As filed with the Securities and Exchange Commission on May 18, 1999
Registration No. 333-55817
Post-Effective Amendment
No. 3 to Registration
Statement No. 333-22131
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
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)
Ellen Richey, Esq.
Providian Financial Corporation
201 Mission Street
San Francisco, California 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 LLP
Worldwide Plaza 666 Fifth Avenue
825 Eighth Avenue New York, New York 10103
New York, New York 10019
----------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable on or after the effective date of this
registration statement.
----------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
----------------------
CALCULATION OF REGISTRATION FEE
Title of Proposed Proposed
each Class of maximum maximum
Securities to offering aggregate Amount of
be registered Amount to price per offering registration
Asset Backed be registered certificate(1) price (1) fee (2)
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.
1
<PAGE>
----------------------
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. 3 to such registration statement.
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<PAGE>
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 1999
$[ ]
Providian Master Trust
$[ ] [Floating Rate] [ %] Class A Asset Backed Certificates, Series 199_-_
$[ ] [Floating Rate] [ %]Class B Asset Backed Certificates, Series 199_-_
Providian National Bank
Seller and Servicer
--------------
The [Floating Rate] [ %] Class A Asset Backed Certificates, Series 199_-_
(the "Class A Certificates") and the [Floating Rate] [ %] Class B Asset Backed
Certificates, Series 199_-_ (the "Class B Certificates") offered hereby
evidence undivided interests in certain assets of the Providian Master Trust,
formerly known as the First Deposit Master Trust (the "Trust"), formed pursuant
to a Pooling and Servicing Agreement between Providian National Bank (the
"Bank"), as Seller and Servicer, and Bankers Trust Company, as 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. The Trust will also
issue the Collateral Interest and the Class D Interest (as defined herein),
each an uncertificated undivided interest in certain assets of the Trust, which
will be subordinated to the Class A Certificates and the Class B Certificates
as described herein and will be issued in the initial amounts of $[ ] and $[ ],
respectively. The Class A Certificates, the Class B Certificates, the
Collateral Interest and the Class D Interest together constitute the "Series
199_-_ Certificates".
(Continued on next page)
Potential investors should consider, among other things, the information
set forth in "Risk Factors" commencing on page S-[12] herein and on page [14]
in the Prospectus.
THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES WILL REPRESENT
INTERESTS IN THE TRUST ONLY AND WILL NOT REPRESENT INTERESTS IN OR OBLIGATIONS
OF THE BANK OR ANY AFFILIATE OF THE BANK. NEITHER THE CLASS A CERTIFICATES, THE
CLASS B CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES OR ANY
COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS OR THIS PROSPECTUS SUPPLEMENT.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Price to Underwriting Proceeds to
Public(1) Discount the Bank(2)
Per Class A Certificate............ [ ]% [ ]% [ ]%
Per Class B Certificate............ [ ]% [ ]% [ ]%
Total..............................$[ ] $[ ] $[ ]
(1) Plus accrued interest, if any, from and including the Series Issuance Date.
(2) Before deducting expenses payable by the Bank, estimated to be $[ ].
------------------
The Class A Certificates and the Class B Certificates are offered by the
Underwriter[s] when, as and if issued to and accepted by the Underwriter[s] and
subject to their right to reject orders in whole or in part. It is expected
that the Class A Certificates and the Class B Certificates will be offered
globally and delivered in book-entry form on or about [ ], 1999, through the
facilities of The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System.
Underwriter[s] of the Class A Certificates
[ ]
Underwriter[s] of the Class B Certificates
[ ]
The date of this Prospectus Supplement is [ ], 1999
S-1
<PAGE>
The Trust has previously issued [ ] Series of Certificates, [ ] of which
are still outstanding, each evidencing undivided interests in certain assets of
the Trust. In addition, from time to time, the Bank may offer other Series of
Certificates evidencing undivided interests in the Trust, which may have terms
significantly different from the Series 199_-_ Certificates. Interest will be
distributed on the Class A Certificates and the Class B Certificates on [ ],
199[ ] and on the [ ] day of each month thereafter (or, if any such [ ]th day
is not a business day, the next succeeding business day) (each an "Interest
Payment Date"). Interest will accrue on the Class A Certificates with respect
to each Interest Period (as defined herein) [at the rate of [ ]%] [at a
floating rate determined as follows] (the "Class A Certificate Rate"). Interest
will accrue on the Class B Certificates with respect to each Interest Period
(as defined herein) [at the rate of [ ]%] [at a floating rate determined as
follows] (the "Class B Certificate Rate"). Principal with respect to the Class
A Certificates and the Class B Certificates is scheduled to be distributed on
the [ ] Distribution Date and the [ ] Distribution Date, respectively.
Principal may be paid earlier [if the Servicer elects not to extend the
Accelerated Principal Payment Date, and may also be paid earlier] or later in
certain circumstances, including those described under "Description of the
Certificates--Pay-Out Events" in the Prospectus and "Series Provisions--Pay Out
Events" [and "Series Provisions--Extension of Accelerated Principal Payment
Date"] herein. The Class B Certificates will be subordinated to the Class A
Certificates, and the Collateral Interest and the Class D Interest will be
subordinated to the Class A Certificates and the Class B Certificates, as
described herein. The Class A Certificates and the Class B Certificates
initially will be represented by certificates that will be registered in the
name of Cede & Co., the nominee of The Depository Trust Company. The interests
of holders of beneficial interests in the Class A Certificates (the "Class A
Certificateholders") and in the Class B Certificates (the "Class B
Certificateholders"), will be represented by book entries on the records of The
Depository Trust Company and participating members thereof. Definitive
Certificates will be available to Class A Certificateholders and Class B
Certificateholders only under the limited circumstances described under "The
Pooling Agreement Generally--Definitive Certificates" in the Prospectus. There
currently is no secondary market for the Class A Certificates or the Class B
Certificates, and there is no assurance that one will develop or, if one does
develop, that it will continue until the Class A Certificates and the Class B
Certificates are paid in full.
------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES OFFERED
HEREBY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING AND THE PURCHASE OF THE
SECURITIES OFFERED HEREBY TO COVER SYNDICATE SHORT POSITIONS. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING".
------------------
THIS PROSPECTUS SUPPLEMENT DOES NOT CONTAIN COMPLETE INFORMATION WITH RESPECT
TO THE OFFERING OF THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES.
ADDITIONAL INFORMATION IS CONTAINED IN THE PROSPECTUS AND PURCHASERS ARE URGED
TO READ BOTH THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS IN FULL. SALES OF
THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES MAY NOT BE CONSUMMATED
UNLESS THE PURCHASER HAS RECEIVED BOTH THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS.
S-2
<PAGE>
SUMMARY OF SERIES TERMS
This Summary of Series Terms sets forth and defines specific terms of the
Class A Certificates and the Class B Certificates offered by this Prospectus
Supplement and the Prospectus, but is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Prospectus Supplement and
the Prospectus. Reference is made to the Glossary in each of this Prospectus
Supplement and the Prospectus for the location herein and therein of certain
capitalized terms. Certain capitalized terms used but not defined herein have
the meanings assigned thereto in the Prospectus.
Title of Securities................$[ ] [Floating Rate] [ %] Class A Asset
Backed Certificates, Series 199_-_, and
$[ ] [Floating Rate] [ %] Class B Asset
Backed Certificates, Series 199_-_.
Class A Initial Invested Amount... $[ ].
Class B Initial Invested Amount... $[ ].
Class A Certificate Rate.......... A rate per annum [of %] [determined as
follows].
Class B Certificate Rate.......... A rate per annum [of %] [determined as
follows].
Interest Payment Dates............ The [ ]th day of each month (or, if any
such [ ]th day is not a business day, the
next succeeding business day), commencing
[ ], 199[ ]. As used herein, a "business
day" is any day other than (a) a Saturday
or a Sunday or (b) a day on which banks
are legally obligated or authorized to
close in New York City or any of the
cities in New Hampshire or California in
which the Bank is headquartered or has
affiliated operations centers.
[Accelerated Principal
Payment Date.................... Unless an Early Amortization Event has
occurred, principal with respect to the
Class A Certificates is expected to be
paid on the Class A Expected Final Payment
Date. If, however, the Seller elects not
to extend the Accelerated Principal
Payment Date (an "Accelerated Principal
Payment Event"), the Revolving Period or
the Class A Accumulation Period, as
applicable, will end, principal and
interest will be paid monthly to the Class
A Certificateholders during the
Accelerated Principal Payment Period and,
as a result, Class A Certificateholders
will receive payments of principal prior
to the Class A Expected Final Payment
Date. The Class B Certificateholders will
begin to receive payments of principal
during the Accelerated Principal Payment
Period after the final payment on the
Class A Certificates has been made, which
may be before the Class B Expected Final
Payment Date. The "Accelerated Principal
Payment Date" will initially be the [ ]
Distribution Date, but will successively
be extended to the next Distribution Date
after the then-current Accelerated
Principal Payment Date unless the Seller
elects not to cause such extension;
provided, however, that the Accelerated
Principal Payment Date may not be extended
later than the Class A Expected Final
Payment Date. The "Accelerated Principal
Payment Period" means the period beginning
on the Accelerated Principal Payment Date
following the Servicer's election not to
extend the Accelerated Principal Payment
Date and ending on the earliest to occur
of (i) the commencement of the Early
Amortization Period, (ii) the payment in
full of the Invested Amount and (iii) the
Series Termination Date. See "Series
Provisions-- Extension of Accelerated
Principal Payment Date."]
