicer or receipt by the Servicer of
written notice of such event given by the Trustee, and as a result of such
breach the Trust's rights in, to or under any Receivables in the related Account
or the proceeds of such Receivables are impaired or such proceeds are not
available for any reason to the Trust free and clear of any lien, then all
Receivables in the Account or Accounts to which such event relates shall be
reassigned or assigned to the Servicer on the terms and conditions set forth
below; PROVIDED, HOWEVER, that such Receivables will not be reassigned or
assigned to the Servicer if, on any day prior to the end of such 60-day or
longer period, (i) the relevant representation and warranty shall be true and
correct, or the relevant covenant shall have been complied with, in all material
respects and (ii) the Servicer shall have delivered to the Trustee a certificate
of an authorized officer describing the nature of such breach and the manner in
which such breach was cured. If FDNB is the Servicer, such reassignment will be
made on or before the Distribution Date following the Monthly Period in which
such reassignment obligation arises by the Servicer deducting the portion of any
such Receivable which is a Principal Receivable from the aggregate amount of
Principal Receivables used to calculate the Sellers' Interest. In addition, if
the deduction of such Principal Receivable would reduce the Sellers' Interest
below zero, FDNB as the Servicer will deposit into the Collection Account the
applicable Transfer Deposit Amount described above under "--Representations and
Warranties". If FDNB is not the Servicer, such assignment and transfer will be
made when the Servicer deposits an amount equal to the amount of such Receivable
in the Collection Account on the business day preceding the Distribution Date
following the Monthly Period during which such obligation arises. The amount of
such deposit shall be deemed a Transfer Deposit Amount hereunder and shall be
treated as a portion of Shared Principal Collections as described under
"Description of the Certificates--Shared Principal Collections". This
reassignment or transfer and assignment to the Servicer constitutes the sole
remedy available to the Certificateholders of any Series if such covenant or
warranty of the Servicer is not satisfied and the Trust's interest in any such
reassigned Receivables shall be automatically assigned to the Servicer.
CERTAIN MATTERS REGARDING THE SERVICER
The Servicer may not resign from its obligations and duties under the
Pooling Agreement, except upon determination that such duties are no longer
permissible under applicable law. No such resignation will become effective
until the Trustee or a successor to the Servicer has assumed the Servicer's
responsibilities and obligations under the Pooling Agreement. Notwithstanding
the foregoing, FDNB may transfer its servicing obligations to any other direct
or indirect wholly-owned subsidiary of Providian Corporation (which meets
certain eligibility standards set forth in the Pooling Agreement) and be
relieved of its obligations and duties under the Pooling Agreement.
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Any person into which, in accordance with the Pooling Agreement, FDNB or the
Servicer may be merged or consolidated or any person resulting from any merger
or consolidation to which FDNB or the Servicer is a party, or any person
succeeding to the business of FDNB or the Servicer, will be the successor to
FDNB, as servicer, or the Servicer, as the case may be, under the Pooling
Agreement.
SERVICER DEFAULT
In the event of any Servicer Default, either the Trustee or
Certificateholders holding Certificates evidencing more than 50% of the
aggregate unpaid principal amount of all outstanding Series, by written notice
to the Servicer (and to the Trustee and certain providers of Series Enhancement,
if given by the Certificateholders) (a "Termination Notice"), may terminate all
of the rights and obligations of the Servicer, as servicer, under the Pooling
Agreement. If the Trustee within 60 days of receipt of a Termination Notice is
unable to obtain any bids from eligible Servicers and the Banks deliver an
officer's certificate to the effect that the Servicer cannot in good faith cure
the Servicer Default which gave rise to the Termination Notice, then the Trustee
shall offer the Banks the right at their option to purchase the
Certificateholders' Interest for all Series. The purchase price for such a
purchase shall be paid on a Distribution Date and shall generally be equal to,
with respect to each Series, the higher of (a) the sum of the Invested Amount
and the Enhancement Invested Amount, if any, of such Series on such Distribution
Date (less the amount, if any, on deposit in any Principal Funding Account with
respect to such Series) plus accrued and unpaid interest at the applicable
certificate rate (together with, if applicable, interest on interest amounts
that were due and not paid on a prior date), through the last day of the
calendar month preceding such Distribution Date and (b) the sum of (i) the
average bid price quoted by at least two recognized dealers for similar
securities rated in the same rating category as the initial rating of the
Certificates of such Series with a remaining maturity approximately equal to the
remaining maturity of the Certificates of such Series and (ii) the Enhancement
Invested Amount, if any, of such Series.
The Trustee shall, as promptly as possible after giving a Termination
Notice, appoint a successor Servicer (a "Service Transfer"), and if no successor
Servicer has been appointed by the Trustee and has accepted such appointment by
the time the Servicer ceases to act as Servicer, all rights, authority, power
and obligations of the Servicer under the Pooling Agreement shall pass to and be
vested in the Trustee. Prior to any Service Transfer, the Trustee will seek to
obtain bids from potential Servicers meeting certain eligibility requirements
set forth in the Pooling Agreement to serve as a successor Servicer for
servicing compensation not in excess of the Servicing Fee. The rights and
interest of the Banks under the Pooling Agreement and any Supplement in the
Sellers' Interest will not be affected by any Termination Notice or Service
Transfer.
A "Servicer Default" refers to any of the following events:
(a) failure by the Servicer to make any payment, transfer or deposit, or
to give instructions or to give notice to the Trustee to make such
payment, transfer or deposit, on the date the Servicer is required to do so
under the Pooling Agreement or any Supplement, which is not cured within a
five business day grace period;
(b) failure on the part of the Servicer duly to observe or perform in any
material respect any other covenants or agreements of the Servicer in
the Pooling Agreement or any Supplement which has a material adverse effect
on the Certificateholders of any Series or Class (which determination shall
be made without regard to whether funds are then available pursuant to any
Series Enhancement) and which continues unremedied for a period of 60 days
after written notice, or the Servicer delegates its duties under the Pooling
Agreement, except as specifically permitted thereunder, and such delegation
continues unremedied for 15 days after written notice;
(c) any representation, warranty or certification made by the Servicer in
the Pooling Agreement or any Supplement or in any certificate
delivered pursuant to the Pooling Agreement or any Supplement proves to have
been incorrect when made, which has a material adverse effect on the rights
of the Certificateholders of any Series or Class (which determination shall
be made without regard to whether funds are then available pursuant to any
Series Enhancement), and which material adverse effect continues for a
period of 60 days after written notice; or
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(d) the occurrence of certain events of bankruptcy, insolvency or
receivership with respect to the Servicer.
Notwithstanding the foregoing, a delay in or failure of performance referred
to under clause (a) above for a period of five business days or referred to
under clause (b) or (c) for a period of 60 days (in addition to any period
provided in (a), (b) or (c)) shall not constitute a Servicer Default until the
expiration of such additional five business days or 60 days, respectively, if
such delay or failure could not be prevented by the exercise of reasonable
diligence by the Servicer and such delay or failure was caused by an act of God
or other similar occurrence. Upon the occurrence of any such event the Servicer
shall not be relieved from using its best efforts to perform its obligations in
a timely manner in accordance with the terms of the Pooling Agreement and any
Supplement and the Servicer shall provide the Trustee, the Banks, certain
providers of Series Enhancement and the Certificateholders of each Series prompt
notice of such failure or delay by it, together with a description of its
efforts to so perform its obligations. The Servicer shall immediately notify the
Trustee in writing of any Servicer Default.
EVIDENCE AS TO COMPLIANCE
The Pooling Agreement provides that on or before March 31 of each calendar
year the Servicer will cause a firm of nationally recognized independent public
accountants (who may also render other services to the Servicer or the Banks) to
furnish a report to the effect that such firm has applied certain procedures
agreed upon with the Servicer and examined certain documents and records
relating to the servicing of the Accounts and that, on the basis of such
procedures, nothing came to the attention of such firm that caused them to
believe that such servicing was not conducted in compliance with the Pooling
Agreement and the applicable provisions of each Supplement except for such
exceptions or errors as such firm shall believe to be immaterial and such other
exceptions as shall be set forth in such statement.
The Pooling Agreement provides for delivery to the Trustee, the Rating
Agency and certain providers of Series Enhancement on or before March 31 of each
calendar year of a statement signed by an officer of the Servicer to the effect
that, to the best of such officer's knowledge, the Servicer has performed its
obligations in all material respects under the Pooling Agreement throughout the
preceding year or, if there has been a default in the performance of any such
obligation, specifying the nature and status of the default.
Copies of all statements, certificates and reports furnished to the Trustee
may be obtained by a request in writing delivered to the Trustee.
AMENDMENTS
The Pooling Agreement and any Supplement may be amended from time to time
(including in connection with (x) the issuance of a Supplemental Certificate,
(y) the addition of a Participation to the Trust or (z) the designation of an
Additional Seller) by agreement of the Trustee and the Banks without the consent
of the Certificateholders of any Series or the consent of the provider of any
Series Enhancement provided that (i) each Bank shall have delivered to the
Trustee a certificate of an authorized officer to the effect that such Bank
reasonably believes, based on the facts known to such officer at the time of
such certificate, that such amendment will not adversely affect in any material
respect the interests of any such Certificateholder and (ii) such amendment will
not result in a Ratings Effect.
