As filed with the Securities and Exchange Commission on June 2, 1998
Registration No. 333-[ ]
Post-Effective Amendment No. 1 to Registration
Statement No. 333-22131
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PROVIDIAN MASTER TRUST
(In which the Investor Certificates evidence undivided interests)
PROVIDIAN NATIONAL BANK
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
United States 02-0118519
(State or other (IRS employer
jurisdiction of organization) identification number)
295 Main Street
Tilton, New Hampshire 03276
(603) 286-4348
(Address, including zip code, and telephone number, including area code,
of each registrant's principal executive offices)
Mary Ellen Richey, Esq.
Providian Financial Corporation
201 Mission Street
San Francisco, CA 94105
(415) 543-0404
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------------------------------
Copies to:
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
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Approximate date of commencement of proposed sale to the public:
As soon as practicable on or after the effective date of this
registration statement.
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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. [ ]
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CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed
Title of maximum Proposed
each Class offering maximum
of Securities Amount price aggregate Amount of
to be to be per offering registration
registered registered certificate (1) price (1) fee (2)
Asset Backed Certificates....$1,800,000,000 100% $1,800,000,000 $531,000
==============================================================================
(1) Estimated solely for the purpose of calculating the registration
fee.
(2) A filing fee of $72,241 was paid with respect to the $209,500,000
remaining amount of certificates referred to below.
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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 $209,500,000 of unissued Asset
Backed Certificates under the registrant's registration statement on
Form S-3 No. 333-22131 and this registration statement constitutes
Post-Effective Amendment No. 1 to such registration statement.
<PAGE>
PROSPECTUS
Providian Master Trust
Asset Backed Certificates
Providian National Bank
Seller and Servicer
---------------------------
Providian National Bank (the "Bank"), 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 Providian Master Trust,
formerly known as the First Deposit Master Trust (the "Trust"). The Trust
was formed pursuant to a Pooling and Servicing Agreement (the "Pooling
Agreement") among First Deposit National Bank, as seller and servicer, the
former Providian National Bank, 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 15 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 THE BANK OR ANY AFFILIATE OF THE
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 Bank 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 Bank 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 Bank 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 , .
<PAGE>
AVAILABLE INFORMATION
The Bank, as originator of the Trust, has 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
Citicorp 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. In addition, any such reports or other
documents filed with the Commission through its Electronic Data Gathering,
Analysis and Retrieval system are publicly available through the
Commission's web site (http://www.sec.gov).
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 Bank does not intend to send, any of its
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, 1997 and the
Current Reports on Form 8-K filed since December 31, 1997. 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 Providian National Bank, in care of Providian Financial
Corporation, 201 Mission Street, San Francisco, CA 94105, attention: Chief
Financial Officer. Telephone requests for such copies should be directed to
the Servicer (in care of Providian Financial Corporation, attention: Chief
Financial Officer) at (415) 543-0404.
<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.
Trust..................... Providian Master Trust, formerly known as the
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".
Bank...................... Providian National Bank (the "Bank"), a
national banking association, is the seller of
the Receivables and originator of the Trust.
Subject to certain conditions described herein
under "The Pooling Agreement Generally--The
Bank's Certificate; Additional Sellers", the
Bank may designate one or more affiliates of
the Bank 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 Bank 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 Bank has
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 the Initial Accounts
from time to time thereafter until the
termination of the Trust. Since the Trust
Cut-Off Date, the Bank has conveyed to the
Trust Receivables in certain Additional
Accounts in accordance with the provisions of
the Pooling Agreement. Pursuant to the Pooling
<PAGE>
Agreement, the Bank expects (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 Bank 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 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 the
Bank, 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, the 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 integral multiples thereof, and will
only be available in book-entry form except
in certain limited circumstances as
described herein under "The Pooling
Agreement Generally--Definitive
Certificates". A portion of the Trust Assets
will be allocated among the
Certificateholders of a particular Series
(the "Certificateholders' Interest"), the
Certificateholders of other Series and the
interest of the Bank and its permitted
transferees (the "Seller's 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
<PAGE>
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 the Bank or any affiliate of
the 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 Seller's Interest......The Seller's 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 Seller's Interest will
fluctuate as the amount of the Principal
Receivables held by the Trust changes from
time to time. In addition, the Bank intends
to cause the issuance of additional Series
from time to time and any such issuance will
have the effect of decreasing the Seller's
Interest to the extent of the Invested
Amount of such Series. See "Description of
the Certificates--New Issuances". The
Seller's Interest is currently held
exclusively by the Bank (the interests of
the Bank and any Additional Sellers in the
Seller's Interest being the "Bank's
Interest") though a portion of the Seller's
Interest may be sold separately in one or
more public or private transactions. See
"The Pooling Agreement Generally--The
Seller's Interest; Additional Sellers".
The Pooling Agreement provides that the Bank
will be required to make an Addition to the
Trust in the event that the Seller's
Interest is less than the Required Seller's
Participation Amount on the last business
day of any Monthly Period. See "Description
of the Certificates--Addition of Trust
Assets". The level of the Required Seller's
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 Seller's 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, 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 provides that,
pursuant to any one or more supplements to
the Pooling Agreement (each a "Supplement"),
the
<PAGE>
Bank may cause the Trustee to issue one or
more new Series and accordingly cause a
reduction in the Bank's Interest. Under the
Pooling Agreement, the Bank may define, with
respect to any Series, the Principal Terms
of such Series. See "Description of the
Certificates--New Issuances". The Bank may
offer any Series to the public or other
investors under a disclosure document (a
"Disclosure Document"), which will consist
of a Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the 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 Bank expects
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
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 the
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.
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 Seller's 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.
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 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
<PAGE>
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 "Risk
Factors--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
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 Bank. 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 of a
Series, collections of Principal Receivables
and certain other amounts allocable to the
Certificateholders' Interest
<PAGE>
of such Series will be deposited on each
Distribution Date with respect to such
Accumulation Period 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 of 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 with respect to such
Scheduled Amortization Period to make
principal distributions to
Certificateholders of such Series or any
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
<PAGE>
beginning with the first Special Payment
Date with respect to such Series. During the
Early Amortization Period of 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 Seller's Interest is less
than or equal to the Required Seller's
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 Bank any Shared Principal Collections
which otherwise would be distributed to the
Bank, but shall deposit such funds in the
Special Funding Account. Funds on deposit in
the Special Funding Account will be
withdrawn and paid to the Bank on any
Distribution Date to the extent that, after
giving effect to such payment, the Seller's
Interest exceeds the Required Seller's
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 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 shortfalls, if any, with respect to such
other Series. See "Description of the
Certificates--Sharing of Additional Finance
Charges".
<PAGE>
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 Bank 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 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
<PAGE>
the Certificates--Credit Enhancement" and
"Risk Factors--Limited Nature of Rating".