Collateral Initial
Invested Amount................ $[ ].
Class D Initial
Invested Amount................ $[ ].
Class A Controlled
Accumulation Amount............ For each Distribution Date with respect to
the Class A
S-3
<PAGE>
Accumulation Period, $[ ] (except that,
if the commencement of the Class A
Accumulation Period is delayed as
described herein under "Series
Provisions--Principal", the Class A
Controlled Accumulation Amount for each
Distribution Date with respect to the
Class A Accumulation Period will be
determined as described under "Series
Provisions--Application of
Collections--Payments of Principal").
See "Description of the Certificates--
Principal" in the Prospectus.
Class B Controlled
Accumulation Amount............ For each Distribution Date with respect to
the Class B Accumulation Period, $[ ] (or
such other amount as the Servicer may
determine as described under "Series
Provisions--Application of
Collections--Payments of Principal"). See
"Description of the
Certificates--Principal" in the
Prospectus.
Class A Expected Final
Payment Date................... The [ ] Distribution Date.
Class B Expected Final
Payment Date................... The [ ] Distribution Date.
The Class A Certificates;
the Class B Certificates;
the Collateral Interest;
the Class D Interest........... Each of the Class A Certificates and the
Class B Certificates offered hereby
represents an undivided interest in
certain Trust Assets and, in the case of
the Class A Certificates, an undivided
interest in investments and moneys on
deposit in the Principal Funding Account
in respect of the Class A Certificates and
in the case of the Class B Certificates,
an undivided interest in investments and
moneys on deposit in the Principal Funding
Account in respect of the Class B
Certificates. In addition, undivided
interests in certain Trust Assets (the
"Collateral Interest" and the "Class D
Interest") will be issued in the
Collateral Initial Invested Amount and the
Class D Initial Invested Amount, which
amounts will equal [ ]% and [ ]%,
respectively, of the sum of the Class A
Initial Invested Amount, the Class B
Initial Invested Amount, the Collateral
Initial Invested Amount and the Class D
Initial Invested Amount (together, the
"Initial Invested Amount") and will
constitute the Credit Enhancement for the
Class A Certificates and the Class B
Certificates. The providers of such Credit
Enhancement are the "Collateral Interest
Holder" and the "Class D Holder". The
Class D Holder will be the Seller. The
portion of the Trust Assets allocated to
the holders of the Series 199_-_
Certificates as described under
"Description of the Certificates" in the
Prospectus will be allocated between the
holders of the Class A Certificates (the
"Class A Certificateholders' Interest"),
the Class B Certificates (the "Class B
Certificateholders' Interest"), the
Collateral Interest Holder and the Class D
Holder as described herein. The Class A
Certificateholders' Interest, the Class B
Certificateholders' Interest, the
Collateral Interest and the Class D
Interest are sometimes collectively
referred to herein as the "Series 199_-_
Certificateholders' Interest".
The principal amount of the Class A
Certificateholders' Interest may decline
as a result of the allocation to the Class
A Certificateholders of Defaulted Amounts,
as described herein. The Class B
Certificateholders' Interest may decline
as a result of (a) the allocation to the
Class B Certificateholders' Interest of
Defaulted Amounts, including those
otherwise allocable to the Class A
Certificateholders' Interest, and (b) the
reallocation of collections of Principal
Receivables otherwise allocable to the
Class B Certificateholders' Interest to
fund certain payments in respect of the
Class A Certificates and certain servicing
fees. The Collateral Interest may decline
as a result of (a) the allocation to the
S-4
<PAGE>
Collateral Interest of Defaulted
Amounts, including those otherwise
allocable to the Class A
Certificateholders' Interest and the
Class B Certificateholders' Interest,
and (b) the reallocation of collections
of Principal Receivables otherwise
allocable to the Collateral Interest or
the Class B Certificateholders'
Interest to fund certain payments in
respect of the Class A Certificates,
the Class B Certificates and certain
servicing fees. The Class D Interest
may decline as a result of (a) the
allocation to the Class D Interest of
Defaulted Amounts, including those
otherwise allocable to the Class A
Certificateholders' Interest, the Class
B Certificateholders' Interest and the
Collateral Interest, and (b) the
reallocation of collections of
Principal Receivables otherwise
allocable to the Class D Interest, the
Collateral Interest or the Class B
Certificateholders' Interest to fund
certain payments in respect of the
Class A Certificates, the Class B
Certificates, the Collateral Interest
and certain servicing fees. Any such
reductions in the Class A
Certificateholders' Interest, the Class
B Certificateholders' Interest, the
Collateral Interest or the Class D
Interest may be reimbursed out of
Available Finance Charge Collections,
as described herein. For the purpose of
allocating collections of Finance
Charge Receivables and the Defaulted
Amount with respect to each Monthly
Period, the Class A Certificateholders'
Interest will be further reduced by the
amount on deposit in the Principal
Funding Account in respect of the Class
A Certificates and the Class B
Certificateholders' Interest will be
further reduced by the amount on
deposit in the Principal Funding
Account in respect of the Class B
Certificates (as so reduced, the "Class
A Adjusted Invested Amount" and the
"Class B Adjusted Invested Amount",
respectively, and collectively with the
Collateral Invested Amount and the
Class D Invested Amount, the "Adjusted
Invested Amount").
The Series 199_-_ Certificateholders'
Interest will include the right to
receive (but only to the extent needed
to make required payments under the
Pooling Agreement and the Series 199_-_
Supplement and subject to any
reallocation of such amounts as
described herein) varying percentages
of the 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. Finance
Charge Receivables collections and the
Defaulted Amount will be allocated to
the Series 199_-_ Certificateholders'
Interest based on the Floating
Allocation Percentage. The Defaulted
Amount with respect to each Monthly
Period will be further allocated
between the Class A Certificates, the
Class B Certificates, the Collateral
Interest and the Class D Interest as
described herein. Finance Charge
Receivables collections with respect to
each Monthly Period allocated to Series
199_-_ will be applied first to pay
interest on the Class A Certificates,
second to pay interest on the Class B
Certificates and then, to the extent
available after making such payments
and other payments having a higher
priority as described herein, interest
on the Collateral Interest and the
Class D Interest. See "Series
Provisions--Application of
Collections-- Payments of Interest,
Fees and Other Items". Collections of
Principal Receivables will be allocated
to the Series 199_-_
Certificateholders' Interest based on
the Principal Allocation Percentage.
Such percentage will vary as described
herein under "Series
Provisions--Allocation Percentages"
depending on whether Series 199_-_ is
in its Revolving Period, Class A
Accumulation Period, Class B
Accumulation Period [, Accelerated
Principal Payment Period,] or Early
Amortization
S-5
<PAGE>
Period. See also "Description of the
Certificates-- Allocation Percentages"
in the Prospectus. Such amounts will be
further allocated between the Class A
Certificates, the Class B Certificates
, the Collateral Interest and the Class
D Interest for certain purposes as
described herein. See "Series
Provisions--Allocation Percentages".
Interest rate swap or cap agreements may be
assigned to the Trust with respect to
Series 199_-_, the payments from which
would be included in Available Finance
Charge Collections. If any such agreement
is entered into, it may be discontinued or
removed from the Trust at any time. See
"Series Provisions--Interest".
Subordination; Additional
Amounts Available to
Class A Certificateholders
and Class B Certificateholders.. The fractional undivided interest in the
Trust Assets constituting the Class B
Certificateholders' Interest will be
subordinated to the extent necessary to
fund certain payments with respect to the
Class A Certificates as described herein;
the fractional undivided interest in the
Trust Assets constituting the Collateral
Interest will be subordinated to the
extent necessary to fund certain payments
with respect to the Class A Certificates
and the Class B Certificates as described
herein; and the fractional undivided
interest in the Trust Assets constituting
the Class D Interest will be subordinated
to the extent necessary to fund certain
payments with respect to the Class A
Certificates, the Class B Certificates and
the Collateral Interest as described
herein. If, on any Distribution Date,
Available Finance Charge Collections are
less than the sum of (a) current and
overdue Class A Monthly Interest and any
Class A Additional Interest, (b) current
and overdue Class B Monthly Interest and
any Class B Additional Interest, (c)
current and overdue Monthly Investor
Servicing Fee, (d) the Class A Defaulted
Amount, (e) the Class B Defaulted Amount
and (f) the Collateral Defaulted Amount as
of, in each case, such Distribution Date
(such deficiency, the "Required Amount"),
then Reallocated Class D Principal
Collections that would otherwise be
allocable to the Class D Interest with
respect to the related Monthly Period will
be used to fund the Required Amount. If
Reallocated Class D Principal Collections
are less than the Required Amount, then
Reallocated Collateral Principal
Collections that would otherwise be
allocable to the Collateral Interest with
respect to the related Monthly Period will
be used to fund the remaining portion of
the Required Amount described in clauses
(a), (b), (c), (d) and (e) above. If
Reallocated Collateral Principal
Collections are insufficient to fund such
remaining portion of the Required Amount,
then Reallocated Class B Principal
Collections that would otherwise be
allocable to the Class B
Certificateholders' Interest with respect
to the related Monthly Period will be used
to fund the remaining portion of the
Required Amount described in clauses (a),
(c) and (d) above.