The Pooling Agreement and any Supplement may also be amended from time to
time by the Banks, the Servicer and the Trustee with the consent of the holders
of Certificates evidencing not less than 66 2/3% of the aggregate unpaid
principal amount of the Certificates of all adversely affected Series for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of the Pooling Agreement or any Supplement or of modifying in
any manner the rights of such Certificateholders. No such amendment, however,
may (a) reduce in any manner the amount of or delay the timing of any
distributions to be made to Certificateholders or deposits of amounts to be so
distributed or the amount available under any Series Enhancement without the
consent of each Certificateholder affected (provided that an amendment of the
terms of a Pay Out Event shall not be deemed to be within the scope of this
clause (a)); (b) change the definition or the manner of calculating the interest
of any Certificateholder without the consent of each affected Certificateholder;
(c) reduce the aforesaid percentage required to consent to any
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such amendment, without the consent of each Certificateholder; or (d) adversely
affect the rating of any Series or Class by the Rating Agency without the
consent of the holders of Certificates of such Series or Class evidencing not
less than 66 2/3% of the aggregate unpaid principal amount of the Certificates
of such Series or Class. Promptly following the execution of any such amendment
(other than an amendment described in the preceding paragraph), the Trustee will
furnish written notice of the substance of such amendment to each
Certificateholder.
TRUSTEE
Bankers Trust Company is the Trustee under the Pooling Agreement. The
Corporate Trust Department of Bankers Trust Company is located at Four Albany
Street, New York, New York 10006. The Banks, the Servicer and their respective
affiliates may from time to time enter into normal banking and trust
relationships with the Trustee and its affiliates. The Trustee, the Banks, the
Servicer and any of their respective affiliates may hold Certificates of any
Series in their own names; however, any Certificates so held shall not be
entitled to participate in any decisions made or instructions given to the
Trustee by such Certificateholders as a group. In addition, for purposes of
meeting the legal requirements of certain local jurisdictions, the Trustee shall
have the power to appoint a co-trustee or separate trustees of all or any part
of the Trust. In the event of such appointment, all rights, powers, duties and
obligations shall be conferred or imposed upon the Trustee and such separate
trustee or co-trustee jointly, or, in any jurisdiction in which the Trustee
shall be incompetent or unqualified to perform certain acts, singly upon such
separate trustee or co-trustee, who shall exercise and perform such rights,
powers, duties and obligations solely at the direction of the Trustee.
The Trustee may resign at any time, in which event the Banks will be
obligated to appoint a successor Trustee. The Servicer may also remove the
Trustee if the Trustee ceases to be eligible to continue as such under the
Pooling Agreement or if the Trustee becomes insolvent. In such circumstances,
the Servicer will be obligated to appoint a successor Trustee. Any resignation
or removal of the Trustee and appointment of a successor Trustee will not become
effective until acceptance of the appointment by the successor Trustee.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
TRANSFER OF RECEIVABLES
Each Bank has sold and will sell Receivables to the Trust. Pursuant to the
Pooling Agreement, each Bank represents and warrants that the transfer of
Receivables by it to the Trust constitutes either a valid transfer and
assignment to the Trust of all right, title and interest of such Bank in and to
such Receivables, except for the interest of such Bank as a holder of the Banks'
Certificate, or a grant of a security interest to the Trust in and to the
Receivables. Each Bank also represents and warrants to the Trust in the Pooling
Agreement that, in the event the transfer of Receivables by such Bank to the
Trust is deemed to create a security interest under the UCC, there will exist a
valid, subsisting and enforceable first priority perfected security interest in
such Receivables, in existence at the time of the formation of the Trust or at
the date of addition of any Additional Accounts, in favor of the Trust and a
valid, subsisting and enforceable first priority perfected security interest in
such Receivables created thereafter in favor of the Trust on and after their
creation, in each case until termination of the Trust. For a discussion of the
Trust's rights arising from these representations and warranties not being
satisfied, see "The Pooling Agreement Generally--Representations and
Warranties".
Pursuant to the Pooling Agreement, each Bank represents that the Receivables
transferred by it to the Trust are "accounts" or "general intangibles" for
purpose of the UCC. Both the sale of accounts and the transfer of accounts as
security for an obligation are treated under the UCC as creating a security
interest therein and are subject to its provisions, and the filing of an
appropriate financing statement or statements is required to perfect the
interest of the Trust in the Receivables. If a transfer of general intangibles
is deemed to create a security interest, the UCC applies and filing an
appropriate financing statement or statements is also required in order to
perfect the Trust's security interest. Financing statements covering the
Receivables have been and will be filed under the UCC to protect the Trust in
the event the transfer by the Banks is deemed to be subject to the UCC. If a
transfer of general intangibles is deemed to be a sale, then the UCC is not
applicable and no further action under the UCC is required to protect the
Trust's interest from third
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parties. Although the priority of a transfer of general intangibles arising
after the formation of the Trust is not as clear under the laws of the States of
California and New Hampshire as the priority of interests governed by the UCC,
counsel to the Banks is of the opinion, in New Hampshire, that it would be
inconsistent for a court to afford the Trust less favorable treatment if the
transfer of the Receivables is deemed to be a sale than if it were deemed to be
a security interest, and, in California, that a court should conclude that a
sale of Receivables consisting of general intangibles would be deemed to have
occurred as of the date of execution of the Pooling Agreement.
There are certain limited circumstances under the UCC in which prior or
subsequent transferees of Receivables coming into existence after the date of
the Pooling Agreement could have an interest in such Receivables with priority
over the Trust's interest. A tax or other government lien on property of the
Bank arising prior to the time a Receivable comes into existence may also have
priority over the interest of the Trust in such Receivables. Furthermore, if the
FDIC were appointed as a receiver of either of the Banks, the receiver's
administrative expenses may also have priority over the interest of the Trust in
such Receivables. Under the Pooling Agreement, however, the Banks warrant that
they have transferred the Receivables to the Trust free and clear of the lien of
any third party (subject to certain potential tax liens referred to under "The
Pooling Agreement Generally--Representations and Warranties"). In addition, the
Banks covenant that they will not sell, pledge, assign, transfer or grant any
lien on any Receivable (or any interest therein) other than to the Trust.
CERTAIN MATTERS RELATING TO RECEIVERSHIP
The Federal Deposit Insurance Act ("FDIA"), as amended by the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), which
became effective August 9, 1989, sets forth certain powers that the FDIC could
exercise if it were appointed as receiver or conservator of either of the Banks.
Subject to clarification by FDIC regulations or interpretations, it would
appear from the positions taken by the FDIC that the FDIC, in its capacity as
receiver or conservator for either of the Banks, would not interfere with the
timely transfer to the Trust of payments collected on the Receivables or
interfere with the timely liquidation of Receivables as described below. To the
extent that the Banks have granted a security interest in the Receivables to the
Trust, and such security interest is validly perfected before an Insolvency
Event and is not taken in contemplation of insolvency or with the intent to
hinder, delay or defraud the relevant Bank or its creditors, based upon opinions
issued by the general counsel of the FDIC and a related policy statement issued
by the FDIC addressing the enforceability against the FDIC, as conservator or
receiver for a depository institution, of a security interest in collateral
granted by such depository institution, such security interest should not be
subject to avoidance, and payments to the Trust with respect to the Receivables
should not be subject to recovery, by the FDIC. However, such opinions and
policy statement are not binding on the FDIC and, if the FDIC were to assert a
contrary position, certain provisions of the FDIA which, at the request of the
FDIC, have been applied in lawsuits to avoid security interests in collateral
granted by depository institutions, would permit the FDIC to avoid such security
interest, thereby resulting in possible delays and reductions in payments to the
Certificateholders of all outstanding Series. In addition, if the FDIC were to
require the Trustee to establish its right to such payments by submitting to and
completing the administrative claims procedure under the FDIA, as amended by
FIRREA, delays in payments on the Certificates of all Series and possible
reductions in the amount of those payments could occur.
The Pooling Agreement provides that, upon the occurrence of an Insolvency
Event, the Banks will promptly give notice thereof to the Trustee and a Pay Out
Event will occur with respect to each outstanding Series. Under the Pooling
Agreement, no new Principal Receivables will be transferred to the Trust and,
unless otherwise instructed within a specified period by each other holder of
the Banks' Certificate and the Certificateholders holding Certificates of each
Series or, if a Series includes more than one Class, each Class of such Series
evidencing more than 50% of the aggregate unpaid principal amount of each such
Series or Class (and, in the case of any Series with respect to which there is
an Enhancement Invested Amount, any Credit Enhancer with respect thereto), or
unless otherwise prohibited by law, the Trustee will proceed to sell,
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dispose of or otherwise liquidate the Receivables in a commercially reasonable
manner and on commercially reasonable terms. The proceeds from the sale of the
Receivables would then be treated by the Trustee as collections on the
Receivables. This procedure, however, could be delayed as described above. Upon
the occurrence of an Insolvency Event, if no Pay Out Event other than such
Insolvency Event exists, the FDIC may have the power to continue to require the
Banks to transfer new Principal Receivables to the Trust and to prevent the
early sale, liquidation or disposition of the Receivables and the commencement
of the Early Amortization Period. See "Description of the Certificates--Pay Out
Events".