Servicing............... The Servicer (initially, the Bank) 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 Bank its 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 Servicer will
calculate the amounts to be allocated to the
Certificateholders of each Class or Series and
the Bank as described herein in respect of
collections of Receivables received with
respect to the preceding Monthly Period.
In certain limited circumstances, the Bank 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. (The Bank or any such successor
servicer is referred to herein as the
"Servicer".) The Bank 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) the Bank, in its capacity as 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 the Bank and
the Receivables (or Receivables in Additional
Accounts) transferred by the Bank to the
Trust. If the Bank breaches any such
representation and warranty, under certain
circumstances and subject to certain
conditions described under "The Pooling
Agreement Generally--Representations and
Warranties", all Receivables with respect to
the affected Account will be reassigned to the
Bank. In addition, if the Bank breaches
certain other representations and warranties
described under "The Pooling Agreement
Generally--Representations and Warranties",
all the Receivables transferred by the Bank to
the Trust may be reassigned to
<PAGE>
the Bank. See "The Pooling Agreement
Generally--Representations and Warranties".
The Bank has provided 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 the Bank,
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 Bank 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 Bank 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 Bank (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 "Risk Factors--
Limited Nature of Rating".
<PAGE>
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) the 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 the 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 Bank expects, 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 Providian 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 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 Bank, 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. Since the Trust
Cut-Off Date, the Bank has 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 Bank has 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. The 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. The Bank will take certain
actions under applicable state law to perfect the Trust's interest in
the Receivables transferred to the Trust by the Bank and, in the Pooling
Agreement, the Bank warrants that, if the transfer by the 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--Representations and Warranties"). Nevertheless, if the
transfer of Receivables by the 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
<PAGE>
property of the 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 the Bank, the receiver's administrative
expenses may also have priority over the Trust's interest in such
Receivables. In addition, while the Bank is the Servicer, cash
collections held by the Bank may, subject to certain conditions, be
commingled and used for the benefit of the Bank 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 the Bank 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 the Bank or if certain other
events relating to the bankruptcy, insolvency or receivership of the
Bank 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 Seller's Interest, 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 Bank grants 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 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 the Bank 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 Bank 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 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. From time to time members of Congress have
attempted unsuccessfully, and may in the future attempt, to limit the
maximum annual percentage rate that may be assessed on credit card
accounts. In addition, in May, 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 Bank 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
<PAGE>
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
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 challenged 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. In June, 1996, the United States
Supreme Court upheld a decision of the California Supreme Court holding
that the late payment fees in question were "interest" and as such were
governed by federal law, which authorizes national banks to charge
out-of-state customers an interest rate allowed by the bank's home
state. 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 or, in some circumstances, to the
Servicer. On the Series Issuance Date with respect to each Series and on
each date of addition, the 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 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 or assigned to the Servicer, as the case
may be. In addition, in the event of the breach of certain
representations and warranties, the Bank may be obligated to accept the
reassignment of all the Receivables, 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 Bank). 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 Bank will be required to
make an Addition to the Trust in the event that either (a) the Seller's
Interest is not maintained at a minimum level equal to the Required
Seller's 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 Seller's 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
<PAGE>
result in a Ratings Effect) over (ii) the aggregate principal amount on
deposit in the Special Funding Account (the "Required Principal
Balance"). The "Required Seller's Percentage" is equal to 4% but may be
reduced under certain circumstances described under "Description of the
Certificates--Addition of Trust Assets". In the event that the Bank
fails to make such Addition by the day on which it is 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 Bank is 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. New consumer credit providers have entered the
market and existing providers have launched strategies such as
co-branding and balance transfer programs to increase their market
share. In addition, certain consumer credit providers offer low
introductory rates or lower rates generally to increase their market
share. Such rates may be lower than those currently assessed on the
Accounts. The Bank 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
Bank's continued ability to generate new Receivables. If the rate at
which new Receivables are generated declines significantly and the Bank
does not add Additional Accounts to the Trust, a Pay Out Event could
occur with respect to each Series.
The Ability of the Bank to Change Terms of the Accounts. Pursuant
to the Pooling Agreement, the Bank does not transfer to the Trust the
Accounts but only the Receivables arising in the Accounts. As owner of
the Accounts, the Bank 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
<PAGE>
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, the Bank has agreed
that, unless required by law or unless, in its sole discretion, the Bank
deems it necessary to maintain on a competitive basis its lending
business, it will not reduce the annual percentage rate of the 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 the Bank which have characteristics
the same as or substantially similar to the Accounts. In addition, the
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 Bank's ability to change the terms of
the Accounts. There can be no assurance that changes in applicable law,
changes in the marketplace, including other credit card issuers lowering
their annual percentage rates, or prudent business practice might not
result in a determination by the Bank 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 Bank's
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,
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 the 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
Seller's Interest 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.
<PAGE>
THE BANK'S CREDIT CARD AND CONSUMER LENDING BUSINESS
Business Overview
The Bank is a national banking association and a wholly-owned
subsidiary of Providian Financial Corporation. The Bank is a diversified
consumer lender, offering a range of lending products, including
unsecured credit cards, revolving lines of credit, home loans, secured
and partially secured credit cards, and fee-based products. The
"Providian Portfolio" discussed herein includes credit card accounts and
revolving line of credit accounts (which are accessed by checks rather
than credit cards) under management by the Bank or its affiliates but
does not include secured and partially secured credit card accounts,
"unbanked" product accounts (designed to serve a population that the
Bank believes has been largely underserved by traditional financial
institutions) and home loans. The Providian Portfolio consists primarily
of unsecured credit card receivables generated through the Visa and
MasterCard credit cards.<F1>
Based on the total credit card balances in the Providian Portfolio,
the Bank is among the largest bank card issuers in the United States.
Receivables transferred and to be transferred by the Bank to the
Trust pursuant to the Pooling Agreement are generated from transactions
made and cash advances obtained by accountholders under accounts in the
Providian Portfolio. All accounts in the Providian Portfolio (other than
certain accounts purchased from third parties) were originated using the
Bank's account opening procedures. Certain of the accounts were
originated by former affiliates of the Bank or were acquired by the Bank
in portfolio acquisitions.
The Bank uses its affiliate, Providian Bancorp Services, and third
party vendors in the process of originating and servicing accounts in
the Providian Portfolio. Account set-up, telemarketing, customer
service, collection activities and certain data processing services are
performed by Providian Bancorp Services primarily at operations centers
located in northern California. 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 processing company. Total System is responsible for issuing
and encoding cards, authorizing accountholder purchases and processing
transactions 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 accounts in the Providian
Portfolio were principally generated through direct mail and
telemarketing. These solicitations are made to a pre-screened list of
prospective accountholders, followed by credit verification and
telemarketing support. The Bank's underwriting, telemarketing, customer
service and collection procedures, described below, are subject to
change as the competitive environment, industry practice, legal
requirements or the Bank's business objectives may require. In addition,
the Bank has acquired and may acquire from time to time in the future
accounts originated by third parties.