If on any Distribution Date, the Class A
Defaulted Amount exceeds the amount of
Available Finance Charge Collections and
Reallocated Principal Collections applied
thereto on such Distribution Date, then
the Class D Invested Amount (after giving
effect to any reductions in the Class D
Invested Amount on such Distribution Date
attributable to the Class D Defaulted
Amount and the application of Reallocated
Principal Collections) will be reduced by
the amount of such excess. If such
reduction would cause the Class D Invested
Amount to be reduced below zero, the
Collateral Invested Amount (after giving
effect to any reductions in the Collateral
Invested Amount on such Distribution
S-6
<PAGE>
Date attributable to the Collateral
Defaulted Amount and the application of
Reallocated Collateral Principal
Collections and Reallocated Class B
Principal Collections) will be reduced by
the amount by which the Class D Invested
Amount would have been reduced below zero.
If such reduction would cause the
Collateral Invested Amount to be reduced
below zero, the Class B Invested Amount
(after giving effect to any reductions in
the Class B Invested Amount on such
Distribution Date attributable to the
Class B Defaulted Amount and the
application of Reallocated Class B
Principal Collections) will be reduced by
the amount by which the Collateral
Invested Amount would have been reduced
below zero. In the event that such
reduction would cause the Class B Invested
Amount to be reduced below zero, the Class
A Invested Amount shall be reduced by the
amount by which the Class B Invested
Amount would have been reduced below zero,
and, in such case, the Class A
Certificateholders will bear directly the
credit and other risks associated with
their undivided interest in the Trust. See
"Series Provisions--Application of
Collections" and "--Defaulted Amounts;
Charge-Offs".
If on any Distribution Date, the Class B
Defaulted Amount exceeds the amount of
Available Finance Charge Collections,
Reallocated Class D Principal Collections
and Reallocated Collateral Principal
Collections applied thereto on such
Distribution Date, then the Class D
Invested Amount (after giving effect to
any reductions in the Class D Invested
Amount on such Distribution Date
attributable to the Class D Defaulted
Amount, the application of Reallocated
Principal Collections and the Class A
Defaulted Amount) will be reduced by the
amount of such excess. If such reduction
would cause the Class D Invested Amount to
be reduced below zero, the Collateral
Invested Amount (after giving effect to
any reductions in the Collateral Invested
Amount on such Distribution Date
attributable to the Collateral Defaulted
Amount, the application of Reallocated
Collateral Principal Collections and
Reallocated Class B Principal Collections
and the Class A Defaulted Amount) will be
reduced by the amount of such excess. In
the event that such reduction would cause
the Collateral Invested Amount to be
reduced below zero, the Class B Invested
Amount will be reduced by the amount by
which the Collateral Invested Amount would
have been reduced below zero, and, in such
case, the Class B Certificateholders will
bear directly the credit and other risks
associated with their undivided interest
in the Trust. See "Series
Provisions--Application of Collections"
and "--Defaulted Amounts; Charge-Offs".
Credit Enhancement................ On each Distribution Date, the amount of the
Collateral Interest and the Class D
Interest, which collectively constitute
the Credit Enhancement for the Class A
Certificates and the Class B Certificates,
will equal the lesser of (a) the sum of
the Collateral Invested Amount and the
Class D Invested Amount and (b) the
Required Enhancement Amount. The Required
Enhancement Amount with respect to any
Distribution Date will be, subject to
certain limitations more fully described
herein, the product of (i) the Adjusted
Invested Amount and (ii) [ ]%. If, as of
any Distribution Date, the sum of the
Collateral Invested Amount and the Class D
Invested Amount is less than the Required
Enhancement Amount, Available Finance
Charge Collections remaining after making
payments on such date having a higher
priority, as described herein, will be
used to increase the Collateral Invested
Amount or the Class D Invested Amount to
the extent of such
S-7
<PAGE>
shortfall. If, as of any Distribution Date,
the Collateral Invested Amount exceeds the
Required Collateral Invested Amount,
Available Principal Collections remaining
after payment of any Class A Monthly
Principal and Class B Monthly Principal on
such date will be used to reduce the
Collateral Invested Amount to the Required
Collateral Invested Amount. See "Series
Provisions--Application of Collections".
Other Series...................... The Trust has previously issued [ ] Series
of Certificates, [ ] of which are still
outstanding. See "Annex I: Other Issuances
of Certificates" for a summary of those
outstanding certificates. Additional
Series are expected to be issued from time
to time by the Trust. See "Description of
the Certificates--New Issuances" in the
Prospectus.
Sharing of Additional Finance
Charges......................... Upon the issuance of the Series 199_-_
Certificates, [ ] Series issued by the
Trust will be outstanding as of the Series
Issuance Date [and will be included in a
group of Series designated as "Group
One"]. [Group One] is expected to include
additional Series issued from time to
time. Subject to certain limitations
described under "Description of the
Certificates--Sharing of Additional
Finance Charges" in the Prospectus,
Additional Finance Charges, if any, with
respect to any Series included in [Group
One] will be applied to cover any
shortfalls with respect to amounts payable
from collections of Finance Charge
Receivables allocable to any other Series
in [Group One], pro rata based upon the
amount of the shortfall, if any, with
respect to each other Series in [Group
One]. See "Description of the
Certificates--Sharing of Additional
Finance Charges" in the Prospectus.
The Receivables................... The aggregate amount of Receivables in the
Accounts as of [ ], 199[ ] (including
approximately $[ ] of Receivables in
Accounts added to the Trust after [ ],
199[ ] and on or prior to the Series
Issuance Date) was $[ ] of which $[ ] were
Principal Receivables and $[ ] were
Finance Charge Receivables (which amounts
include overdue Principal Receivables and
overdue Finance Charge Receivables,
respectively). The amount of such Finance
Charge Receivables will not affect the
amount of the Certificateholders' Interest
represented by the Certificates or the
amount of the Sellers' Interest, which are
determined on the basis of the amount of
Principal Receivables in the Trust. See
"The Accounts" in the Prospectus and
"Composition of the Accounts" herein.
Series Cut-Off Date............... [ ], 199[ ].
Series Issuance Date.............. On or about [ ], 199[ ].
Revolving Period and
Accumulation Periods............ Unless a Pay Out Event [or an Accelerated
Principal Payment Event] occurs, the
revolving period with respect to the
Series 199_-_ Certificates (the "Revolving
Period") will end, and the accumulation
period with respect to the Class A
Certificates (the "Class A Accumulation
Period") will commence, at the close of
business on the last business day of [ ]
(except that, subject to the conditions
set forth under "Series
Provisions--Principal", the day on which
the Revolving Period ends and the Class A
Accumulation Period begins may be delayed
to not later than the last business day of
[ ]). Unless a Pay Out Event [or an
Accelerated Principal Payment Event]
occurs, the accumulation period with
respect to the Class B Certificates (the
"Class B Accumulation Period") will
commence at the close of business on the
last business day of the Monthly Period
immediately preceding the Class A Expected
S-8
<PAGE>
Final Payment Date. See "Description of
the Certificates--Principal" in the
Prospectus.
Series Servicing Fee Percentage... For so long as the Bank is the Servicer, [
]% per annum or, if a successor Servicer
is appointed, a percentage determined by
the Trustee, which will not exceed [ ]%
per annum. The Monthly Investor Servicing
Fee will be paid on each Distribution Date
as described under "Series
Provisions--Application of
Collections--Payment of Interest, Fees and
Other Items". See also "Description of the
Certificates-- Servicing Compensation and
Payment of Expenses" in the Prospectus.
Registration...................... The Class A Certificates and the Class B
Certificates initially will be represented
by certificates registered in the name of
Cede, as nominee of DTC, and no purchaser
of Class A Certificates or Class B
Certificates will be entitled to receive a
definitive certificate except under
certain limited circumstances. Class A
Certificateholders and Class B
Certificateholders may elect to hold their
Certificates through DTC (in the United
States) or CEDEL or Euroclear (in Europe).
See "The Pooling Agreement
Generally--Book-Entry Registration" and
"--Definitive Certificates" in the
Prospectus.