In the event of a Servicer Default, if a conservator, receiver or liquidator
is appointed for the Servicer, and no Servicer Default other than such
conservatorship, receivership, liquidation or insolvency of the Servicer exists,
the conservator, receiver or liquidator may have the power to prevent either the
Trustee or the requisite percentage of holders of Certificates of all Series
from appointing a successor Servicer. See "The Pooling Agreement
Generally--Servicer Default".
CONSUMER PROTECTION LAWS
The relationship between an accountholder and consumer lender is extensively
regulated by federal, state and local consumer protection laws. With respect to
consumer revolving credit accounts owned by the Banks, the most significant
federal laws include the Federal Truth-in-Lending, Equal Credit Opportunity,
Fair Credit Reporting and Fair Debt Collection Practices Acts. These statutes
impose disclosure requirements before and when an Account is opened and at the
end of monthly billing cycles and, in addition, limit accountholder liability
for unauthorized use, prohibit certain discriminatory practices in extending
credit, impose certain limitations on the type of account-related charges that
may be issued and regulate collection practices. In addition, accountholders are
entitled under these laws to have payments and credits applied to their accounts
promptly and to require billing errors to be resolved promptly. The Trust may be
liable for certain violations of consumer protection laws that apply to the
Receivables, either as assignee from the Banks with respect to obligations
arising before transfer of the Receivables to the Trust or as the party directly
responsible for obligations arising after the transfer. In addition, an
accountholder may be entitled to assert such violations by way of setoff against
the obligation to pay the amount of Receivables owing. See "Risk
Factors--Certain Legal Aspects" and "--The Ability of the Banks to Change Terms
of the Accounts". All Receivables that were not created in compliance in all
material respects with the requirements of such laws, subject to certain
conditions described under "The Pooling Agreement Generally--Representations and
Warranties", will be reassigned to the Banks. The Servicer has also agreed in
the Pooling Agreement to indemnify the Trust, among other things, for any
liability arising from such violations. For a discussion of the Trust's rights
if the Receivables were not created in compliance in all material respects with
applicable laws, see "The Pooling Agreement Generally--Representations and
Warranties".
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty at 6%. In addition, subject to judicial discretion, any
action or court proceeding in which an individual in military service is
involved may be stayed if the individual's rights would be prejudiced by denial
of such a stay.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders of all Series if such laws result
in any Receivables being charged off as uncollectible. See "Description of the
Certificates--Defaulted Receivables; Rebates and Fraudulent Charges".
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TAX MATTERS
FEDERAL INCOME TAX CONSEQUENCES--GENERAL
Set forth below is a discussion of the federal income tax consequences to
holders of Certificates of each Series or Class that are intended to be
characterized as debt; additional or different tax considerations will be
disclosed in the applicable Prospectus Supplement for other Series or Classes.
This discussion does not purport to deal with all aspects of federal income
taxation that may be relevant to holders of the Certificates in light of their
personal investment circumstances, nor to certain types of holders subject to
special treatment under the federal income tax laws (for example, banks, life
insurance companies and tax-exempt organizations). Prospective investors are
advised to consult their own tax advisors with regard to the federal income tax
consequences of holding and disposing of Certificates, as well as the tax
consequences arising under the laws of any state, foreign country or other
jurisdiction. This discussion is based upon present provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), the regulations promulgated
thereunder, and judicial or ruling authority, all of which are subject to
change, which change may be retroactive. No ruling on any of the issues
discussed below will be sought from the Internal Revenue Service (the "IRS").
The discussion assumes that a Certificate is issued in registered form, has
all payments denominated in U.S. dollars and has a term that exceeds one year.
Moreover, the discussion assumes that the interest formula for the Certificates
meets the requirements for "qualified stated interest" under Treasury
regulations (the "OID regulations") relating to original issue discount ("OID"),
and that any OID on the Certificates arising from any excess of the principal
amount of a Certificate over its issue price is DE MINIMIS (I.E., less than 1/4%
of its principal amount multiplied by the number of full years until its
maturity date), all within the meaning of the OID regulations. If those
conditions are not satisfied, additional tax considerations will be disclosed in
the applicable Prospectus Supplement.
TREATMENT OF THE CERTIFICATES AS INDEBTEDNESS
The Banks and Certificateholders will express in the Pooling Agreement the
intent that for federal, state and local income and franchise tax purposes, the
Certificates will be indebtedness of the Banks secured by the Receivables. The
Banks, by entering into the Pooling Agreement, and each investor, by the
acceptance of a Certificate, will agree to treat the Certificates as
indebtedness of the Banks for federal, state and local income and franchise tax
purposes. However, the Pooling Agreement generally refers to the transfer of
Receivables as a "sale", and because different criteria are used in determining
the nontax accounting treatment of the transaction, the Banks will treat the
Pooling Agreement, for certain nontax accounting purposes, as a transfer of an
ownership interest in the Receivables and not as creating a debt obligation of
the Banks.
A basic premise of federal income tax law is that the economic substance of
a transaction generally determines the tax consequences. The form of a
transaction, while a relevant factor, is not conclusive evidence of its economic
substance. In appropriate circumstances, the courts have allowed taxpayers, as
well as the IRS, to treat a transaction in accordance with its economic
substance, as determined under federal income tax law, even though the
participants in the transaction have characterized it differently for nontax
purposes.
The determination of whether the economic substance of a purchase of an
interest in property is instead a loan secured by the transferred property has
been made by the IRS and the courts on the basis of numerous factors designed to
determine whether the seller has relinquished (and the purchaser has obtained)
substantial incidents of ownership in the property. Among those factors, the
primary factors examined are whether the purchaser has the opportunity to gain
if the property increases in value, and has the risk of loss if the property
decreases in value. Based upon its analysis of such factors, Cravath, Swaine &
Moore, special federal tax counsel to the Banks ("Tax Counsel"), has concluded
that the holders of Certificates (through their ownership of the Certificates)
are not the owners of the Receivables for federal income tax purposes. Moreover,
in the opinion of Tax Counsel, the Certificates will properly be characterized
for federal income tax purposes as indebtedness.
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TREATMENT OF THE TRUST
The Trust could be viewed for federal income tax purposes either as (1) a
collateral arrangement for debt issued directly by the Banks and other holders
of the Banks' Certificate or (2) a separate entity owning the Receivables,
issuing its own debt. However, in the opinion of Tax Counsel, in the former
event the Trust will be disregarded for federal income tax purposes and in the
latter event under current law the Trust would be a partnership, rather than an
association (or publicly traded partnership) taxable as a corporation.
Therefore, in the opinion of Tax Counsel, under current law the Trust will not
be subject to federal income tax.
If the Trust were considered to be a partnership, as described in the
preceding paragraph, and if any of its interests that are properly treated as
equity for Federal income tax purposes were considered to be publicly traded,
the Trust might be treated as a publicly traded partnership taxable as a
corporation, even though all of its publicly offered Certificates were properly
treated as debt for Federal income tax purposes. The Banks intend to take
measures to minimize the risk that the Trust would be considered to have
publicly traded equity and thus to be a publicly traded partnership. It is
believed such measures will be successful, but no assurance can be given in this
regard.
FEDERAL INCOME TAX CONSEQUENCES--UNITED STATES INVESTORS
INTEREST INCOME TO CERTIFICATEHOLDERS
Assuming the Certificates are debt obligations for federal income tax
purposes, based on the above assumptions they will not be considered issued with
OID (except as discussed below or in the applicable Prospectus Supplement).
Interest thereon will be taxable as ordinary interest income when received or
accrued by holders utilizing the cash or accrual methods of accounting,
respectively. Under the OID regulations, a holder of a Certificate issued with a
DE MINIMIS amount of OID must include such OID in income, on a pro rata basis,
as principal payments are made on the Certificate. A purchaser who buys a
Certificate for more or less than its principal amount will generally be
subject, respectively, to the premium amortization or market discount rules of
the Code.
However, the application of the OID regulations to the Certificates is
unclear because the current payment of interest in excess of the cash available
to the Trust is not enforceable by Cetificateholders. As a result, it is
possible that all interest payable on the Certificates would be treated as OID.
Treatment of interest on the Certificates as OID would not significantly affect
an accrual basis holder of Certificates but would somewhat accelerate taxable
income to a cash basis holder by in effect requiring such holder to report
interest income on the accrual basis. Moreover, all holders would be required to
accrue any DE MINIMIS discount into income over the life of the Certificates
rather than when principal is paid. The Banks intend to take the position that,
pending clarification of the OID regulations, the consequences described in this
paragraph do not apply.