Accounts acquired by the Bank from third parties were originally
opened using criteria established by other institutions and may not have
been subject to the same underwriting procedures and credit review as
accounts established by the Bank. It is expected that the portfolios of
credit card accounts purchased by the Bank from other credit card
issuers will be added to the Trust from time to time. There can be no
assurance that the purchased accounts will perform similarly to accounts
originated by the Bank. See "Description of the Certificates--Addition
of Trust Assets".
Underwriting Procedures
The Bank's credit screening process begins with a "prescreening"
review which identifies creditworthy consumers who are likely to be
eligible for an account. These consumers generally receive direct mail
solicitations or solicitations by telephone. Applications from consumers
who respond to the solicitations are reviewed against criteria
established by the Bank's loan committee.
In the "prescreening" process, the Bank provides a set of credit
criteria directly, or indirectly through a third party, to credit
reporting agencies. The credit reporting agencies 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
- -----------------
<F1> Visa and MasterCard are registered trademarks of Visa U.S.A. Inc.
and MasterCard International Incorporated, respectively.
<PAGE>
by the Bank from a statistical modeling of attributes from previous
solicitations, behavioral usage and credit risk. This final list is then
statistically verified by the Bank to ensure that the list complies with
the criteria supplied.
Individuals who receive the solicitations must respond in writing
or by telephone. Once the response is received, the Bank reviews credit
reporting agency information and information provided by the applicant
to confirm that the applicant meets the Bank's credit criteria. Pricing
and credit limits are established on an individualized basis, based on
the customer's risk profile and the customer's loan feature preferences
and price sensitivity. In this manner, the Bank seeks to configure a set
of terms that meets the customer's needs as well as the Bank's
risk/return parameters.
Each accountholder is subject to an agreement governing the terms
and conditions of the account. Pursuant to such lending agreement, the
Bank reserves the right to change or terminate any terms, conditions,
services or features of the account (including increasing or decreasing
periodic finance charges, other charges or minimum payments). The Bank
monitors the payment performance and risk profiles of customers, and may
adjust the interest rate and other terms on a customer's account based
on such customer's credit behavior. By their terms, the Bank's lending
agreements are governed by New Hampshire law.
Telemarketing and Customer Service
The Bank believes that customer contact must be quickly established
to take advantage of additional marketing opportunities, verify
application information and assist in the collections process. Customers
have access to their account information 24 hours a day, seven days a
week. 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, the 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 Bank or its affiliates as well as attorneys retained in different
states. Current collection practices are characterized by quick
intervention when payments become overdue, automated calling systems
designed to improve efficiency in contacting customers, and close
monitoring of delinquencies and charge-offs. Collections practices are
revised from time to time in accordance with the Bank's experience.
Current collection policy consists primarily of the following: (i)
statements are sent monthly and accountholders have approximately 30
days after the statement date to remit payments before an account is
considered past-due; (ii) 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; (iii) arrangements may be made
with accountholders to extend or change payment schedules; (iv)
collection efforts are event-driven and, thus, accounts are escalated to
more experienced collectors, suspended, closed and/or referred for legal
collection based on customer behavior rather than on the passage of
time; and (v) legally permissible collections activities continue after
an account is charged off.
The Bank's policy is to charge off the principal balance of
delinquent accounts no more than 180 days after the delinquency occurs
unless the accountholder cures the default by making a partial payment
which qualifies under the Bank's standards. Related interest and fees
are written off as a reversal of current earnings. Account balances for
deceased and bankrupt accountholders are written off upon determination
of collectibility, but in no event more than 180 days after delinquency.
Because accountholders for whom the 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
<PAGE>
may from time to time change the amount of Interchange reimbursed to
banks issuing their credit cards. Interchange paid to the Bank will be
allocated to the Trust with respect to each Monthly Period on the basis
of (i) the Interchange for all accounts in the Providian 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 Providian Portfolio, in each case for
such Monthly Period. The Bank 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
Bank 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.
<PAGE>
THE ACCOUNTS
General
The Receivables arise in certain Eligible Accounts (the "Trust
Portfolio") selected by the Bank from the Providian Portfolio as
described below.
The accounts originated by the Bank 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. Accounts may be
added to the Trust which were originated by third parties for which the
account groupings may differ. The Accounts included in the Trust
consisting of rollouts or other account groupings may include accounts
for which Receivables have been charged off as uncollectible prior to
their addition to the Trust. Receivables in charged-off Accounts are
deemed to have a zero balance. The Trust generally has the right to
receive recoveries with respect to such charged-off Receivables.
Although the characteristics (including loss experience) of a
particular rollout or account grouping may differ from those of the
Providian Portfolio as a whole, the Bank has 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 Providian Portfolio. The Bank believes that,
collectively, the Accounts currently included in the Trust are generally
representative of the Accounts in the Providian Portfolio. There can be
no assurance that performance of the Accounts included in the Trust
(including but not limited to the payment rate, yield, loss and
delinquency experience with respect to such Accounts) will be comparable
to that of the Accounts in the entire Providian Portfolio.
The 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 Bank has the
right, and in certain cases the obligation (subject to certain
limitations and conditions described below), to designate from time to
time additional qualifying accounts in the Providian Portfolio 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 Bank designates such accounts as Additional Accounts. Since the
Trust Cut-Off Date, the Bank has 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 applicable addition date) and on the date any new Receivables are
created, the Bank has represented and warranted or will represent and
warrant to the Trust, as the case may be, that each of the Receivables
in any Account or Additional Account owned by the 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, the 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 the Bank. The Bank may from time to time
remove from the Trust certain charged-off Accounts and closed accounts
having a zero balance. See "Description of the Certificates--Removal of
Accounts". 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
and may be accounts acquired from third parties. 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
<PAGE>
reducing the Portfolio Yield. The Bank intends 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.
Billing and Payments
The following is information with respect to the billing and
payment characteristics generally applicable to the accounts in the
Providian Portfolio.
Monthly billing statements are sent by the Bank to active
accountholders. The accounts generally require a minimum monthly payment
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 cash
advances. However, most accounts do have a grace period for new
purchases if the entire account balance is paid in full by the due date
shown on the monthly billing statement.
Accounts may have different annual percentage rates for cash
advances, purchases and balance transfers and the annual percentage rate
may be fixed or variable. New accountholders are offered a reduced
annual percentage rate (which in some cases may be as low as 0%) for an
introductory period, generally no more than three months, and the annual
percentage rate on some accounts may be lower or higher than those
generally offered by the Bank. For an additional fee, certain
accountholders have subscribed to a credit protection feature pursuant
to which the accountholder's obligation to make payments will be
suspended upon the occurrence of certain conditions. Other add-on fee
products are also offered to accountholders.