Optional Repurchase............... On any day occurring on or after the day
on which the Invested Amount is reduced to
[ ]% or less of the Initial Invested
Amount, the Bank will have the option to
repurchase the Series 199_-_
Certificateholders' Interest and thereby
retire the Series 199_-_ Certificates. The
purchase price will be equal to the sum of
the Adjusted Invested Amount and accrued
and unpaid interest on the Class A
Certificates, the Class B Certificates and
the Collateral Interest (and accrued and
unpaid interest with respect to interest
amounts that were due but not paid on any
prior Interest Payment Date) through (a)
if the day on which such repurchase occurs
is a Distribution Date, the day
immediately preceding such Distribution
Date, or (b) if the day on which such
repurchase occurs is not a Distribution
Date, the day immediately preceding the
Distribution Date following such day. See
"Description of the Certificates--Optional
Termination; Final Payment of Principal"
in the Prospectus.
Series Termination Date........... The [ ] Distribution Date. See "Series
Provisions--Series Termination".
Tax Status........................ In the opinion of Cravath, Swaine & Moore,
special tax counsel for the Bank and the
Trust, the Class A Certificates and the
Class B Certificates will properly be
characterized as debt for federal income
tax purposes and under current law the
Trust will not be subject to federal
income tax. Each Class A Certificateholder
and Class B Certificateholder, by
acceptance of a Class A Certificate or
Class B Certificate, as applicable, will
agree to treat such as indebtedness of the
Bank for federal, state and local income
and franchise tax purposes. See "Tax
Matters" in the Prospectus for additional
information concerning the application of
federal, California and New Hampshire tax
laws.
[The Class A Certificates may be eligible
for purchase by Benefit Plans. The Class B
Certificates are not expected to be
eligible for purchase by Benefit Plans.]
ERISA Eligibility................. [See "ERISA Considerations" in the
Prospectus.]
Class A Certificate Rating........ It is a condition to the issuance of the
Class A Certificates that they be rated in
[one of] the [ ] rating [category]
[categories] by at least [ ]
S-9
<PAGE>
nationally recognized statistical rating
[agency] [agencies]. The rating of the
Class A Certificates is based primarily
on the value of the Receivables and the
circumstances in which funds otherwise
allocable to the Class B
Certificateholders' Interest, the
Collateral Interest and the Class D
Interest may be available to the Class
A Certificateholders. The rating of the
Class A Certificates is not based on
the availability of payments under any
interest rate swap or cap agreement
that may be assigned to the Trust with
respect to the Series 199_-_
Certificates. See "Risk
Factors--Limited Nature of Rating" in
the Prospectus.
Class B Certificate
Rating............................ It is a condition to the issuance of the
Class B Certificates that they be rated in
[one of] the [ ] rating [category]
[categories] by at least [ ] nationally
recognized statistical rating [agency]
[agencies]. The rating of the Class B
Certificates is based primarily on the
value of the Receivables and the
circumstances in which funds otherwise
allocable to the Collateral Interest and
the Class D Interest may be available to
the Class B Certificateholders. The rating
of the Class B Certificates is not based
on the availability of payments under any
interest rate swap or cap agreement that
may be assigned to the Trust with respect
to the Series 199_-_ Certificates. See
"Risk Factors--Limited Nature of Rating"
in the Prospectus.
S-10
<PAGE>
RISK FACTORS
Potential investors should consider, among other things, the risk factors
discussed under "Risk Factors" in the Prospectus and the following risk factors
in connection with the purchase of the Series 199_-_ Certificates.
Limited Amounts of Credit Enhancement. The Credit Enhancement with respect
to the Class A Certificates will be provided by the subordination of the Class
B Certificates, the Collateral Interest and the Class D Interest, and the
Credit Enhancement with respect to the Class B Certificates will be provided by
the subordination of the Collateral Interest and the Class D Interest. In each
case the amounts available as Credit Enhancement are limited and will be
reduced by payments or reductions that may be made pursuant to the terms of the
Series 199_-_ Supplement, as described herein. If the Collateral Invested
Amount and the Class D Invested Amount have been reduced to zero, Class B
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust and the Class B Invested Amount may
be reduced. If the Class B Invested Amount is reduced to zero, Class A
Certificateholders will bear directly the credit and other risks associated
with their undivided interest in the Trust and the Class A Invested Amount may
be reduced. Further, in the event of a reduction of the Class B Invested
Amount, the Collateral Invested Amount or the Class D Invested Amount, the
amount of principal and interest available to make distributions with respect
to the Class A Certificates and the Class B Certificates may be reduced.
Additionally, the amount of Credit Enhancement may be reduced or the form
thereof altered at the Bank's option at any time, subject to the approval of
each Rating Agency that has rated the Class A Certificates and the Class B
Certificates.
Effect of Subordination of Class B Certificates; Principal Payments.
Payments of principal and interest on the Class B Certificates are subordinated
in right of payment to the Class A Certificates. Payments of principal in
respect of the Class B Certificates will not commence until after the final
principal payment with respect to the Class A Certificates has been made as
described herein. Moreover, the Class B Invested Amount is subject to reduction
if the portion of the Required Amount for any Monthly Period attributable to
the Class A Certificates and the Monthly Investor Servicing Fee is greater than
zero and is not funded by a reduction in the Collateral Invested Amount or the
Class D Invested Amount. To the extent the Class B Invested Amount is reduced,
the amount of interest distributable to Class B Certificateholders may be
reduced. Moreover, to the extent the amount of such reduction in the Class B
Invested Amount is not reimbursed, the amount of principal distributable to the
Class B Certificateholders will be reduced. See "Series Provisions--Allocation
Percentages" and "--Application of Collections". If the Class B Invested Amount
is reduced to zero, the holders of the Class A Certificates will bear directly
the credit and other risks associated with their undivided interest in the
Trust.
MATURITY CONSIDERATIONS
The Pooling Agreement and the Series 199_-_ Supplement provide that the
Class A Invested Amount is payable to the Class A Certificateholders, to the
extent funds are available therefor in the Principal Funding Account, on the
Class A Expected Final Payment Date or earlier in the event of a Pay Out Event
which results in the commencement of an early amortization period with respect
to the Series 199_-_ Certificates (an "Early Amortization Period") [or an
Accelerated Principal Payment Event]. The Class A Certificateholders will
receive payments of principal [(i)] on each Distribution Date following the
Monthly Period in which a Pay Out Event occurs [and (ii) on each Distribution
Date beginning with the commencement of the Accelerated Principal Payment
Period] (each such Distribution Date, a "Special Payment Date") until the Class
A Invested Amount is paid in full or the Series Termination Date occurs. The
Class B Certificateholders will not begin to receive payments of principal
until the final principal payment on the Class A Certificates has been made.
On each Distribution Date with respect to the Class A Accumulation Period,
Available Principal Collections in an amount up to the Class A Controlled
Deposit Amount with respect to such Distribution Date will be deposited in the
Principal Funding Account (as described under "Series Provisions--Application
of Collections--Payments of Principal"), until the Principal Funding Account
Balance is equal to the Class A Invested Amount. The Class A Certificateholders
will receive the aggregate principal amount on deposit in the Principal Funding
Account on the Class A Expected Final Payment Date. Although it is anticipated
that Available Principal Collections for each Monthly Period with respect to
the Class A Accumulation Period will be sufficient to fund the deposit of the
Class A Invested Amount in the Principal Funding Account for payment to the
Class A Certificateholders on the Class A Expected Final Payment Date, no
assurance can be given in that regard. If the Class A Invested Amount is not
paid in full on the Class A Expected Final Payment Date, principal will be paid
to the Class A Certificateholders monthly on each Distribution Date until the
Class A Invested Amount is paid in full and then to the Class B
Certificateholders until the Class B Invested Amount is paid in full or, in
either case, until the Series Termination Date occurs.
If the Class A Invested Amount is paid in full on the Class A Expected
Final Payment Date, then on each Distribution Date with respect to the Class B
Accumulation Period, Available Principal Collections in an amount up to the
Class B Controlled Deposit Amount with respect to such Distribution Date will
be deposited in the Principal Funding Account (as described under "Series
Provisions--Application of Collections--Payments of Principal"), until the
Principal Funding Account Balance is equal to the Class B Invested Amount. The
Class B Certificateholders will receive the aggregate principal amount on
deposit in the Principal Funding Account on the Class B Expected Final Payment
Date. Although it is anticipated that Available Principal Collections for each
Monthly Period with respect to the Class B Accumulation Period will be
sufficient to fund the deposit of the Class B Invested Amount in the Principal
Funding Account for payment to the Class B Certificateholders on the Class B
Expected Final Payment Date, no assurance can be given in that regard. If the
Class B Invested Amount is not paid in full on the Class B Expected Final
Payment Date, principal will be paid to the Class B Certificateholders monthly
on each Distribution Date until the Class B Invested Amount is paid in full or
until the Series Termination Date occurs.