The Paying Agent will be required to report annually to the IRS, and to each
Certificateholder of record, the amount of interest paid (or, if the preceding
paragraph applies, OID accrued) on the Certificates (and the amount of interest
withheld for federal income taxes, if any) for each calendar year, except as to
exempt holders (generally, holders that are corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to their
status as nonresidents). As long as the only "Certificateholder" of record is
Cede, as nominee for DTC, Certificateholders and the IRS will receive tax and
other information only from Participants and Indirect Participants rather than
the Paying Agent. Accordingly, each nonexempt Certificateholder will be required
to provide, under penalties of perjury, a certificate on IRS Form W-9 containing
the holder's name, address, correct federal taxpayer identification number and a
statement that such holder is not subject to backup withholding. If a nonexempt
Certificateholder fails to provide the required certification, the Paying Agent
(or the Participants or Indirect Participants) will be required to withhold (or
cause to be withheld) 31% of the interest (and principal) otherwise payable to
the holder, and remit the withheld amount to the IRS as a credit against the
holder's federal income tax liability.
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POSSIBLE CLASSIFICATION OF THE CERTIFICATES AS INTERESTS IN A PARTNERSHIP OR
ASSOCIATION
Although, as described above, it is the opinion of Tax Counsel that the
Certificates will properly be characterized as debt for federal income tax
purposes, such opinion is not binding on the IRS and thus no assurance can be
given that such a characterization will prevail. If the IRS were to contend
successfully that some or all of the Certificates were not debt obligations for
federal income tax purposes, the arrangement among the Banks, any other holders
of the Banks' Certificate, the holders of such Certificates and holders of other
Certificates might be classified as a partnership for federal income tax
purposes, as an association taxable as a corporation or as a "publicly traded
partnership" taxable as a corporation.
If some or all of the Certificates are treated as equity interests in a
partnership, the partnership would in all likelihood be treated as a "publicly
traded partnership". A publicly traded partnership is, in general, taxable as a
corporation. If the partnership were nevertheless not taxable as a corporation
(because of an exception for an entity whose income is interest income that is
not derived in the conduct of a financial business) it would not be subject to
federal income tax. Rather, each item of income, gain, loss, deduction and
credit generated through the ownership of the Receivables by the partnership
would be passed through to the partners in such a partnership (including holders
of Certificates that are treated as equity interests in the partnership)
according to their respective interests therein.
The income reportable by Certificateholders as partners in such a
partnership could differ from the income reportable by Certificateholders as
holders of debt. However, except as provided below, it is not expected that such
differences would be material. A cash basis Certificateholder treated as a
partner might be required to report income when it accrues to the partnership
rather than when it is received by the Certificateholder. Moreover, an
individual Certificateholder's share of expenses of the partnership would be
miscellaneous itemized deductions that might not be deductible in whole or in
part, meaning that the holder might be taxed on a greater amount of income than
the stated interest on the Certificates. Finally, if any Certificates are
treated as equity interests in a partnership in which other Certificates are
debt, all or part of a tax-exempt investor's share of income from the
Certificates that are treated as equity would be treated as unrelated
debt-financed income under the Code taxable to the investor.
If, alternatively, some or all of the Certificates were treated as equity
interests in an association taxable as a corporation or a "publicly traded
partnership" taxable as a corporation, the resulting entity would be subject to
federal income taxes at corporate tax rates on its taxable income generated by
ownership of the Receivables. Moreover, distributions by the entity on such
Certificates and the Banks' Certificate would probably not be deductible in
computing the entity's taxable income and distributions to such
Certificateholders would probably be treated as dividend income to such holders.
Such an entity-level tax could result in reduced distributions to all
Certificateholders, and the holders of Certificates that are treated as equity
could also be liable for a share of such a tax.
Since the Banks will treat the Certificates as indebtedness for federal
income tax purposes, the Paying Agent (and Participants and Indirect
Participants) will not comply with the tax reporting requirements that would
apply under those alternative characterizations of the Certificates.
FEDERAL INCOME TAX CONSEQUENCES--NON-UNITED STATES INVESTORS
Tax Counsel has given its opinion that the Certificates will properly be
classified as debt for federal income tax purposes. If the Certificates are
treated as debt:
(a) interest paid to a nonresident alien or foreign corporation or
partnership would be exempt from U.S. withholding taxes (including
backup withholding taxes), provided the holder complies with applicable
identification requirements (and does not actually or constructively own 10%
or more of the voting stock of Providian Corporation, is not a controlled
foreign corporation with respect to Providian Corporation, and does not bear
certain relationships to holders of the Banks' Certificate other than the
Banks). Applicable identification requirements will be satisfied if there is
delivered to a securities clearing organization (or bank or other financial
institution that holds Certificates on behalf of the customer in the
ordinary course of its trade or business) (i) IRS Form W-8 signed under
penalties of perjury by the beneficial owner of the Certificates stating
that the holder is not a U.S. person and
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providing such holder's name and address, (ii) IRS Form 1001 signed by the
beneficial owner of the Certificates or such owner's agent claiming an
exemption from withholding under an applicable tax treaty, or (iii) IRS Form
4224 signed by the beneficial owner of the Certificates or such owner's
agent claiming exemption from withholding of tax on income connected with
the conduct of a trade or business in the United States; provided that in
any such case (x) the applicable form is delivered pursuant to applicable
procedures and is properly transmitted to the United States entity otherwise
required to withhold tax and (y) none of the entities receiving the form has
actual knowledge that the holder is a U.S. person or that any certification
on the form is false;
(b) a holder of a Certificate who is a nonresident alien or foreign
corporation will not be subject to United States federal income tax
on gain realized on the sale, exchange or redemption of such Certificate,
provided that (i) such gain is not effectively connected to a trade or
business carried on by the holder in the United States, (ii) in the case of
a holder that is an individual, such holder is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in clause (a) are satisfied; and
(c) a Certificate held by an individual who at the time of death is a
nonresident alien will not be subject to United States federal estate
tax as a result of such individual's death if, immediately before his death,
(i) the individual did not actually or constructively own 10% or more of the
voting stock of Providian Corporation, and does not bear certain
relationships to holders of the Banks' Certificate other than the Banks and
(ii) the holding of such Certificate was not effectively connected with the
conduct by the decedent of a trade or business in the United States.
If the IRS were to contend successfully that some or all of the Certificates
are equity interests in a partnership (not taxable as a corporation), a holder
of such a Certificate that is a nonresident alien or foreign corporation might
be required to file a U.S. individual or corporate income tax return and pay tax
on its share of partnership income at regular U.S. rates, including in the case
of a corporation the branch profits tax (and would be subject to withholding tax
on its share of partnership income). If some or all of the Certificates are
recharacterized as equity interests in an association taxable as a corporation
or a "publicly traded partnership" taxable as a corporation, to the extent
distributions on such Certificates were treated as dividends, a nonresident
alien individual or foreign corporation would generally be taxed on the gross
amount of such dividends (and subject to withholding) at the rate of 30% unless
such rate were reduced by an applicable treaty.
STATE AND LOCAL TAX CONSEQUENCES
CALIFORNIA. This discussion is based upon present provisions of the
California Revenue & Tax Code and the regulations promulgated thereunder, and
applicable judicial or ruling authority, all of which are subject to change,
which change may be retroactive. No ruling on any of the issues discussed below
will be sought from the California Franchise Tax Board.
California imposes an income tax on corporations doing business in the state
and a franchise tax on corporations earning income from the state. The
California Revenue & Tax Code, which governs the taxation of individuals,
partnerships, trusts and corporations, largely incorporates the Federal Internal
Revenue Code. Accordingly, in the opinion of Farella, Braun & Martel, special
California tax counsel to the Banks ("California Tax Counsel"), if the
Certificates are treated as debt of the Banks for Federal income tax purposes,
California would also treat the Certificates as debt of the Banks. Pursuant to
this treatment, the Trust would be treated as a mere security device and would
not be subject to California income or franchise tax. In addition,
Certificateholders not otherwise subject to California taxes would not become
subject to them solely by reason of their ownership of the Certificates.
Certificateholders already subject to taxation in California, however, could be
required to pay tax on income generated from the Certificates.
If the Trust were treated for Federal income tax purposes either (i) as a
partnership (not taxable as a corporation) between the Banks and any other
owners of the Banks' Certificate (of which the Certificateholders or other
holders of Certificates are treated as creditors) or (ii) as a partnership (not
taxable as a
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corporation) among the Banks, any other owners of the Banks' Certificate and
some or all of the Certificateholders or other holders of Certificates (in which
any other Certificateholders or other holders of Certificates are treated as
creditors), in the opinion of California Tax Counsel, the same treatment should
also apply for California tax purposes. Since California follows the Federal tax
treatment of partnerships, I.E., only certain publicly traded partnerships are
liable for entity-level income or franchise tax, and all other partnerships are
100% pass-through, neither kind of partnership should be liable for entity-level
income or franchise tax in California.
If the Pooling Agreement is characterized for Federal income tax purposes as
a partnership between the Banks and any other owners of the Banks' Certificate,
and the Certificates are respected as debt of such a partnership, neither the
Trustee nor the Certificateholders should be subject to California income or
franchise tax merely by virtue of their acting as Trustee or their investment in
the Certificates.