The Bank typically charges accounts certain additional fees
including: (i) a late fee, if the Bank does not receive the required
minimum monthly payment by the due date shown on the monthly billing
statement; (ii) a returned payment check fee, for each accountholder
check received by the Bank that is not paid by the bank on which the
check was drawn; (iii) an over-limit fee, if the new balance of an
account exceeds the accountholder's stated credit limit before addition
of new finance charges 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 Bank returns unpaid. The Bank also charges a cash advance fee
on certain types of cash advances. Any of these fees may be waived or
modified by the Bank at any time.
The Bank generally does not charge customers an annual fee for the
accounts in the Providian Portfolio. However, the Bank reserves the
right to modify the terms of any account to charge an annual fee or
other types of fees.
Payments to the Bank on the accounts are processed and applied
first to finance charges, then to any fees billed to the account and
then to unpaid principal. Any excess creates a credit balance. Finance
charges are posted as of the last day of an account's monthly billing
cycle. Principal receivables are posted daily.
Annual percentage rates, minimum monthly payment requirements, fees
and other charges may increase or decrease from current levels. The
lending agreements governing the accounts permit the Bank to change
rates and other terms at any time after an applicable notice period.
There can be no assurance that annual percentage rates, minimum monthly
payment requirements, fees and other charges will remain at current
levels in the future. See "Risk Factors--The Ability of the Bank to
Change Terms of the Accounts".
THE BANK
The Bank is a wholly-owned subsidiary of Providian Financial
Corporation, a publicly owned financial services company which provides
lending and deposit products to consumers nationwide. Providian
Financial Corporation and its subsidiaries offer a range of lending
products, including unsecured credit cards, revolving lines of credit,
home loans, secured and partially secured credit cards, and fee based
products nationwide, primarily through direct mail and telemarketing.
Providian Financial Corporation became an independent, publicly held
company in a spin-off transaction
<PAGE>
that occurred on June 10, 1997, when shares of its common stock were
distributed to the shareholders of Providian Corporation, which was
Providian Financial Corporation's parent company prior to the spin-off.
The Bank is the surviving entity in the merger, completed on
January 1, 1998 of Providian National Bank, another subsidiary of
Providian Financial Corporation, into First Deposit National Bank.
Immediately following the merger, First Deposit National Bank changed
its name to Providian National Bank.
The Bank is a national bank regulated by the Office of the
Comptroller of the Currency. Under the grandfather provisions of the
Competitive Equality Banking Act of 1987. Providian Financial
Corporation is not required to register as a bank holding company so
long as certain restrictions are observed, including limitations on new
activities by the Bank and on affiliate overdrafts and limitations on
the Bank's ability to cross-market its products and services with
products and services of its affiliates. The principal executive offices
of the Bank are located at 295 Main Street, Tilton, New Hampshire 03276,
and the principal executive offices of Providian Financial Corporation
are located at 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 Bank and will be used for the Bank's 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 Seller's Interest 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 Bank has conveyed to the Trust, without recourse, its interest
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 Bank 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 Bank
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".
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,
between the Bank, as seller of its interest in the Receivables and 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.
<PAGE>
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
Bank, 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 Bank has 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 Bank 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
Bank. 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, of 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 with respect to such Accumulation Period 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, of 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 with respect to such Scheduled Amortization Period 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
<PAGE>
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 of 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 of 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 Seller's Interest is less than the
Required Seller's Participation Amount or (b) the amount of Principal
Receivables in the Trust is less than the Required Principal Balance,
the Bank shall, on or prior to the close of business on the tenth
business day following such day, unless the Seller's Interest equals or
exceeds the Required Seller's 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 tenth business day, make an Addition to the Trust such that, after
giving effect to such Addition, the Seller's Interest is at least equal
to the Required Seller's 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 the 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 the 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 Bank may, upon 30 days' prior notice to the
Trustee, the Rating Agency and certain providers of Series Enhancement,
reduce the Required Seller's Percentage, provided that (a) such
reduction will not result in a Ratings Effect and (b) the 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 the 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 Seller's Percentage shall never be less than
2%. In addition, the Bank may from time to time, at its sole discretion,
subject to the conditions described below, voluntarily make an Addition
to the Trust.
The 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 Bank 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 Bank to designate Automatic Additional
<PAGE>
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 the Bank or any affiliate of the
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 Bank 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, the Bank 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, the 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 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 Bank
shall have provided the Rating Agency with 15 days' prior written notice
and the Rating Agency shall not have notified the Bank 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, the
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 the 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 the Bank
which would result in a selection of Additional Accounts (from the
available Eligible Accounts owned by the Bank) that would be materially
adverse to the interests of the Certificateholders of any Series as of
the date of addition.
The Bank 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 Seller's
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 Bank may originate or acquire portfolios of
revolving credit card accounts or other revolving credit accounts the
receivables in which may be participated to the Bank 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 Providian 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
<PAGE>
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 the 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 the Bank, upon
satisfaction of the following conditions: (a) on or before the tenth
business day (the "Removal Notice Date") immediately preceding the date
upon which the Receivables in such Accounts are to be removed from the
Trust, the 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, the 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) the 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) the Bank shall
have delivered to the Trustee and certain providers of Series
Enhancement a certificate of an authorized officer, dated the Removal
Date, to the effect that the 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 the 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 the 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 the 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 Bank a written reassignment and shall be
deemed to sell, transfer, assign, set over and otherwise convey to the
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 Bank 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 Seller's Interest to the extent of the Invested Amount of such new
Series. Under the Pooling Agreement, the Bank 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 Bank, the
Servicer, the Trustee or the Trust is required or intends to obtain the
consent of any
<PAGE>
Certificateholder of any outstanding Series to issue any additional
Series. The Bank 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
Bank. The Bank intends to offer, from time to time, additional Series.
The Pooling Agreement provides that the Bank 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 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
Bank may deliver a different form of Series Enhancement agreement. The
Bank also has the option under the Pooling Agreement to vary among
Series the terms upon which a Series may be repurchased by the Bank or
remarketed to other investors. There is no limit to the number of New
Issuances that the Bank 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 Bank 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
Bank 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 Bank 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 Bank 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 Bank 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 Bank 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
Bank's 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 Bank 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
<PAGE>
(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 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 Ratings Group ("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 Financial
Corporation 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 Seller's
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 Seller's Interest.