S-11
<PAGE>
At or after the time at which the Class A Accumulation Period commences
for Series 199_-_, the Bank may designate another Series (or some portion
thereof) as a Paired Series with respect to Series 199_-_ and may use such
other Series to finance the increase in the Seller's Interest caused by the
accumulation of principal in the Principal Funding Account with respect to
Series 199_-_. A Paired Series is intended to be issued as a pair with a Series
which is in its Accumulation Period or Scheduled Amortization Period, and,
accordingly, new Paired Series may be excluded from the definition of Required
Principal Balance and thereby increase the aggregate Invested Amounts that may
be issued by the Trust in relation to the aggregate amount of Principal
Receivables. If a Pay Out Event occurs with respect to any Paired Series and
the Early Amortization Period for such Series overlaps the Class A Accumulation
Period, the Class B Accumulation Period [, the Accelerated Principal Payment
Period,] or the Early Amortization Period for the Series 199_-_ Certificates,
the final payment of principal to the Class A Certificateholders and Class B
Certificateholders may be delayed.
If a Pay Out Event [or an Accelerated Principal Payment Event] occurs with
respect to the Series 199_-_ Certificates and the Early Amortization Period [or
the Accelerated Principal Payment Period, as applicable,] commences, any amount
on deposit in the Principal Funding Account on the first Special Payment Date,
and the Available Principal Collections on each Distribution Date thereafter,
will be paid to the Class A Certificateholders until the Class A Invested
Amount is paid in full and then to the Class B Certificateholders until the
Class B Invested Amount is paid in full or, in either case, until the Series
Termination Date occurs. See "Description of the Certificates--Pay Out Events"
in the Prospectus and "Series Provisions--Pay Out Events" [and "Series
Provisions--Extension of Accelerated Principal Payment Date"] herein. If the
commencement of the Class A Accumulation Period is delayed as described under
"Series Provisions--Principal", and a Pay Out Event with respect to the Series
199_-_ Certificates or with respect to any other Series occurs after the date
originally scheduled for the commencement of the Class A Accumulation Period,
then it is probable that the Class A Certificateholders, and consequently the
Class B Certificateholders, would receive some of their principal later than if
the Class A Accumulation Period had not been delayed. [ A similar result may
occur if an Accelerated Principal Payment Event follows a delay in the
commencement of the Class A Accumulation Period, as other, non-extendable
Series will have priority over the Series 199_-_ Certificates in the allocation
of Shared Principal Collections. See "Series Provisions--Extension of
Accelerated Principal Payment Date" herein.]
The following table sets forth the highest and lowest accountholder
monthly payment rates for the Providian Portfolio during any month in the
period shown and the average accountholder monthly payment rates for all months
during the periods shown, in each case calculated as a percentage of total
opening monthly account balances during the applicable months. Payments shown
in the table consist of amounts that would be deemed payments of Principal
Receivables and Finance Charge Receivables with respect to the Accounts.
S-12
<PAGE>
ACCOUNTHOLDER MONTHLY PAYMENT RATES
PROVIDIAN PORTFOLIO<F1>
Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Lowest .................. 8.93% 8.59% 7.84% 7.31% 7.29%
Highest .................. 11.51% 10.58% 9.35% 8.95% 8.98%
Monthly Average .......... 9.78% 9.39% 8.47% 8.01% 8.20%
<FN>
<F1> The figures shown for the four years ended December 31, 1997, 1996,
1995 and 1994 do not incorporate information with respect to the
Acquired Portfolios.
</FN>
</TABLE>
The amount of outstanding Receivables and the rates of payments,
delinquencies, charge-offs and new borrowings on the Accounts depend upon a
variety of factors, including seasonal variations, the availability of other
sources of credit, legal factors, general economic conditions and consumer
spending and borrowing patterns. The Bank cannot predict, and no assurance can
be given as to, the accountholder monthly payment rates that will actually
occur in any future period. There can be no assurance that collections of
Principal Receivables with respect to the Accounts, and thus the rate at which
the Principal Funding Account could be funded during the Class A Accumulation
Period or the Class B Accumulation Period, or the rate at which Class A
Certificateholders and Class B Certificateholders could expect to receive
payments of principal on their Class A Certificates and their Class B
Certificates during the Early Amortization Period [or the Accelerated Principal
Payment Period], will be similar to the historical experience set forth above.
In addition, the Trust, as a master trust, has issued and may issue additional
Series from time to time, and there can be no assurance that the terms of any
such Series might not have an impact on the timing or amount of payments
received by a Class A Certificateholder or Class B Certificateholder. If a Pay
Out Event occurs with respect to the Series 199_-_ Certificates or other Series
in certain circumstances discussed above, payments of principal on the Class A
Certificates and the Class B Certificates could be delayed. In other
circumstances, if a Pay Out Event occurs with respect to the Series 199_-_
Certificates, the average life and maturity of the Class A Certificates and the
Class B Certificates could be significantly reduced. As a result, there can be
no assurance that the actual number of months elapsed from the date of issuance
of the Class A Certificates and the Class B Certificates to the respective
final Distribution Dates with respect to the Class A Certificates and the Class
B Certificates will equal the expected number of months. See "Risk
Factors--Payments and Maturity" in the Prospectus.
THE PROVIDIAN PORTFOLIO
General
Set forth below is certain information with respect to the Providian
Portfolio. See "The Bank's Credit Card and Consumer Lending Business" in the
Prospectus. There can be no assurance that the yield, loss and delinquency
experience with respect to the Receivables will be comparable to that set forth
below with respect to the entire Providian Portfolio.
During the first and second quarters of 1998 the Bank acquired from First
Union Direct Bank, N.A. two portfolios of unsecured credit card accounts (the
"First Union Portfolios"). As of December 31, 1998, the total receivables
outstanding in the First Union Portfolios was approximately $1.6 billion, which
represents approximately 17% of the Providian Portfolio. The accounts in the
First Union Portfolios were underwritten by First Union Direct Bank, N.A. See
"The Bank's Credit Card and Consumer Lending Business--Business Overview" in
the Prospectus. Accounts acquired by the Bank from First Union Direct Bank,
N.A. were originally opened using criteria which are different than the Bank's
and have not been subject to the same underwriting procedures and credit review
as accounts established by the Bank. Information about the criteria used to
open such accounts can be found in publicly available filings made by First
Union National Bank of Georgia, the predecessor of First Union Direct Bank,
N.A., with the Commission prior to August 1, 1996 (the "First Union Filings").
The Bank makes no representations as to the accuracy or completeness of such
filings or as to whether there were changes in those criteria and undertakes no
obligation to verify any such information. The accounts in the First Union
Portfolios have higher delinquency and loss rates than the accounts in the
Trust Portfolio. Information about the historical delinquency and loss rates of
the credit card accounts owned by First Union (which were the source of the
First Union Portfolios) can be found in the First Union Filings. The Bank makes
no representations as to the accuracy or completeness of such filings or as to
whether there have been changes in the delinquency or loss rates provided
therein and undertakes no obligation to verify any such information.
During the fourth quarter of 1998 the Bank acquired a portfolio of credit
card accounts from Morgan Stanley Dean Witter's Bravo card program. As of
December 31, 1998, the total receivables outstanding in the Bravo portfolio was
approximately $328 million, which represents approximately 3.5% of the
Providian Portfolio. During the first quarter of 1999, the Bank acquired a
portfolio of credit card accounts from H&R Block, Inc.'s "WebCard" program.
These acquired portfolios, together with the First Union Portfolios, are
collectively referred to as the "Acquired Portfolios".
On October 20, 1998, randomly selected accounts with an aggregate
principal balance of approximately $300 million from the First Union Portfolios
were added to the Trust Portfolio. The conditions, including the
S-13
<PAGE>
eligibility criteria in the Pooling Agreement, applicable to any Addition
of Accounts were satisfied in connection with this Addition and will be
satisfied in connection with any future Addition. See "Description of the
Certificates--Addition of Trust Assets" in the Prospectus.
Revenue Experience
Gross revenues from periodic finance charges and fees billed to
accountholders on accounts contained in the Providian Portfolio for each of the
five years ended December 31, 1998, 1997, 1996, 1995 and 1994 are set forth in
the following table. Revenue from the Receivables will depend on the types of
fees and charges assessed on the Accounts, and could be adversely affected by
future changes made by the Bank or the Servicer in such fees and charges or by
other factors. See "Risk Factors--Certain Legal Aspects" and "The Ability of
the Bank to Change Terms of the Accounts" and "The Accounts--Billing and
Payments" in the Prospectus.
S-14
<PAGE>
REVENUE EXPERIENCE
PROVIDIAN PORTFOLIO<F1>
Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Average Receivables $9,248,467 $7,654,900 $6,646,608 $4,180,220 $3,567,940
Outstanding(2)......................
Finance Charge and Fee $1,966,404 $1,523,513 $1,233,457 $ 975,434 $ 743,553
Income(3)...........................
Average Revenue Yield(4)............ 21.26% 19.90% 18.56% 20.28% 20.84%
<FN>
<F1> The figures shown for the four years ended December 31, 1997, 1996, 1995
and 1994 do not incorporate information with respect to the Acquired
Portfolios.