If, however, the relationship created by the Pooling Agreement is
characterized for Federal income tax purposes as a partnership that includes not
only the Banks and any other owners of the Banks' Certificate but also one or
more of the Certificateholders, California would view such a partnership as
doing business in California to the extent the activities of the Banks in
servicing the Receivables take place principally in California. As a result,
each Certificateholder that is treated as an equity investor of the partnership
for Federal tax purposes would be treated as an equity investor of the
partnership for California tax purposes and would be subject to California
income or franchise tax. Under these circumstances, such a Certificateholder
might be taxed by California on its share of the partnership's income
apportioned to California and the partnership would be required to withhold 7%
of all distributions in excess of $1,500 to any U.S. Certificateholder not
resident in California, unless the Certificateholder either obtains a waiver
from the Franchise Tax Board or notifies the partnership that (i) the
Certificateholder reported the income on a duly filed California tax return, or
(ii) the Certificateholder has a permanent place of business within California.
In addition, in the event of such a partnership characterization, a holder of a
Certificate that is a nonresident alien or foreign corporation would be subject
to California withholding on its share of California apportioned income at the
highest individual or corporate rate (11% and 9.3%, respectively). Moreover,
such partnership characterization might cause a Certificateholder not otherwise
subject to tax in California to pay California tax on income beyond that derived
from the Certificates.
If the Pooling Agreement were characterized for Federal income tax purposes
as a publicly traded partnership, which is taxable as a corporation, or as a
corporation, California would follow this characterization. The resulting entity
would be liable for California income or franchise tax, which would reduce the
amounts available for distribution to the Certificateholders. The
Certificateholders, themselves, however, would be treated as owning interests in
a corporation for California tax purposes, and Certificateholders not otherwise
subject to California taxes should not become subject to such taxes solely by
reason of their ownership of Certificates.
NEW HAMPSHIRE. This discussion is based upon present provisions of the New
Hampshire statutes, the regulations promulgated thereunder, and applicable
judicial or ruling authority, all of which are subject to change, which change
may be retroactive. No ruling on any of the issues discussed below will be
sought from the New Hampshire Department of Revenue Administration.
New Hampshire has a Business Profits Tax, an Interest and Dividends Tax and
a Business Enterprise Tax. New Hampshire taxing authorities would follow federal
income tax standards on characterization of the Certificates as indebtedness.
Accordingly, it is the opinion of Gallagher, Callahan & Gartrell, P.A., New
Hampshire tax counsel to the Banks ("New Hampshire Tax Counsel") that if the
Certificates were characterized as indebtedness for federal income tax purposes,
they would also be characterized as indebtedness for New Hampshire tax purposes.
Pursuant to this characterization, the Trust would be treated as a mere security
device.
The activities to be undertaken by the Banks in originating and conveying
Receivables to the Trust might be viewed as taking place in New Hampshire;
pursuant to the Pooling Agreement, FDNB, as Servicer, will be responsible for
the administration and the servicing of the Receivables. All Trust operations,
however, will take place outside of New Hampshire. Because the situs of the
Trust is outside the State of New
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Hampshire and all duties and obligations of the trustee of the Trust are
performed outside of the State of New Hampshire (except in connection with the
enforcement of rights and remedies in the event of default), New Hampshire Tax
Counsel is of the opinion that the Trust will not be considered as carrying on
any business activity in the State of New Hampshire and will not be subject to
the Business Profits Tax or the Business Enterprise Tax. There is insufficient
nexus to justify New Hampshire taxation.
In the alternative, if the Trust was characterized for federal income tax
purposes as a partnership, as a corporation, or as a publicly-traded partnership
taxable as a corporation, there would still be insufficient nexus with New
Hampshire to subject the Trust to New Hampshire taxation at the entity level.
Although it is not expected that the Trust will be subject to tax by New
Hampshire, the effect of taxation at the entity level would be reduced
distributions to Certificateholders. However, Certificateholders not otherwise
subject to taxation in New Hampshire would not become subject to New Hampshire
taxation solely due to ownership of Certificates.
New Hampshire imposes a tax on interest and dividends received by a
partnership, association or trust, the beneficial interest in which is not
represented by transferable shares. It is the opinion of New Hampshire Tax
Counsel that the Trust is not subject to the Interest and Dividends Tax because:
(i) there is insufficient nexus with the State of New Hampshire; and (ii) the
beneficial interests in the Trust are represented by transferable shares.
Certificateholders already subject to taxation in New Hampshire would be
required to pay Interest and Dividends Tax on income generated from the
Certificates.
If the relationship established under the Pooling Agreement between the
Banks and the Certificateholders is characterized as a partnership or
corporation for federal tax purposes, and if the activity of FDNB as Servicer is
deemed to be conducted on behalf of the partnership or corporation and
sufficient to provide taxable nexus within the State of New Hampshire, the
entity would be liable for Business Profits Tax and Business Enterprise Tax at
the entity level, which would result in reduced distributions to
Certificateholders.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and Section 4975 of the Code prohibit a pension, profit
sharing or other employee benefit plan (including an individual retirement
account) (collectively referred to as "Benefit Plans") from engaging in certain
transactions involving "plan assets" with persons that are "parties in interest"
under ERISA or "disqualified persons" under Section 4975 of the Code with
respect to the Benefit Plan. A violation of these "prohibited transaction" rules
may generate excise tax and other liabilities under ERISA and the Code for such
persons. For example, a prohibited transaction would arise, unless an exemption
were available, if a Certificate were viewed as debt of either of the Banks and
such Bank were a disqualified person or a party in interest with respect to a
Benefit Plan that acquired the Certificate.
Moreover, additional prohibited transactions could arise if the Trust Assets
were deemed to constitute "plan assets" of any Benefit Plan that owned
Certificates. The Department of Labor ("DOL") has issued a final regulation (the
"Final Regulation") concerning the definition of what constitutes "plan assets"
of a Benefit Plan. Under the Final Regulation, the assets and properties of
corporations, partnerships and certain other entities in which a Benefit Plan
makes an investment in an "equity interest" could in certain circumstances be
deemed to be assets of the Benefit Plan, or "plan assets." Accordingly, if
Benefit Plans or other entities whose assets include plan assets purchase
Certificates, the Trust could be deemed to hold plan assets unless one of the
exceptions under the Final Regulation is applicable to the Trust.
The Final Regulation only applies to the use of the assets of a Benefit Plan
to acquire an "equity interest" in an entity. Assuming that a Certificate is an
equity interest, the Final Regulation contains an exception which provides that
if assets of a Benefit Plan are used to acquire a "publicly-offered security",
the issuer of the security is not deemed to hold plan assets. A publicly-offered
security is a security that is (i) freely transferable, (ii) part of a class of
securities that is owned by 100 or more investors independent of the issuer and
of one another at the conclusion of the initial offering and (iii) either is (A)
part of a class of securities registered under Section 12(b) or 12(g) of the
Exchange Act, or (B) sold to the Benefit Plan as part
61
<PAGE>
of an offering of securities to the public pursuant to an effective registration
statement under the Act and the class of securities of which such security is a
part is registered under the Exchange Act within 120 days (or such later time as
may be allowed by the Commission) after the end of the fiscal year of the issuer
during which the offering of such securities to the public occurred.
The Certificates of each Class and Series must be separately tested under,
and may each meet, the criteria of publicly-offered securities as described
above. There are no restrictions imposed on the transfer of the Certificates
offered hereby, and the Certificates offered hereby will be sold as part of an
offering pursuant to an effective registration statement under the Act and then
will be timely registered under the Exchange Act. Based on information provided
by an underwriter, agent or dealer involved in the distribution of the
Certificates offered hereby, the Banks will notify the Trustee as to whether or
not the Certificates of a Class or Series offered by this Prospectus and an
accompanying Supplement will be held by at least 100 separately named persons at
the conclusion of the offering thereof. The Banks will not, however, determine
whether the 100-independent investor requirement of the exception for
publicly-offered securities is satisfied as to either a specific Class or
Series. Prospective purchasers may obtain a copy of the notification described
in the second preceding sentence from the Trustee at its Corporate Trust
Department.
If the Certificates of a Class or Series fail to meet the criteria of
publicly-offered securities and the Trust Assets are deemed to include assets of
Benefit Plans, transactions involving the Trust and "parties in interest" or
"disqualified persons" with respect to such Benefit Plans might be prohibited
under Section 406 of ERISA and Section 4975 of the Code unless an exemption is
available. Thus, for example, if a participant in any Benefit Plan holding
Certificates is an accountholder of one of the Accounts, under a DOL
interpretation the purchase of such Certificates by such Benefit Plan could
constitute a prohibited transaction.
Moreover, as discussed above, while Tax Counsel has given its opinion that
(unless otherwise provided in the related Prospectus Supplement) the
Certificates of a Series offered hereby will properly be treated as debt for
federal income tax purposes, if any Certificates were instead treated as equity
interests in a partnership not taxable as a corporation in which any other Class
or Series of Certificates are debt, all or part of a tax-exempt investor's share
of income from the Certificates that are treated as equity would be treated as
unrelated debt-financed income under the Code taxable to the investor.
In light of the foregoing, fiduciaries of Benefit Plans or other investors
of "plan assets" considering the purchase of Certificates should consult their
own counsel as to whether the acquisition of such Certificates would be a
prohibited transaction, whether Trust Assets which are represented by such
Certificates would be considered plan assets, the consequences that would apply
if the Trust Assets were considered plan assets, the applicability of exemptive
relief from the prohibited transaction rules, and the applicability of the tax
on unrelated business income and unrelated debt-financed income. In addition,
based on the reasoning of the United States Supreme Court's recent decision in
JOHN HANCOCK LIFE INS. CO. V. HARRIS TRUST AND SAV. BANK, 144 S.Ct. 517 (1993),
under certain circumstances assets in the general account of an insurance
company might be deemed to be plan assets for certain purposes, and under such
reasoning the purchase of Certificates with assets of an insurance company's
general account might be subject to the prohibited transaction rules described
above.