Deposits in Collection Account
For as long as (i) the Bank remains the Servicer under the Pooling
Agreement and (ii) either (x) the Bank, 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)
the Bank has and maintains a certificate of deposit rating of at least
A-1 and P-1 (or their equivalent) by the Rating Agency, the Bank 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 the Bank 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 the Bank 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 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
<PAGE>
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 the Bank or another eligible affiliate of
Providian Financial Corporation is not the Servicer, the Collection
Account will be moved from the Bank, 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
Bank (a) the Bank's allocable portion of collections on Principal
Receivables, provided that the Seller's 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
Bank's allocable portion of collections on Finance Charge Receivables,
except in the case of collections consisting of Interchange, the Bank's
allocable portion of which will be retained by the Bank. Any amount not
allocated to the Bank because the Seller's Interest in Principal
Receivables is zero will be held in the Collection Account unallocated
("Unallocated Principal Collections") until the Seller's Interest in
Principal Receivables is greater than zero (at which time such amount
will be allocated to the Bank) 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 Bank, provided that (a) such Shared Principal Collections will be
distributed to the Bank only to the extent that the Seller's 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 Seller's Interest is less than or equal to the
Required Seller's 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 Bank any Shared
Principal Collections that otherwise would be distributed to the Bank,
but shall deposit such funds in an Eligible Deposit Account established
and 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 Bank on any
Distribution Date to the extent that, after giving effect to such
payment, the Seller's Interest exceeds the Required Seller's
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
<PAGE>
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 the Bank
shall deliver to the Trustee a certificate of an authorized officer to
the effect that, in the reasonable belief of the Bank, the continued
sharing of Additional Finance Charges among Series in any Group would
have adverse regulatory implications with respect to the Bank. Following
the delivery by the 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 Bank. 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) the Bank will not at any time deliver a certificate as
described above. While the Bank believes 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 it, 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.
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
Bank 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.
<PAGE>
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
the Bank or the Servicer becomes obligated to accept reassignment or
assignment during such Monthly Period (unless an Insolvency Event has
occurred with respect to the 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 Bank is to charge off the
receivables in an account when that account becomes 180 days delinquent,
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 Bank. If the Bank receives notice that an
accountholder is deceased or in bankruptcy proceedings, the Bank will
generally charge off the receivables in such account when a
determination is made as to collectibility, but in no event more than
180 days after 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 the 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 Seller's
Interest in Principal Receivables at such time to be a negative number,
the Bank 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".
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
<PAGE>
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 (in which the Bank may have
an interest) 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 Classes to receive distributions of
principal and/or interest on any Payment Date will be subordinated to
such rights of the holders of the Classes which are senior to such
subordinated Classes 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
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 Classes will be distributed to holders of Classes which are
senior to such subordinated Classes. The amount of subordination will
decrease whenever amounts otherwise payable to the holders of
subordinated Classes are paid to the holders of the Classes which are
senior to such subordinated Classes.
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.
<PAGE>
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 the Bank (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 agreements of the Bank 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 the Bank 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 the Bank 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
Bank in the Pooling Agreement or the Supplement with respect to such
Series or any information required to be given by the Bank 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 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
the Bank; (d) a failure by the Bank to make an Addition to the Trust by
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) the Bank 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 Bank 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.
<PAGE>
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 Bank 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 Seller's Interest 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 Seller's 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 Bank 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 Bank. 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 Bank (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 the Bank 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 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 business day of the calendar month preceding the date of such
<PAGE>
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 Bank 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 Bank fails 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 and the Paying Agent, and
no later than each Distribution Date, the Paying Agent will provide to
each Rating Agency, 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 were 31,
61 and 91 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.
<PAGE>
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.
<PAGE>
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 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,
<PAGE>
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 Bank 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 Bank 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 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
<PAGE>
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 Bank advises 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 Bank
is unable to locate a qualified successor, (ii) the Bank, at its option,
elects 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.
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.
<PAGE>
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 Seller's Interest; Additional Sellers
The Pooling Agreement provides that the Bank may exchange a portion
of the Bank's Interest in the Trust for one or more interests (each, a
"Supplemental Interest") for transfer or assignment to a person
designated by the Bank 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
Bank's 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 transfer,
the Bank shall have delivered to the Trustee a Tax Opinion with respect
to the transfer or assignment of such Supplemental Interest. Any
transfer or assignment of a Supplemental Interest is subject to the
conditions set forth in clauses (a) and (c) of the preceding sentence.
The Bank may also transfer a portion of the Bank's 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 Bank may designate affiliates of the Bank 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"); 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 Interest 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 the
Bank and each Additional Seller generally will have the same obligations
and rights as the Bank described herein.
Termination of Trust
Unless the Bank instructs 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 Bank 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
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 Bank.
Conveyance of Receivables
Pursuant to the Pooling Agreement, the Bank has sold and assigned
and will sell and assign to the Trust its 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 Bank is required to indicate in its computer records that the
Receivables have been conveyed to the Trust. In addition, the Bank has
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. The Bank, 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.
<PAGE>
The Bank has filed and is 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 "Risk Factors" 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, the Bank
will 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 the 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 the Bank or receipt of written notice of such breach by
the 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 the 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 the 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) the 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 Bank on or
before the end of the Monthly Period in which such reassignment
obligation arises by the 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 Seller's Interest. In the event that the exclusion of an Ineligible
Receivable from the calculation of the Seller's Interest would cause the
Seller's Interest to be a negative number, on the Distribution Date
following the Monthly Period in which such reassignment obligation
arises, the Bank will make a deposit into the Collection Account in
immediately available funds in an amount equal to the amount by which
the Seller's 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
the 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".
The 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 the Bank and
(b) the Pooling Agreement constitutes a valid sale, transfer and
assignment to the Trust of all right, title and interest of the 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 the 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 the Bank and the Servicer (and to the
Trustee if given by the holders of the requisite percentage of
Certificates of all Series), may direct the Bank to accept the
reassignment of the Receivables transferred by it to the Trust within 60
days of such notice, or within such longer
<PAGE>
period specified in such notice; provided, however, that such
Receivables will not be reassigned to the 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) the 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. The 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 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. 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 Certificateholders of all Series gives a
notice as provided above, the obligation of the 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 the Bank which as of
the Trust Cut-Off Date with respect to an Initial Account or 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 the 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 the Bank as an
employee of the 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 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 the Bank as lost or
stolen; provided, that (a) the balance of all receivables in such
accounts is reflected on the books and records of the 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 the Bank
and will not be reinstated by the 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 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 the
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 the Bank in
connection with the creation of such Receivable or the execution,
delivery and performance by the 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 Bank 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 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
Bank to the Trust of all the Bank's 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
<PAGE>
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 the Bank
has satisfied all obligations to be fulfilled at the time it is
transferred to the Trust; and (k) as to which the 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, impair the rights of the Trust
or the 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
Bank's 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
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.
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 Bank has 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 Bank
was a general partner. In the event of a Service Transfer, the successor
Servicer will indemnify and hold harmless the Bank for any losses,
claims, damages and liabilities of the Bank 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 Bank, the Servicer or any of their
directors, officers, employees or agents will be under any other
liability to the Trust, the Trustee, the Certificateholders 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 Bank, 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 the Certificateholders 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
<PAGE>
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, the Bank, 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. The Bank 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 "The Bank's 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 cancelation 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 the Bank 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 Seller's
Interest. In addition, if the deduction of such Principal Receivable
would reduce the Seller's Interest below zero, the Bank as the Servicer
will deposit into the Collection Account the applicable Transfer Deposit
Amount described above under "--Representations and Warranties". If the
Bank 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.