<F2> Average Receivables Outstanding for any period is equal to the average of
the Average Daily Balance for each month in such period. The Average Daily
Balance for a month is equal to the average of the Receivables outstanding
on each day in such month. Receivables outstanding on any day are the sum
of Principal Receivables and Finance Charge Receivables on such day.
<F3> Finance Charge and Fee Income includes Interchange and is reduced by
purchase rebates with respect to certain accounts.
<F4> Average Revenue Yield is the result of dividing Finance Charge and Fee
Income by Average Receivables Outstanding during the periods indicated.
</FN>
</TABLE>
Loss and Delinquency Experience
The following tables set forth the delinquency and loss experience with
respect to payments by accountholders on the Providian Portfolio for each of
the periods shown. There can be no assurance, however, that the loss and
delinquency experience for the Receivables will be similar to the historical
experience for the Providian Portfolio set forth below.
DELINQUENCY EXPERIENCE
PROVIDIAN PORTFOLIO<F1>
<TABLE>
At December 31
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Delinquent Percen- Delinquent Percen- Delinquent Percen- Delinquent Percen- Delinquent Percen-
Amount tage<F1> Amount tage<F2> Amount tage<F2> Amount tage<F2> Amount tage<F2>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30-59 days....... $160,600 1.70% $108,142 1.37% $127,322 1.63% $ 81,933 1.45% $ 54,160 1.34%
60-89 days....... 96,092 1.02% 69,228 0.88% 71,890 0.92% 44,170 0.78% 29,000 0.72%
90 days or more.. 174,998 1.86% 127,583 1.62% 120,571 1.55% 57,579 1.02% 38,278 0.95%
======== ===== ======= ===== ======= ===== ======== ===== ======== =====
Total......... $431,690 4.58% $304,953 3.87% $319,783 4.10% $183,682 3.25% $121,438 3.01%
S-15
<PAGE>
<FN>
<F1> The figures shown for the four years ended December 31, 1997, 1996, 1995 and 1994 do not incorporate
information with respect to the Acquired Portfolios.
<F2> The percentages are the result of dividing the Delinquent Amount by the aggregate Receivables outstanding at the
dates indicated. The aggregate Receivables outstanding at December 31, 1998, 1997, 1996, 1995 and 1994 were
$9,425,177, $7,891,220, $7,790,346, $5,637,675 and $4,040,238, respectively. Receivables outstanding on any day
are the sum of Principal Receivables and Finance Charge Receivables on such day.
</FN>
</TABLE>
S-16
<PAGE>
LOSS EXPERIENCE
PROVIDIAN PORTFOLIO<F1>
<TABLE>
Year Ended December 31,
<CAPTION>
1998 1997 1996 1995 1994
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Average Receivables Outstanding(2)....... $9,248,467 $7,654,900 $6,646,608 $4,810,220 $3,567,940
Gross Charge-offs(3)..................... 865,552 608,097 410,614 253,367 197,936
Recoveries............................... 77,086 58,004 44,570 35,555 28,283
Net Charge-offs(4)....................... 788,466 550,093 366,044 217,812 169,653
Net Charge-offs as a Percentage
of Average Receivables................. 8.53% 7.19% 5.51% 4.53% 4.75%
<FN>
<F1> The figures shown for the four years ended December 31, 1997, 1996, 1995
and 1994 do not incorporate information with respect to the Acquired
Portfolios.
<F2> Average Receivables Outstanding for any period is equal to the average of
the Average Daily Balance for each month in such period. The Average Daily
Balance for a month is equal to the average of the Receivables outstanding
on each day in such month. Receivables outstanding on any day are the sum
of Principal Receivables and Finance Charge Receivables on such day.
<F3> Gross Charge-offs are Receivables charged off as uncollectible in
accordance with the Bank's customary practices (excludes reductions due to
fraud, returned goods and customer disputes for all periods shown).
<F4> Gross Charge-offs less the total amount of recoveries on previously
Charged-off Accounts.
</FN>
</TABLE>
The increase in the delinquency and loss rates for the Providian Portfolio
for the year ended December 31, 1998 is due in part to the higher rates of
delinquencies and losses associated with the Acquired Portfolios. Excluding the
Acquired Portfolios, the total delinquent amount (the amount with respect to
payments from accountholders that is 30 days or more past due) as a percentage
of the Providian Portfolio at December 31, 1998 would have been 3.88% and Net
Charge-Offs as a Percentage of Average Receivables in the Providian Portfolio
for the year ended December 31, 1998 would have been 7.49%. Excluding the
impact of the Acquired Portfolios, the increase in the Providian Portfolio's
Net Charge-Offs as a Percentage of Average Receivables for the year ended
December 31, 1998 compared to the year ended December 31, 1997 is primarily
attributable to seasoning of the accounts in the Providian Portfolio.
The Bank may, from time to time, remove groups of charged-off receivables
from the Trust for transfer to a third party. Any initial cash proceeds
received by the Bank from such a disposition of removed charged-off receivables
will be treated as recoveries by the Trust with any residual amounts payable to
the Bank remaining the property of the Bank. The effect on the Trust will be to
accelerate the receipt of recoveries that might otherwise be received by the
Trust in future months. This, in turn, will result in a reduction in the
aggregate amount of recoveries that the Trust would otherwise have received in
future months had the Seller not removed such charged-off receivables from the
Trust.
COMPOSITION OF THE ACCOUNTS
The Receivables in the Accounts as of December 31, 1998 included
$158,475,082 of Finance Charge Receivables and $6,374,932,335 of Principal
Receivables (which amounts include overdue Finance Charge Receivables and
overdue Principal Receivables, respectively). As of December 31, 1998, there
were 4,591,763 Accounts (including 2,021,285 closed Accounts with a zero
balance and 421,740 charged-off Accounts). As of December 31, 1998, the
Accounts had an average total Principal Receivables balance of $2,971
(excluding 2,443,025 closed Accounts with a zero balance and charged-off
Accounts) and an average credit limit of $7,378 (excluding 2,443,025 closed
Accounts with a zero balance and charged-off Accounts). As of December 31,
1998, the average total Principal Receivables balance in the Accounts as a
percentage of the average credit limit with respect to the Accounts (excluding
2,443,025 closed Accounts with a zero balance and charged-off
Accounts) was approximately 40.3%. As of December 31, 1998, the weighted
average age of the Accounts was 44.2 months. The Accounts were selected from
the Providian Portfolio in the manner described in the Prospectus under "The
Accounts--General." See "The Accounts" in the Prospectus.
S-17
<PAGE>
The following tables summarize the Accounts by various criteria as of
December 31, 1998. References to "Receivables Outstanding" in the following
tables include both Finance Charge Receivables and Principal Receivables.
Because the composition of the Accounts will change in the future, these tables
are not necessarily indicative of the future composition of the Accounts.
S-18
<PAGE>
COMPOSITION OF ACCOUNTS BY ACCOUNT BALANCE
(As of December 31, 1998)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number of Number Receivables Total Receivables
Account Balance Accounts<F1> of Accounts Outstanding<F1> Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Credit Balance(2)................ 57,579 2.68% (8,678) (0.13%)
No Balance(3).................... 655,406 30.50% 0 0.00%
$0.01 to $1,499.99............... 457,667 21.30% 217,078 3.32%
$1,500.00 to $2,999.99........... 193,094 8.99% 437,610 6.70%
$3,000.00 to $4,499.99........... 194,340 9.04% 724,201 11.08%
$4,500.00 to $5,999.99........... 214,270 9.97% 1,101,958 16.87%
$6,000.00 to $7,499.99........... 105,199 4.90% 704,480 10.78%
$7,500.00 to $8,999.99........... 70,180 3.27% 574,962 8.80%
$9,000.00 to $10,499.99.......... 52,098 2.42% 506,041 7.75%
$10,500.00 and above............. 148,905 6.93% 2,275,755 34.83%
------- -------- --------- ------
Total........................ 2,148,738 100.00% 6,533,407 100.00%
========= ======== ========= ======
<FN>
<F1> Receivables outstanding are the sum of Principal Receivables and Finance
Charge Receivables. Does not include 2,021,285 closed Accounts with a zero
balance and 421,740 charged-off Accounts. The Receivables of the charged-
off Accounts are valued at zero. However, for purposes of realizing
recoveries, the Receivables of such Accounts (or, in the event such
charged-off receivables are sold to a third party, the initial cash
proceeds from such sale) have been assigned to the Trust.
<F2> Credit Balances are a result of accountholder payments and credit
adjustments applied in excess of an Account's unpaid balance. Accounts
with a credit balance are included, as Receivables may be generated with
respect thereto in the future.
<F3> Accounts with no balance are included, as Receivables may be generated
with respect thereto in the future.