Unless otherwise provided in the Prospectus Supplement, if the Banks do not
notify the Trustee, as described above, that the Certificates of any particular
Class or Series will be held by at least 100 separately named persons, the
Certificates of such Class or Series may not be acquired by any Benefit Plan or
by any entity investing with assets that are treated as assets of a Benefit
Plan. Furthermore, in that case, the Pooling Agreement, the related Supplement
and each Certificate of such Class or Series will provide that each holder of
such Certificate shall be deemed to have represented and warranted that it is
not a Benefit Plan, is not purchasing such Certificate on behalf of a Benefit
Plan, and is not using assets treated as assets of any Benefit Plan to effect
the purchase.
PLAN OF DISTRIBUTION
The Banks may sell Certificates in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The related Prospectus Supplement will set forth the terms
62
<PAGE>
of the offering of any Certificates offered hereby, including, without
limitation, the names of any underwriters, the purchase price of such
Certificates and the proceeds to the Banks from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any initial
public offering price and any discounts or concessions allowed or reallowed or
paid to dealers.
If underwriters are used in a sale of any Certificates of a Series offered
hereby, such Certificates will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices to be determined at the time of sale or at the time of commitment
therefor. Such Certificates may be offered to the public either through
underwriting syndicates represented by managing underwriters or by underwriters
without a syndicate. Unless otherwise set forth in the related Prospectus
Supplement, the obligations of the underwriters to purchase such Certificates
will be subject to certain conditions precedent, and the underwriters will be
obligated to purchase all of such Certificates if any of such Certificates are
purchased. Any initial public offering price and any discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
Certificates of a Series offered hereby may also be offered and sold, if so
indicated in the related Prospectus Supplement, in connection with a remarketing
upon their purchase, in accordance with a redemption or repayment pursuant to
their terms, by one or more firms ("remarketing firms") acting as principals for
their own accounts or as agents for the Banks. Any remarketing firm will be
identified and the terms of its agreement, if any, with the Banks and its
compensation will be described in the related Prospectus Supplement. Remarketing
firms may be deemed to be underwriters in connection with the Certificates
remarketed thereby.
Certificates may also be sold directly by the Banks or through agents
designated by the Banks from time to time. Any agent involved in the offer or
sale of Certificates will be named, and any commissions payable by the Banks to
such agent will be set forth, in the related Prospectus Supplement. Unless
otherwise indicated in the related Prospectus Supplement, any such agent will
act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution of
Certificates may be deemed to be underwriters, and any discounts or commissions
received by them on the sale or resale of Certificates may be deemed to be
underwriting discounts and commissions, under the Act. Agents and underwriters
may be entitled under agreements entered into with the Banks to indemnification
by the Banks against certain civil liabilities, including liabilities under the
Act, or to contribution with respect to payments that the agents or underwriters
may be required to make in respect thereof. Agents and underwriters may be
customers of, engage in transactions with, or perform services for, the Banks or
their affiliates in the ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed upon for
the Banks and the Trust by Cravath, Swaine & Moore, New York, New York and for
any underwriters, agents or dealers by Orrick, Herrington & Sutcliffe, New York,
New York. Certain federal income tax matters will be passed upon for the Banks
by Cravath, Swaine & Moore, New York, New York, certain California tax matters
will be passed upon for the Banks by Farella Braun & Martel, San Francisco,
California and certain New Hampshire tax matters will be passed upon for the
Banks by Gallagher, Callahan & Gartrell, P.A., Concord, New Hampshire.
63
<PAGE>
GLOSSARY FOR PROSPECTUS
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- -----
<S> <C>
Accounts....................................... 1
Accumulation Period............................ 8
Act............................................ 2
Addition....................................... 27
Additional Accounts............................ 28
Additional Finance Charges..................... 34
Additional Sellers............................. 45
Adjustment Payment............................. 35
Aggregate Additional Limit..................... 28
Automatic Additional Accounts.................. 28
Banks.......................................... 1
Banks' Certificate............................. 6
Base Rate...................................... 38
Benefit Plans.................................. 61
California Tax Counsel......................... 59
Capital Cash................................... 20
Cede........................................... 2
CEDEL.......................................... 43
CEDEL Participants............................. 43
Certificateholders............................. 2
Certificateholders' Interest................... 5
Certificates................................... 1
Citibank....................................... 42
Class.......................................... 1
Code........................................... 56
Collection Account............................. 31
Commission..................................... 2
Controlled Accumulation Amount................. 8
Controlled Amortization Amount................. 9
Controlled Deposit Amount...................... 8
Controlled Distribution Amount................. 9
Cooperative.................................... 44
Credit Enhancement............................. 11
Credit Enhancer................................ 36
Date of Processing............................. 11
Defaulted Amount............................... 35
Defaulted Receivables.......................... 35
Definitive Certificates........................ 44
Depositaries................................... 42
Depository..................................... 26
Determination Date............................. 11
Disclosure Document............................ 6
Distribution Date.............................. 8
DOL............................................ 61
DTC............................................ 2
Early Amortization Period...................... 9
Eligible Account............................... 47
Eligible Deposit Account....................... 31
Eligible Institution........................... 31
Eligible Investments........................... 32
<CAPTION>
TERM PAGE
- ----------------------------------------------- -----
<S> <C>
Eligible Receivable............................ 48
Enhancement Invested Amount.................... 36
ERISA.......................................... 61
Euroclear...................................... 44
Euroclear Operator............................. 44
Euroclear Participants......................... 43
Exchange Act................................... 2
Expected Final Payment Date.................... 7
FDIA........................................... 54
FDIC........................................... 5
FDNB........................................... 1
Final Regulation............................... 61
Finance Charge Receivables..................... 4
FIRREA......................................... 54
First Deposit Portfolio........................ 20
Floating Allocation Percentage................. 32
Funding Period................................. 10
GAO............................................ 16
Group.......................................... 34
Holders........................................ 45
Indirect Participants.......................... 43
Ineligible Receivables......................... 46
Initial Accounts............................... 3
Initial Amount................................. 10
Insolvency Event............................... 15
Interchange.................................... 22
Interest Funding Account....................... 7
Interest Payment Dates......................... 30
Invested Amount................................ 30
IRS............................................ 56
L/C Issuer..................................... 37
Lending Guidelines............................. 19
Monthly Investor Servicing Fee................. 39
Monthly Period................................. 23
Monthly Report................................. 40
Moody's........................................ 32
Morgan......................................... 42
New Hampshire Tax Counsel...................... 60
New Issuance................................... 30
OID............................................ 56
OID regulations................................ 56
Participants................................... 42
Participations................................. 27
Pay Out Event.................................. 37
PNB............................................ 1
Payment Date................................... 41
Pooling Agreement.............................. 1
Portfolio Yield................................ 38
Prefunding Account............................. 10
Prefunding Account Balance..................... 34
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
TERM PAGE
- ----------------------------------------------- -----
Principal Allocation Percentage................ 32
<S> <C>
Principal Commencement Date.................... 7
Principal Funding Account...................... 8
Principal Receivables.......................... 4
Principal Shortfalls........................... 33
Principal Terms................................ 30
Prospectus Supplement.......................... 1
publicly-offered security...................... 61
Rating Agency.................................. 13
Ratings Effect................................. 14
Receivables.................................... 1
Record Date.................................... 40
remarketing firms.............................. 63
Removal Date................................... 29
Removal Notice Date............................ 29
Removed Accounts............................... 4
Required Principal Balance..................... 17
Required Sellers' Participation Amount......... 17
Required Sellers' Percentage................... 17
Revolving Period............................... 7
rollouts....................................... 23
Scheduled Amortization Period.................. 8
Sellers' Interest.............................. 5
Series......................................... 1
Series Cut-off Date............................ 7
Series Enhancement............................. 3
Series Issuance Date........................... 46
<CAPTION>
TERM PAGE
- ----------------------------------------------- -----
<S> <C>
Series Servicing Fee Percentage................ 39
Series Termination Date........................ 40
Service Transfer............................... 51
Servicer....................................... 12
Servicer Default............................... 51
Servicing Fee.................................. 39
Shared Principal Collections................... 33
Special Funding Account........................ 34
Special Payment Date........................... 38
Spread Account................................. 37
Standard & Poor's.............................. 32
Supplement..................................... 6
Supplemental Certificate....................... 45
Tax Counsel.................................... 56
Tax Opinion.................................... 31
Termination Notice............................. 51
Terms and Conditions........................... 44
Total System................................... 20
Transfer Deposit Amount........................ 47
Trust.......................................... 1
Trust Assets................................... 3
Trust Cut-off Date............................. 3
Trust Portfolio................................ 23
Trust Termination Date......................... 46
Trustee........................................ 1
UCC............................................ 15
Unallocated Principal Collections.............. 33
</TABLE>
65
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee.............................................. $ 344,828
Printing and Engraving........................................ 60,000
Trustee's Fees................................................ 40,000
Legal Fees and Expenses....................................... 800,000
Blue Sky Fees and Expenses.................................... 20,000
Accountants' Fees and Expenses................................ 100,000
Rating Agency Fees............................................ 200,000
Miscellaneous Fees............................................ 200,000
------------
Total..................................................... $1,764,828
------------
------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article ELEVENTH of the Articles of Association of Providian National Bank
("PNB") provides that any person, his heirs, executors or administrators, may be
indemnified or reimbursed by PNB for reasonable expenses actually incurred in
connection with any action, suit or proceeding, civil or criminal, to which he
or they shall be made a party by reason of his being or having been a director,
officer or employee of PNB or of any other corporation, partnership, joint
venture, trust or other enterprise which he served in any such capacity at the
request of PNB; PROVIDED, HOWEVER, that no person shall be so indemnified unless
he acted in good faith and in a manner he reasonably believed to be in the best
interests of PNB; and PROVIDED, FURTHER, that any indemnification (unless
ordered by a court) shall be made by PNB only as authorized in the specific case
upon a determination that indemnification is proper in the circumstances because
the applicable standard of conduct is met, and such determination shall be made
(1) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the shareholders. Such Article also provides that the
foregoing right of indemnification or reimbursement shall not be exclusive of
other rights to which such persons, their heirs, executors or administrators,
may be entitled as a matter of law.