<PAGE>
Notwithstanding the foregoing, the Bank may transfer its servicing
obligations to any other direct or indirect wholly owned subsidiary of
Providian Financial Corporation (which meets certain eligibility
standards set forth in the Pooling Agreement) and be relieved of its
obligations and duties under the Pooling Agreement.
Any person into which, in accordance with the Pooling Agreement,
the Bank or the Servicer may be merged or consolidated or any person
resulting from any merger or consolidation to which the Bank or the
Servicer is a party, or any person succeeding to the business of the
Bank or the Servicer, will be the successor to the Bank, 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 Bank delivers 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 Bank the right at its 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 Bank under the Pooling Agreement and any Supplement in the
Seller's 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 (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,
<PAGE>
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 Bank, 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 Bank) to furnish a report addressed to the Trustee
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,
such firm is of the opinion that such servicing was 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
Bank without the consent of the Certificateholders of any Series or the
consent of the provider of any Series Enhancement provided that (i) the
Bank shall have delivered to the Trustee a certificate of an authorized
officer to the effect that the 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 Bank, the Servicer and the Trustee with the consent
of the Certificateholders 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 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 Certificateholders
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.
<PAGE>
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 Bank, 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 Bank, 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 Bank 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.
<PAGE>
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Transfer of Receivables
The Bank has sold and will sell Receivables to the Trust. Pursuant
to the Pooling Agreement, the 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
the Bank in and to such Receivables, except for the interest of the Bank
as a holder of the Bank's Interest, or a grant of a security interest to
the Trust in and to the Receivables. The Bank also represents and
warrants to the Trust in the Pooling Agreement that, in the event the
transfer of Receivables by the 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, the 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 Bank 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 parties. Although the priority
of a transfer of general intangibles arising after the formation of the
Trust or the date of addition 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 Bank 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
(including after-arising Receivables) consisting of general intangibles
would be deemed to have occurred as of the date of execution of the
related assignment under 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 Bank, the receiver's
administrative expenses may also have priority over the interest of the
Trust in such Receivables. Under the Pooling Agreement, however, the
Bank warrants that it has 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 Bank
covenants that it 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 the Bank.
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 the Bank, 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 Bank has 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 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
<PAGE>
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 Bank 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 Seller's Interest 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,
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 Bank 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
Certificateholders 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
Bank, the most significant federal laws include the Federal
Truth-in-Lending, Equal Credit Opportunity, Fair Credit Reporting,
Telemarketing and Consumer Fraud and Abuse Prevention 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 by third parties. 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 Bank 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 Bank 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
Bank. 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.
<PAGE>
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".
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 Bank 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
Bank secured by the Receivables. The Bank, 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 Bank 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 Bank 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 Bank.
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 Bank ("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.
<PAGE>
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 Bank and
other holders of the Seller's Interest 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 Bank intends 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.
If any interest due on a Series or Class of Certificates is not
paid in full on its scheduled payment date, Certificates of that Series
or Class will thereafter be considered to be issued with OID. The Bank
intends to take the position that OID does not arise on a Series or
Class of Certificates unless and until an event described in the
preceding sentence occurs. This position is based on the Bank's belief
that the likelihood of any such event is a "remote contingency" under
applicable Treasury regulations. However, if at the time of issuance of
a Series or Class of Certificates such an event was not considered to be
a "remote contingency", the Certificates of that Series or Class would
be considered to have OID from their date of issuance without regard to
the occurrence of any such event.
If the Certificates of a Series or Class were considered to have
OID, either initially or subsequently, all holders of Certificates of
that Series or Class would thereafter be required to accrue OID into
income at a rate equal to the full interest rate payable on the
Certificates, whether or not all or part of the interest on the
Certificates was paid currently. Moreover, the holders would be required
to accrue any de minimis discount into income over the life of the
Certificates rather than when principal is paid. As a result, holders
might be required to report taxable income prior to the receipt of cash
attributable to such income.
The Paying Agent will be required to report annually to the IRS,
and to each Certificateholder of record, the amount of interest paid (or
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.
<PAGE>
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 Bank, any other holders of the Seller's Interest,
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
Seller's Interest 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 Bank 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 Financial Corporation, is not a controlled foreign corporation
with respect to Providian Financial Corporation, and does not bear
certain relationships to holders of the Seller's Interest other than the
Bank). 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 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.
<PAGE>
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 Financial Corporation, and does
not bear certain relationships to holders of the Seller's Interest other
than the Bank 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. Recently finalized Treasury Regulations
would modify the foregoing identification requirements effective January
1, 2000.
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 LLP, special California tax counsel to the Bank
("California Tax Counsel"), if the Certificates are treated as debt of
the Bank for federal income tax purposes, California would also treat
the Certificates as debt of the Bank. 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 Bank and
any other owners of the Seller's Interest (of which the
Certificateholders or other holders of Certificates are treated as
creditors) or (ii) as a partnership (not taxable as a corporation) among
the Bank, any other owners of the Seller's Interest 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 only certain
publicly traded partnerships are liable for entity-level California
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 Bank and any other owners of the
Seller's Interest, 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 Bank and any other owners of the Seller's Interest
but also one or more of the
<PAGE>
Certificateholders, California would view such a partnership as doing
business in California to the extent the activities of the Bank 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 (9.3% and 8.84%, 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
Bank ("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 Bank in originating and
conveying Receivables to the Trust might be viewed as taking place in
New Hampshire; pursuant to the Pooling Agreement, the Bank, 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 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. In this regard,
New Hampshire would follow federal OID characterization. Amounts
characterized as OID
<PAGE>
for federal purposes would be interest taxable to New Hampshire
Certificateholders under the Interest and Dividends Tax or the Business
Profits Tax.
New Hampshire does not follow federal pass-through treatment of
non-publicly traded partnerships. Partnerships are subject to the
Business Profits Tax and Business Enterprise Tax at the entity-level in
New Hampshire. Therefore, if the relationship established under the
Pooling Agreement between the Bank and the Certificateholders is
characterized as a partnership or corporation for federal tax purposes,
and if the activity of the Bank 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.
<PAGE>
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 the Bank and the Bank
was 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 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 Bank 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 Bank 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 investors 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
<PAGE>
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 Courts decision in John Hancock Life Ins. Co.
v. Harris Trust and Sav. Bank, 510 U.S. 86 (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. Insurance company general account investors
should also consider the effect of the recent enactment of Section
401(c) of ERISA.
Unless otherwise provided in the Prospectus Supplement, if the Bank
does 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 Bank 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 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 Bank 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 Bank. Any remarketing firm will be identified and the
terms of its agreement, if any, with the Bank 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 Bank or through
agents designated by the Bank from time to time. Any agent involved in
the offer or sale of Certificates will be named, and any commissions
payable by the Bank 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 Bank to indemnification by the Bank 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
<PAGE>
and underwriters may be customers of, engage in transactions with, or
perform services for, the Bank or their affiliates in the ordinary
course of business.