</FN>
</TABLE>
COMPOSITION OF ACCOUNTS BY CREDIT LIMIT
(As of December 31, 1998)
<TABLE>
<CAPTION>
Percentage Percent-
of Total Receivables age of Total
Number of Number ables Out- Receivables
Credit Limit Accounts<F1> of Accounts anding<F1> Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
$0.01 to $1,499.99.......................... 20,196 0.94% 11,332 0.17%
$1,500.00 to $2,999.99...................... 23,752 1.11% 35,570 0.54%
$3,000.00 to $4,499.99...................... 106,422 4.95% 215,888 3.31%
$4,500.00 to $5,999.99...................... 952,603 44.33% 1,211,910 18.55%
$6,000.00 to $7,499.99...................... 351,357 16.35% 944,733 14.46%
$7,500.00 to $8,999.99...................... 171,149 7.97% 584,801 8.95%
$9,000.00 to $10,499.99..................... 177,135 8.24% 627,961 9.61%
$10,500.00 and above........................ 346,124 16.11% 2,901,212 44.41%
--------- ------- --------- -------
Total................................... 2,148,738 100.00% 6,533,407 100.00%
========= ======= ========= =======
<FN>
<F1> Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include 2,021,285 closed Accounts
with a zero balance and 421,740 charged-off Accounts. The Receivables of
the charged- off Accounts are valued at zero. However, for purposes of
realizing recoveries, the Receivables of such Accounts (or, in the event
such charged-off receivables are sold to a third party, the initial cash
proceeds from such sale) have been assigned to the Trust.
</FN>
</TABLE>
S-19
<PAGE>
COMPOSITION OF ACCOUNTS BY PAYMENT STATUS
(As of December 31, 1998)
<TABLE>
<CAPTION>
Percentage Percentage of
of Total Total Receivables
Number of Number Receivables Outstanding
Payment Status Accounts(1) of Accounts Outstanding(1)
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Current (2)................................. 2,101,374 97.79% 6,237,537 95.47%
30-59 Days Delinquent....................... 18,431 0.86% 110,795 1.70%
60-89 Days Delinquent....................... 10,258 0.48% 65,579 1.00%
90 Days Delinquent or more.................. 18,675 0.87% 119,496 1.83%
--------- ----- --------- -------
Total....................................... 2,148,738 100.00% 6,533,407 100.00%
========= ====== ========= =======
<FN>
<F1> Receivables outstanding are the sum of Principal Receivables and Finance
Charge Receivables. Does not include 2,021,285 closed Accounts with a zero
balance and 421,740 charged-off Accounts. The Receivables of the charged-
off Accounts are valued at zero. However, for purposes of realizing
recoveries, the Receivables of such Accounts (or, in the event such
charged-off receivables are sold to a third party, the initial cash
proceeds from such sale) have been assigned to the Trust.
<F2> Includes Accounts on which the minimum payment has not been received
prior to the second billing date following issuance of the related billing
statement.
</FN>
</TABLE>
COMPOSITION OF ACCOUNTS BY ACCOUNT AGE
(As of December 31, 1998)
<TABLE>
<CAPTION>
Percentage Percentage of
of Total Total Receivables
Number of Number Receivables
Account Age Accounts<F1> of Accounts Outstanding<F1> Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
0 to 6 months old................. 39,017 1.82% $ 74,698 1.14%
Over 6 to 12 months............... 275,359 12.81% 542,081 8.29%
Over 12 to 24 months.............. 538,381 25.06% 1,225,454 18.76%
Over 24 to 36 months.............. 414,789 19.30% 1,442,417 22.08%
Over 36 to 48 months.............. 316,197 14.72% 1,251,026 19.15%
Over 48 months.................... 564,995 26.29% 1,997,731 30.58%
--------- ------ --------- -------
Total............................. 2,148,738 100.00% $6,533,407 100.00%
========= ====== ========== =======
<FN>
<F1> Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include 2,021,285 closed Accounts
with a zero balance and 421,740 charged-off Accounts. The Receivables of
the charged-off Accounts are valued at zero. However, for purposes of
realizing recoveries, the Receivables of such Accounts have been assigned
to the Trust.
</FN>
</TABLE>
S-20
<PAGE>
COMPOSITION OF ACCOUNTS BY GEOGRAPHIC DISTRIBUTIONM<F1>
(As of December 31, 1998)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number of Number of Receivables Total Receivables
State Accounts<F2> Accounts Outstanding<F2> Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
California.................. 281,901 13.12% $ 839,763 12.85%
Texas....................... 158,380 7.37% 496,412 7.60%
New York.................... 152,700 7.11% 433,390 6.63%
Florida..................... 122,543 5.70% 351,299 5.38%
Illinois.................... 92,814 4.32% 287,441 4.40%
Pennsylvania................ 93,448 4.35% 267,872 4.10%
Ohio........................ 84,076 3.91% 260,709 3.99%
North Carolina.............. 64,524 3.00% 224,348 3.43%
Michigan.................... 68,104 3.17% 203,260 3.11%
New Jersey.................. 71,725 3.34% 193,246 2.96%
Georgia..................... 55,213 2.57% 188,495 2.89%
Indiana..................... 52,306 2.43% 165,268 2.53%
Virginia.................... 48,091 2.24% 159,192 2.44%
Washington.................. 47,978 2.23% 149,600 2.29%
Missouri.................... 45,282 2.11% 139,960 2.14%
Tennessee................... 41,459 1.93% 137,336 2.10%
All Others (3)(4)........... 668,194 31.10% 2,035,816 31.16%
--------- ------- --------- -------
Total....................... 2,148,738 100.00% $6,533,407 100.00%
========= ======= ========== =======
<FN>
<F1> Determined on the basis of accountholders' telephone area codes.
<F2> Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include 2,021,285 closed Accounts
with a zero balance and 421,740 charged-off Accounts. The Receivables of
the charged- off Accounts are valued at zero. However, for purposes of
realizing recoveries, the Receivables of such Accounts have been assigned
to the Trust.
<F3> No state other than those listed has more than 2.00% of the total
Receivables Outstanding, excluding Accounts for which computer records
show "unknown" in the state field.
<F4> Includes Accounts representing approximately 0.01% of the total
Receivables Outstanding for which computer records show "unknown" in the
state field.
</FN>
</TABLE>
S-21
<PAGE>
(1) Determined on the basis of accountholders' telephone area codes.
(3) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] 2,021,285 closed Accounts
with a zero balance and [ ] 421,740 charged-off Accounts. The Receivables
of the
S-22
<PAGE>
charged-off Accounts are valued at zero. However, for purposes of
realizing recoveries, the Receivables of such Accounts have been assigned
to the Trust.
(3) No state other than those listed has more than 2.00% of the total
Receivables Outstanding, excluding Accounts for which computer records
show "unknown" in the state field.
(4) Includes Accounts representing approximately 0.01% of the total
Receivables Outstanding for which computer records show "unknown" in the
state field.
THE BANK
As of the Bank's December 31, 1998 Call Report, the Bank had total
deposits of approximately $4,336 million, total assets of approximately $6,431
million and total equity of approximately $666 million. See "The Bank" in the
Prospectus.
USE OF PROCEEDS
Net proceeds from the sale of the Series 199_-_ Certificates in the amount
of the Class A Initial Invested Amount, Class B Initial Invested Amount and the
Collateral Invested Amount, less offering expenses, will be paid to the Bank.
The Bank will use such proceeds for general corporate purposes.
SERIES PROVISIONS
General
The Series 199_-_ Certificates will be issued pursuant to the Pooling
Agreement and a Supplement thereto relating to the Series 199_-_ Certificates
(the "Series 199_-_ Supplement"). The Series 199_-_ Certificates will consist
of four Classes, the Class A Certificates, the Class B Certificates, the Class
comprising the Collateral Interest and the Class comprising the Class D
Interest. Reference should be made to the Prospectus for additional information
concerning the Series 199_-_ Certificates and the Pooling Agreement.
Interest
Interest will accrue on the outstanding principal amount of the Class A
Certificates at the Class A Certificate Rate. Interest will be distributed to
the Class A Certificateholders on [ ], 199[ ] and each Interest Payment Date
thereafter in an amount equal to the product of the Class A Certificate Rate[,]
[and] the outstanding principal amount of the Class A Certificates as of the
preceding Record Date [and a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
[365] [360]]. Interest with respect to the Class A Certificates due but not
paid on any Interest Payment Date will be due on the next succeeding Interest
Payment Date with additional interest on such amount at a rate equal to the
Class A Certificate Rate to the extent permitted by law.
Interest will accrue on the Class B Invested Amount at the Class B
Certificate Rate. Interest will be distributed to the Class B
Certificateholders on [ ], 199[ ] and each Interest Payment Date thereafter in
an amount equal to the product of the Class B Certificate Rate[,] [and] the
Class B Invested Amount as of the preceding Record Date [and a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is [365] [360]]. Interest with respect to the
Class B Certificates due but not paid on any Interest Payment Date will be due
on the next succeeding Interest Payment Date with additional interest on such
amount at a rate equal to the Class B Certificate Rate to the extent permitted
by law.