Article TENTH of the Articles of Association of First Deposit National Bank
("FDNB") provides that any person, his heirs, executors, or administrators, may
be indemnified or reimbursed by FDNB for reasonable expenses actually incurred
in connection with any action, suit, or proceeding, civil or criminal, to which
such person shall be made a party by reason of being or having been a director,
officer, or employee of FDNB or of any firm, corporation, or organization which
such person served in any such capacity at the request of FDNB; PROVIDED,
HOWEVER, that no person shall be so indemnified or reimbursed in relation to any
matter in such action, suit, or proceeding as to which he shall finally be
adjudged to have been guilty of or liable for gross negligence, willful
misconduct, or criminal acts in the performance of his duties to FDNB or any
other entity; and, PROVIDED FURTHER that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been made the subject of a compromise settlement except with the approval of
a court of competent jurisdiction, the holders of record of a majority of the
outstanding shares of FDNB, or the Board acting by vote of directors not parties
to the same or substantially the same action, suit, or proceeding, constituting
a majority of the whole number of directors. The foregoing right of
indemnification or reimbursement shall not be exclusive of other rights to which
such persons, heirs, executors, or administrators, may be entitled as a matter
of law.
There are directors and officers liability insurance policies presently
outstanding which insure directors and officers of each of the Banks. The
policies cover losses for which the Banks shall be required or
II-1
<PAGE>
permitted by law to indemnify directors and officers and which result from
claims made against such directors or officers based upon the commission of
wrongful acts in the performance of their duties. The policies also cover losses
which the directors or officers must pay as the result of claims brought against
them based upon the commission of wrongful acts in the performance of their
duties and for which they are not indemnified by the Banks. The losses covered
by the policies are subject to certain exclusions and do not include fines or
penalties imposed by law or other matters deemed uninsurable under the law. The
policies contain certain self-insured retention provisions.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1. Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to the
issuer's Registration Statement on Form S-3 No. 33-59922)
4.1. Pooling and Servicing Agreement dated as of June 1, 1993 (incorporated by
reference to Exhibit 4.1 to the issuer's Registration Statement on Form S-3 No.
33-84844)
4.2. Forms of Supplements to the Pooling and Servicing Agreement, including forms of
Certificates (incorporated by reference to Exhibit 4.2 to the issuer's
Registration Statement on Form S-3 No. 33-59922)
4.3. Amendment No. 1 to the Pooling and Servicing Agreement, dated as of August 1,
1994 (incorporated by reference to Exhibit 4.3 to the issuer's Registration
Statement on Form S-3 No. 33-84884)
4.4. Amendment No. 2 to the Pooling and Servicing Agreement, dated as of June 1, 1995
(incorporated by reference to the issuer's report on Form 8-K filed on July 24,
1995)
5.1. Opinion of Cravath, Swaine & Moore with respect to legality
8.1. Opinion of Cravath, Swaine & Moore with respect to federal tax matters
8.2. Opinion of Farella, Braun & Martel with respect to California tax matters
8.3. Opinion of Gallagher, Callahan & Gartell, P.A., with respect to New Hampshire tax
matters
24.1. Consent of Cravath, Swaine & Moore (included in their opinion filed as Exhibit
8.1)
24.2. Consent of Farella Braun & Martel (included in their opinion filed as Exhibit
8.2)
24.3. Consent of Gallagher, Callahan & Gartrell, P.A. (included in their opinion filed
as Exhibit 8.3)
25.1. Powers of Attorney*
</TABLE>
- --------------
* Previously filed.
ITEM 17. UNDERTAKINGS
Each of the undersigned registrants hereby agrees:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement; (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change in such information in the
registration statement; PROVIDED, HOWEVER, that (a)(i) and (a)(ii) will not
apply if the information required to be included in a post-effective
amendment thereby is contained in periodic reports filed pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
II-2
<PAGE>
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering hereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(d) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of that registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(e) To provide to the underwriters at the closing specified in the
underwriting agreements certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.
(f) That insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(g) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed
to be part of this Registration Statement as of the time it was declared
effective.
(h) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a
form of prospectus shall be deemed to be new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, First Deposit
National Bank certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on May 28, 1996.
FIRST DEPOSIT NATIONAL BANK, as
originator of
the Trust and Registrant,
By ________/s/ DAVID J. PETRINI_______
Name: David J. Petrini
Title: SENIOR VICE PRESIDENT AND
SENIOR FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
<C> <S> <C>
* Chairman of the Board and Director
Julie A. Montanari (Principal Executive Officer) May 28, 1996
*
Clifford Colby President and Director May 28, 1996
Senior Vice President and Senior
/s/ DAVID J. PETRINI Financial Officer (Principal Financial May 28, 1996
David J. Petrini Officer)
*
Dianne Peterson Assistant Vice President and Director May 28, 1996
*
James V. Elliot Director May 28, 1996
*
Darrell Hotchkiss Director May 28, 1996
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
<C> <S> <C>
*
Katharine Bogle Shields Director May 28, 1996
*By /s/ DAVID J. PETRINI
David J. Petrini
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Providian
National Bank certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-3 and has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, on May 28, 1996.
PROVIDIAN NATIONAL BANK, as originator
of
the Trust and Registrant,
By ________/s/ DAVID J. PETRINI_______
Name: David J. Petrini
Title: SENIOR VICE PRESIDENT AND
SENIOR FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
<C> <S> <C>
* Chairman of the Board and Director
Julie A. Montanari (Principal Executive Officer) May 28, 1996
*
Dianne Peterson President and Director May 28, 1996
Senior Vice President and Senior
/s/ DAVID J. PETRINI Financial Officer (Principal Financial May 28, 1996
David J. Petrini Officer)
*
James V. Elliott Director May 28, 1996
*
Clifford Colby Director May 28, 1996
*
Charles D. Bond Director May 28, 1996
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------------------------------------- ---------------
<C> <S> <C>
*
Robert S. Fennerty Director May 28, 1996
*By /s/ DAVID J. PETRINI
Name: David J. Petrini
Title: ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
EXHIBITS
<TABLE>
<C> <S>
1.1. Form of Underwriting Agreement (incorporated by reference to Exhibit 1.1 to the
issuer's Registration Statement on Form S-3 No. 33-59922)
4.1. Pooling and Servicing Agreement dated as of June 1, 1993 (incorporated by
reference to Exhibit 4.1 to the issuer's Registration Statement on Form S-3 No.
33-84844)
4.2. Forms of Supplements to the Pooling and Servicing Agreement, including forms of
Certificates (incorporated by reference to Exhibit 4.2 to the issuer's
Registration Statement on Form S-3 No. 33-59922)
4.3. Amendment No. 1 to the Pooling and Servicing Agreement, dated as of August 1,
1994 (incorporated by reference to Exhibit 4.3 to the issuer's Registration
Statement on Form S-3 No. 33-84884)
4.4. Amendment No. 2 to the Pooling and Servicing Agreement, dated as of June 1, 1995
(incorporated by reference to the issuer's report on Form 8-K filed on July 24,
1995)
5.1. Opinion of Cravath, Swaine & Moore with respect to legality
8.1. Opinion of Cravath, Swaine & Moore with respect to federal tax matters
8.2. Opinion of Farella Braun & Martel with respect to California tax matters
8.3. Opinion of Gallagher, Callahan & Gartell, P.A., with respect to New Hampshire tax
matters
24.1. Consent of Cravath, Swaine & Moore (included in their opinion filed as Exhibit
8.1)
24.2. Consent of Farella Braun & Martel (included in their opinion filed as Exhibit
8.2)
24.3. Consent of Gallagher, Callahan & Gartrell, P.A. (included in their opinion filed
as Exhibit 8.3)
25.1. Powers of Attorney*
</TABLE>
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* Previously filed.