LEGAL MATTERS
Certain legal matters relating to the Certificates will be passed
upon for the Bank and the Trust by Cravath, Swaine & Moore, New York,
New York and for any underwriters, agents or dealers by Orrick,
Herrington & Sutcliffe LLP, New York, New York. Certain federal income
tax matters will be passed upon for the Bank by Cravath, Swaine & Moore,
New York, New York, certain California tax matters will be passed upon
for the Bank by Farella Braun & Martel LLP, San Francisco, California
and certain New Hampshire tax matters will be passed upon for the Bank
by Gallagher, Callahan & Gartrell, P.A., Concord, New Hampshire.
<PAGE>
GLOSSARY FOR PROSPECTUS
Term Page
- ---- ----
Accounts ................................................ 1
Accumulation Period...................................... 7
Act...................................................... 2
Addition ................................................ 25
Additional Accounts...................................... 26
Additional Finance Charges............................... 31
Additional Sellers ...................................... 41
Adjustment Payment ...................................... 32
Aggregate Additional Limit .............................. 25
Automatic Additional Accounts............................ 25
Bank..................................................... 1
Bank's Interest.......................................... 6
Base Rate................................................ 34
Benefit Plans............................................ 57
California Tax Counsel................................... 54
Cede..................................................... 2
CEDEL.................................................... 39
CEDEL Participants ...................................... 39
Certificateholders ...................................... 2
Certificateholders' Interest ............................ 4
Certificates ............................................ 1
Citibank................................................. 38
Class.................................................... 1
Code..................................................... 51
Collection Account....................................... 29
Commission............................................... 2
Controlled Accumulation Amount........................... 8
Controlled Amortization Amount........................... 8
Controlled Deposit Amount................................ 8
Controlled Distribution Amount........................... 8
Cooperative.............................................. 39
Credit Enhancement....................................... 10
Credit Enhancer.......................................... 33
Date of Processing....................................... 11
Defaulted Amount......................................... 32
Defaulted Receivables.................................... 32
Definitive Certificates.................................. 40
Depositaries............................................. 38
Depository............................................... 24
Determination Date....................................... 11
Disclosure Document...................................... 6
Distribution Date........................................ 8
DOL...................................................... 57
DTC...................................................... 2
Early Amortization Period................................ 9
Eligible Account......................................... 43
Eligible Deposit Account................................. 29
Eligible Institution..................................... 29
Eligible Investments..................................... 29
Eligible Receivable...................................... 43
Enhancement Invested Amount.............................. 33
ERISA.................................................... 57
Euroclear................................................ 39
Euroclear Operator....................................... 39
Euroclear Participants................................... 39
Exchange Act............................................. 2
Expected Final Payment Date.............................. 7
FDIA..................................................... 49
<PAGE>
Term Page
- ---- ----
FDIC..................................................... 5
Final Regulation......................................... 57
Finance Charge Receivables............................... 4
FIRREA................................................... 49
Floating Allocation Percentage........................... 29
Funding Period........................................... 10
GAO...................................................... 14
Group.................................................... 31
Holders.................................................. 40
Indirect Participants.................................... 38
Ineligible Receivables................................... 42
Initial Accounts......................................... 3
Initial Amount........................................... 10
Insolvency Event......................................... 14
Interchange.............................................. 19
Interest Funding Account................................. 7
Interest Payment Dates................................... 27
Invested Amount.......................................... 27
IRS...................................................... 51
L/C Issuer............................................... 33
Lending Guidelines....................................... 17
Monthly Investor Servicing Fee........................... 35
Monthly Period........................................... 21
Monthly Report........................................... 36
Moody's.................................................. 29
Morgan................................................... 38
New Hampshire Tax Counsel................................ 55
New Issuance............................................. 3
OID...................................................... 51
OID regulations.......................................... 51
Participants............................................. 38
Participations........................................... 25
Pay Out Event............................................ 34
Payment Date............................................. 37
Pooling Agreement........................................ 1
Portfolio Yield.......................................... 34
Prefunding Account....................................... 10
Prefunding Account Balance............................... 31
Principal Allocation Percentage.......................... 29
Principal Commencement Date.............................. 7
Principal Funding Account................................ 8
Principal Receivables.................................... 4
Principal Shortfalls..................................... 30
Principal Terms.......................................... 28
Prospectus Supplement.................................... 1
Providian Portfolio...................................... 18
Publicly-offered security................................ 57
Rating Agency............................................ 12
Ratings Effect........................................... 13
Receivables.............................................. 1
Record Date.............................................. 36
Remarketing Firms........................................ 58
Removal Date............................................. 27
Removal Notice Date...................................... 27
Removed Accounts......................................... 4
Required Principal Balance............................... 16
Required Seller's Participation Amount................... 16
Required Seller's Percentage............................. 16
Revolving Period......................................... 7
Rollouts................................................. 21
<PAGE>
Term Page
- ---- ----
Scheduled Amortization Period............................ 8
Seller's Interest........................................ 4
Series................................................... 1
Series Cut-off Date...................................... 7
Series Enhancement....................................... 3
Series Issuance Date..................................... 42
Series Servicing Fee Percentage.......................... 35
Series Termination Date.................................. 36
Service Transfer......................................... 46
Servicer................................................. 11
Servicer Default......................................... 46
Servicing Fee............................................ 35
Shared Principal Collections............................. 30
Special Funding Account.................................. 31
Special Payment Date..................................... 35
Spread Account........................................... 34
Standard & Poor's........................................ 29
Supplement............................................... 6
Supplemental Interest.................................... 41
Tax Counsel.............................................. 51
Tax Opinion.............................................. 28
Termination Notice....................................... 46
Terms and Conditions..................................... 40
Total System............................................. 18
Transfer Deposit Amount.................................. 42
Trust.................................................... 1
Trust Assets............................................. 3
Trust Cut-off Date....................................... 3
Trustee.................................................. 1
Trust Portfolio.......................................... 21
Trust Termination Date................................... 41
UCC...................................................... 13
Unallocated Principal Collections........................ 30
<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.
Registration Fee.......................................... $ 531,000
Printing and Engraving.................................... 250,000
Trustee's Fees............................................ 100,000
Legal Fees and Expenses................................... 1,200,000
Blue Sky Fees and Expenses................................ 45,000
Accountants' Fees and Expenses............................ 200,000
Rating Agency Fees........................................ 1,000,000
Miscellaneous Fees........................................ 400,000
-------
Total............................................... $ 3,726,000
===========
Item 15. Indemnification of Directors and Officers
Article TENTH of the Articles of Association of Providian National
Bank (the "Bank") provides that any person, his heirs, executors, or
administrators, may be indemnified or reimbursed by the Bank 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 the Bank or of any firm, corporation, or organization which
such person served in any such capacity at the request of the Bank;
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 the Bank 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 the Bank, 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 the Bank.
The policies cover losses for which the Bank shall be required or
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 Bank. 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
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)
<PAGE>
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)
4.5. Amendment No. 3 to the Pooling and Servicing Agreement,
dated as of March 1, 1997 (incorporated by reference to the
issuer's report on Form 8-K filed on March 17,1997)
4.6. Supplemental Agreement No. 1 to the Pooling and Servicing
Agreement, dated as of January 1, 1998 (incorporated by
reference to the issuer's report on Form 8-K filed on
January 9, 1998)
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 LLP 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, (included on the registrant's signature
page)
Item 17. Undertakings
The undersigned registrant 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. (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
<PAGE>
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.
<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 Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, on June 2, 1998.
Providian National Bank, as originator
of the Trust and Registrant,
By /s/ Shailesh J. Mehta
-----------------------------------
Name: Shailesh J. Mehta
Title: Chairman of the Board and Chief
Executive Officer
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned
hereby constitutes and appoints David J. Petrini, Daniel Sanford, Ellen
Richey, Ronald Claveloux and Clifford Shapiro, and each of them, his/her
attorneys for him/her in his stead, in each of his/her offices and
capacities as an officer, director, or both of the Company, to sign and
to file with the Commission such Registration Statements on Form S-3,
and any and all amendments, modifications, or supplements thereto, and
any exhibits thereto, and grants to each of said attorneys full power
and authority to sign and file any and all other documents and to
perform and do all and every act and thing whatsoever requisite and
necessary to be done in and about the premises as fully, to all intents
and purposes, as he/she might or could do if personally present at the
doing thereof, and hereby ratifies and confirms all that said attorneys
may or shall lawfully do, or cause to be done, by virtue hereof in
connection with the registration of the aforesaid securities.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 2, 1998.
Signature Title
/s/ Shailesh J. Mehta
- ---------------------------- Chairman of the Board and Chief Executive
Shailesh J. Mehta Officer and Director
/s/ David J. Petrini Senior Vice President, Chief Financial
- ---------------------------- Officer and Treasurer (Principal Financial
David J. Petrini Officer)
/s/ Daniel Sanford
- ---------------------------- Vice President and Controller (Principal
Daniel Sanford Accounting Officer)
/s/ Dianne Peterson
- ---------------------------- President and Director
Dianne Peterson
/s/ Seth Barad
- ---------------------------- Executive Vice President and Director
Seth Barad
/s/ Darrell Hotchkiss
- ---------------------------- Director
Darrell Hotchkiss
/s/ Janice Kitchen
- ---------------------------- Director
Janice Kitchen
<PAGE>
EXHIBITS
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)
4.5. Amendment No. 3 to the Pooling and Servicing Agreement,
dated as of March 1, 1997 (incorporated by reference to the
issuer's report on Form 8-K filed on March 17, 1997)
4.6. Supplemental Agreement No. 1 to the Pooling and Servicing
Agreement, dated as of January 1, 1998 (incorporated by
reference to the issuer's report on Form 8-K filed on
January 9, 1998)
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 LLP 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, (included on the registrant's signature
page)
Exhibit 5.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
June 2, 1998
Providian Master Trust
Asset Backed Certificates
Dear Sirs:
We have acted as counsel for Providian National
Bank, a national banking association (the "Bank"), in
connection with the filing by the Bank, on behalf of the
Providian Master Trust (the "Trust"), with the Securities and
Exchange Commission of a Registration Statement 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 dated as of June 1, 1993 (as amended
by any amendments executed on or before the date hereof, the
"Pooling and Servicing Agreement"), between the Bank and
Bankers Trust Company, as trustee (the "Trustee"), and a
related Series Supplement to the Pooling and Servicing
Agreement (a "Series Supplement") between the Bank 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>
2
Based upon the foregoing, we are of opinion as
follows:
1. The Pooling and Servicing Agreement has been
duly authorized, executed and delivered by the Bank, and
constitutes the legal, valid and binding obligation of the
Bank enforceable against the Bank 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 the Bank
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 the Bank and the Trustee, such
Series Supplement will constitute the legal, valid and
binding obligation of the Bank enforceable against the Bank
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 the Bank 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 the Bank, 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.
<PAGE>
3
We are admitted to practice only in New York and
our opinion is limited to matters governed by the laws of 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
Providian National Bank
295 Main Street
Tilton, NH 03276
Exhibit 8.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
June 2, 1998
Providian Master Trust
Asset Backed Certificates
Dear Sirs:
We have acted as special Federal tax counsel to
Providian National Bank, a national banking association (the
"Bank"), in connection with the filing by the Bank on behalf
of Providian Master Trust (the "Trust"), with the Securities
and Exchange Commission of a Registration Statement 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 dated as of June 1, 1993 (as amended
by any amendments executed on or before the date hereof, the
"Pooling and Servicing Agreement"), among the Bank 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.
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
<PAGE>
2
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
Providian National Bank
295 Main Street
Tilton, NH 03276
EXHIBIT 8.2
June 2, 1998
Providian National Bank
295 Main Street
Tilton, New Hampshire 03276
Re: Providian Master Trust Asset Backed Certificates
Ladies and Gentlemen:
We have acted as special California tax counsel for
Providian National Bank, a national banking association (the
"Bank"), in connection with the filing by the Bank, on behalf
of the Providian Master Trust (the "Trust"), with the
Securities and Exchange Commission of a Registration
Statement on Form S-3 on or about June 2, 1998 (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"), between the Bank and Bankers Trust Company, as
Trustee, and a Series Supplement to the Pooling and Servicing
Agreement between the Bank 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 describe the material California
state tax consequences to holders of the Certificates.
<PAGE>
Providian National Bank
June 2, 1998
Page 2
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 & GARTRELL LLP
June 2, 1998
Providian National Bank
295 Main Street
Tilton, New Hampshire 03276
Providian Master Trust
Asset Backed Certificates
Ladies and Gentlemen:
We have acted as special New Hampshire tax counsel
for Providian National Bank, a national banking association
("PNB"), in connection with the filing by PNB, on behalf of
the Providian Master Trust (the "Trust"), with the Securities
and Exchange Commission of a Registration Statement on Form
S-3 on or about June 2, 1998 (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"), between PNB and
Bankers Trust Company, as Trustee, and a Series Supplement to
the Pooling and Servicing Agreement between 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-New Hampshire", appearing under the heading
<PAGE>
Providian National Bank
June 2, 1998
Page 2
"Tax Matters", accurately describe the material New Hampshire
state 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 8.3
and 24.3 thereto.
Very truly yours,
/s/ GALLAGHER, CALLAHAN & GARTRELL
Professional Association