<PAGE>
Letterhead of Cravath, Swaine & Moore
May 28, 1996
FIRST DEPOSIT MASTER TRUST
ASSET BACKED CERTIFICATES
Dear Sirs:
We have acted as counsel for First Deposit National Bank, a national
banking association ("FDNB"), and Providian National Bank, a national banking
association ("PNB"), in connection with the filing by FDNB and PNB, on behalf of
the First Deposit Master Trust (the "Trust"), with the Securities and Exchange
Commission of a Registration Statement on Form S-3, Registration No. 33-99462
(the "Registration Statement") registering Asset Backed Certificates
representing undivided interests in certain assets of the Trust (the
"Certificates"). The Certificates of a particular Series will be issued
pursuant to the Pooling and Servicing Agreement dated as of June 1, 1993 (the
"Pooling and Servicing Agreement"), among FDNB, PNB and Bankers Trust Company,
as Trustee, and a related Series Supplement to the Pooling and Servicing
Agreement (a "Series Supplement") among FDNB, PNB and the Trustee, substantially
in the forms filed as Exhibits 4.1 and 4.2, respectively, to the Registration
Statement.
In that connection, we have examined originals or copies, certified or
otherwise identified to our satisfaction of such documents, corporate records,
certificates of public officials and other instruments as we have deemed
necessary or advisable for purposes of this opinion.
<PAGE>
Based upon the foregoing, we are of opinion as follows:
1. The Pooling and Servicing Agreement has been duly authorized,
executed and delivered by each of FDNB and PNB, and constitutes the legal, valid
and binding obligation of each of FDNB and PNB enforceable against FDNB and PNB
in accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect). The enforceability of
the obligations of FDNB and PNB under the Pooling and Servicing Agreement is
also subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and no opinion
is expressed as to the availability of equitable remedies, including specific
performance and injunctive relief.
2. When the Series Supplement relating to a particular Series of
Certificates is duly authorized, executed and delivered by each of FDNB, PNB and
the Trustee, such Series Supplement will constitute the legal, valid and binding
obligations of each of FDNB and PNB enforceable against FDNB and PNB in
accordance with its terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect). The enforceability of
the obligations of FDNB and PNB under such Series Supplement is also subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law) and no opinion is expressed as
to the availability of equitable remedies, including specific performance and
injunctive relief.
3. When the Certificates of a particular Series have been duly
authorized by FDNB and PNB, when such Certificates have been duly executed and
authenticated in accordance with the terms of the Pooling and Servicing
Agreement and the related Series Supplement and when such Certificates have been
delivered and sold as contemplated by the Registration Statement, such
Certificates will be validly issued and outstanding and entitled to the benefits
provided for by the Pooling and Servicing Agreement and such Series Supplement.
We are admitted to practice only in New York and our opinion is
limited to matters governed by the laws of
<PAGE>
the State of New York and the Federal laws of the United States.
We know that we are referred to under the heading "Legal Matters" in
the Prospectus forming a part of the Registration Statement, and we hereby
consent to such use of our name therein and to the use of this opinion for
filing with the Registration Statement as Exhibits 5.1 and 24.1 thereto.
Very truly yours,
/s/ Cravath, Swaine & Moore
CRAVATH, SWAINE & MOORE
First Deposit National Bank
295 Main Street
Tilton, NH 03276
Providian National Bank
53 Regional Drive
Concord, NH 03301
3D
O
<PAGE>
Letterhead of Cravath, Swaine & Moore
May 28, 1996
FIRST DEPOSIT MASTER TRUST
ASSET BACKED CERTIFICATES
Dear Sirs:
We have acted as special Federal tax counsel to First Deposit National
Bank, a national banking association, and Providian National Bank, a national
banking association (collectively, the "Banks"), in connection with the filing
by the Banks on behalf of the First Deposit Master Trust (the "Trust"), with the
Securities and Exchange Commission of a Registration Statement on Form S-3,
Registration No. 33-99462 (the "Registration Statement") registering Asset
Backed Certificates representing undivided interests in certain assets of the
Trust (the "Certificates"). The Certificates of a particular Series will be
issued pursuant to the Pooling and Servicing Agreement dated as of June 1, 1993
(the "Pooling and Servicing Agreement"), among the Banks and Bankers Trust
Company, as Trustee, and a Series Supplement to the Pooling and Servicing
Agreement among the Banks and the Trustee, substantially in the forms filed as
Exhibits 4.1 and 4.2, respectively, to the Registration Statement.
We hereby confirm that the statements set forth in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the heading
"Tax Matters" (excluding the statements under the subheading "State and Local
Tax Consequences"), accurately describe the material Federal income tax
consequences to holders of the Certificates issued pursuant to the Prospectus.
<PAGE>
We know that we are referred to under the headings "Tax Matters" and
"Legal Matters" in the Prospectus forming a part of the Registration Statement,
and we hereby consent to such use of our name therein and to the use of this
opinion for filing with the Registration Statement as Exhibits 8.1 and 24.1
thereto.
Very truly yours,
/s/ Cravath, Swaine & Moore
CRAVATH, SWAINE & MOORE
First Deposit National Bank
295 Main Street
Tilton, NH 03276
Providian National Bank
53 Regional Drive
Concord, NH 03301
3D
O
<PAGE>
Letterhead of Farella Braun & Martel
May 28, 1996
First Deposit National Bank Providian National Bank
295 Main Street 53 Regional Drive
Tilton, NH 03276 Concord, NH 03301
Re: FIRST DEPOSIT MATER TRUST ASSET BACKED CERTIFICATES
Ladies and Gentlemen:
We have acted as special California tax counsel for First Deposit
National Bank, a national banking association ("FDNB"), and Providian National
Bank, a national banking association ("PNB"), in connection with the filing by
FDNB and PNB, on behalf of the First Deposit Master Trust (the "Trust"), with
the Securities and Exchange Commission of Registration Statement No. 33-99462 on
Form S-3 (the "Registration Statement") registering Asset Backed Certificates
representing undivided interests in certain assets of the Trust (the
"Certificates"). The Certificates of a particular Series will be issued
pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), among FDNB, PNB and Bankers Trust Company, as Trustee, and a Series
Supplement to the Pooling and Servicing Agreement among FDNB, PNB and the
Trustee, substantially in the forms incorporated by reference as Exhibits 4.1
and 4.2, respectively, to the Registration Statement.
We hereby confirm that the statements set forth in the prospectus (the
"prospectus") forming a part of the Registration Statement under the subheading
"State and Local Tax Consequences, California," appearing under the heading "Tax
Matters" accurately
<PAGE>
describe the material California state income and franchise tax consequences to
holders of the Certificates.
We know that we are referred to under the headings "Tax Matters" and
"Legal Matters" in the Prospectus forming a part of the Registration Statement,
and we hereby consent to such use of our name therein and to the use of this
opinion for filing with the Registration Statement as Exhibits 8.2 and 24.2
thereto.
Very truly yours,
/s/ Farella Braun & Martel
FARELLA BRAUN & MARTEL
<PAGE>
First Deposit National Bank
Providian National Bank
May 28, 1996
Page 1
Letterhead of Gallagher, Callahan & Gartrell
May 28, 1996
First Deposit National Bank
295 Main Street
Tilton, New Hampshire 03276
Providian National Bank
53 Regional Drive
Concord, New Hampshire 03301
FIRST DEPOSIT MASTER TRUST
ASSET BACKED CERTIFICATES
Ladies and Gentlemen:
We have acted as special New Hampshire tax counsel for First Deposit
National Bank, a national banking association ("FDNB"), and Providian National
Bank, a national banking association ("PNB"), in connection with the filing by
FDNB and PNB, on behalf of the First Deposit Master Trust (the "Trust"), with
the Securities and Exchange Commission of Registration Statement No. 33-99462 on
Form S-3 (the "Registration Statement") registering Asset Backed Certificates
representing undivided interests in certain assets of the Trust (the
"Certificates"). The Certificates of a particular Series will be issued
pursuant to the Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement"), among FDNB, PNB and Bankers Trust Company, as Trustee,
<PAGE>
First Deposit National Bank
Providian National Bank
May 28, 1996
Page 2
and a Series Supplement to the Pooling and Servicing Agreement among FDNB, PNB
and the Trustee, substantially in the forms incorporated by reference as
Exhibits 4.1 and 4.2, respectively, to the Registration Statement.
We hereby confirm that the statements set forth in the prospectus (the
"Prospectus") forming a part of the Registration Statement under the sub-heading
"State and Local Tax Consequences - New Hampshire", appearing under the heading
"Tax Matters", accurately describe the material New Hampshire state tax
consequences to holders of the Certificates.
<PAGE>
First Deposit National Bank
Providian National Bank
May 28, 1996
Page 3
We know that we are referred to under the headings "Tax Matters" and "Legal
Matters" in the Prospectus forming a part of the Registration Statement, and we
hereby consent to such use of our name therein and to the use of this opinion
for filing with the Registration Statement as Exhibits 8.3 and 24.3 thereto.
Very truly yours,
/s/ Gallagher, Callahan & Gartrell
----------------------------------
GALLAGHER, CALLAHAN & GARTRELL
Professional Association