Interest payments on the Class A Certificates and the Class B Certificates
on any Interest Payment Date will be funded from Available Finance Charge
Collections for the related Monthly Period as described under "--Application of
Collections--Payments of Interest, Fees and Other Items". To the extent that
Available Finance Charge Collections for such Monthly Period are insufficient
to pay interest on the Class A Certificates, Reallocated Principal Collections
that would otherwise be allocable to the Class D Invested Amount, the
Collateral Invested Amount and the Class B Invested Amount will be used to make
such payments. To the extent that Available Finance Charge Collections for such
Monthly Period are insufficient to pay interest on the Class B Certificates,
Reallocated Class D Principal Collections and Reallocated Collateral Principal
Collections that would otherwise be allocable to the Class D Invested Amount
and the Collateral Invested Amount (to the extent such amounts are not needed
to pay interest on the Class A Certificates) will be used to make such
payments.
"Available Finance Charge Collections" means, with respect to any
Distribution Date, an amount equal to the sum of: (a) the product of the
Floating Allocation Percentage and the aggregate amount of collections of
Finance Charge Receivables with respect to the related Monthly Period
(including any investment earnings and certain other amounts that are to be
treated as collections of Finance Charge Receivables in accordance with the
Pooling Agreement, but excluding any investment earnings constituting Principal
Funding Investment Proceeds); (b) the Principal Funding Investment Proceeds, if
any, with respect to such Distribution Date; (c) amounts, if any, withdrawn
from the Reserve Account that are required to be included in Available Finance
Charge Collections pursuant to the Series 199_-_ Supplement with respect to
such Distribution Date; (d) any Additional Finance Charges from other Series in
Group
S-23
<PAGE>
One that are allocated to Series 199_-_ with respect to such Monthly
Period; and (e) payments, if any, received with respect to such
Distribution Date under any interest rate swap or cap agreement assigned
to the Trust for the benefit of the Series 199_-_ Certificateholders.
Principal
During the Revolving Period (which begins on the Series Cut-Off Date and
ends immediately prior to the commencement of the Class A Accumulation Period
or, if earlier, the Early Amortization Period [or Accelerated Principal Payment
Period]), no principal payments will be made to Class A Certificateholders or
Class B Certificateholders. On each Distribution Date with respect to the Class
A Accumulation Period, principal will be deposited in the Principal Funding
Account in an amount up to the Class A Controlled Deposit Amount with respect
to such Distribution Date and amounts on deposit therein will be distributed to
the Class A Certificateholders on the Class A Expected Final Payment Date. If
the Class A Invested Amount is paid in full on the Class A Expected Final
Payment Date, then on each Distribution Date with respect to the Class B
Accumulation Period, principal will be deposited in the Principal Funding
Account in an amount up to the Class B Controlled Deposit Amount with respect
to such Distribution Date and amounts on deposit therein will be distributed to
the Class B Certificateholders on the Class B Expected Final Payment Date. If
the Class A Invested Amount is not paid in full on the Class A Expected Final
Payment Date or the Class B Invested Amount is not paid in full on the Class B
Expected Final Payment Date, a Pay Out Event will occur and an Early
Amortization Period will commence. During the Early Amortization Period,
principal will be paid to the Class A Certificateholders monthly on each
Special Payment Date until the Class A Invested Amount is paid in full and then
to the Class B Certificateholders until the Class B Invested Amount is paid in
full or, in either case, until the Series Termination Date occurs. If a Pay Out
Event [or an Accelerated Principal Payment Event] occurs with respect to the
Series 199_-_ Certificates during the Class A Accumulation Period or the Class
B Accumulation Period, any amount on deposit in the Principal Funding Account
will be paid to the Class A Certificateholders or the Class B
Certificateholders, as the case may be, on the first Special Payment Date. See
"--Application of Collections--Payments of Principal" [, "--Extension of
Accelerated Principal Payment Date"] and "--Pay Out Events" herein and
"Description of the Certificates--Pay Out Events" in the Prospectus for a
discussion of events that might lead to the commencement of an Early
Amortization Period [or an Accelerated Principal Payment Period].
The Class A Accumulation Period is scheduled to commence at the close of
business on the last business day of [ ]. However, the Servicer may elect to
postpone the commencement of the Class A Accumulation Period and extend the
length of the Revolving Period, subject to the conditions set forth below. The
Servicer may make such election only if the Class A Accumulation Period Length
(determined as described below) is less than twenty-four months and if no Pay
Out Event has occurred and is continuing with respect to any other Series. On
each Determination Date during the Revolving Period, the Servicer will
determine the "Class A Accumulation Period Length", which is the number of
months expected to be required fully to fund the Class A Initial Invested
Amount no later than the Class A Expected Final Payment Date, based on (a) the
expected monthly collections of Principal Receivables allocated to all
outstanding Series (other than certain variable funding Series, [including ]),
assuming a principal payment rate no greater than the lowest monthly principal
payment rate on the Receivables for the preceding twelve months and (b) the
amount of principal expected to be distributable to the Certificateholders of
all outstanding Series (excluding any variable funding Series) that are not
expected to be in their revolving period during the Class A Accumulation
Period. If the Class A Accumulation Period Length is less than twenty-four
months, the Servicer may, at its option, postpone the commencement of the Class
A Accumulation Period such that the number of months included in the Class A
Accumulation Period will be equal to or exceed the Class A Accumulation Period
Length. The effect of the foregoing calculation is to permit the reduction of
the length of the Class A Accumulation Period based on the invested amounts of
certain other Series which are expected to be in their revolving periods during
the Class A Accumulation Period or on increases in the principal payment rate
occurring after the Series Issuance Date. The length of the Class A
Accumulation Period will not be less than one month. If the commencement of the
Class A Accumulation Period is delayed in accordance with the foregoing, and if
a Pay Out Event with respect to Series 199_-_ occurs after the date originally
scheduled as the commencement of the Class A Accumulation Period or a Pay Out
Event occurs with respect to any other Series, then it is probable that the
Class A Certificateholders, and consequently the Class B Certificateholders,
would receive some of their principal later than if the Class A Accumulation
Period had not been delayed.
Allocation Percentages
Pursuant to the Pooling Agreement, for each day during each Monthly
Period, the Servicer will allocate between the Series 199_-_
Certificateholders' Interest, the Seller's Interest and the Certificateholders'
Interests of the other Series issued and outstanding from time to time all
collections of Finance Charge Receivables and Principal Receivables and the
Defaulted Amount with respect to such Monthly Period. Collections of Finance
Charge Receivables and the Defaulted Amount with respect to any Monthly Period
will be allocated at all times to the Series 199_-_ Certificateholders'
Interest based on the percentage equivalent of a fraction, the numerator of
which is the Adjusted Invested Amount as of the last day of the immediately
preceding Monthly Period and the denominator of which is the sum of the total
amount of Principal Receivables in the Trust and the amount on deposit in the
Special Funding Account as of the last day of such immediately preceding
Monthly Period; provided, however, that for the first Monthly Period, the
numerator will be the Initial Invested Amount for the period from and including
the Series Issuance Date through and including the last day of such first
Monthly Period and the denominator will be the sum of the Principal Receivables
in the Trust and the amount on deposit in the Special Funding Account as of the
Series Cut-Off Date (the "Floating Allocation Percentage"). Collections of
Principal Receivables with respect to each day during any Monthly Period at all
times will be allocated to the Series 199_-_ Certificateholders' Interest based
on the percentage equivalent of a fraction, the numerator of which is (a)
during the Revolving Period, the Invested Amount
S-24
<PAGE>
as of the last day of the preceding Monthly Period and (b) during the Class A
Accumulation Period, the Class B Accumulation Period[, the Accelerated
Principal Payment Period,] or the Early Amortization Period, the Invested
Amount as of the last day of the Revolving Period and the denominator of which
is the greater of (i) the sum of the Principal Receivables in the Trust and the
amount on deposit in the Special Funding Account as of the last day of the
preceding Monthly Period and (ii) the sum of the numerators used to calculate
the allocation percentages with respect to collections of Principal Receivables
for all Series outstanding as of the date of determination (the "Principal
Allocation Percentage").
"Invested Amount" means, with respect to any date of determination, an
amount equal to the sum of the Class A Invested Amount, the Class B Invested
Amount, the Collateral Invested Amount and the Class D Invested Amount. "Class
A Invested Amount" means, when used with respect to any date of determination,
an amount equal to (a) the Class A Initial Invested Amount, minus (b) the
aggregate amount of principal payments made to Class A Certificateholders prior
to such date, minus (c) the excess, if any, of the aggregate amount of Class A
Charge-Offs over the aggregate amount of Class A Charge-Offs reimbursed as
described under "--Application of Collections-- Payments of Interest, Fees and
Other Items" prior to such date; provided, however, that the Class A Invested
Amount will not be reduced below zero.
"Class B Invested Amount" means, when used with respect to any date of
determination, an amount equal to (a) the Class B Initial Invested Amount,
minus (b) the aggregate amount of principal payments made to Class B
Certificateholders prior to such date, minus (c) the aggregate amount by which
the Class B Invested Amount has been reduced in respect of the application of
Reallocated Class B Principal Collections on all prior Distribution Dates as
described under "--Application of Collections--Payments of Interest, Fees and
Other Items", minus (d) the aggregate amount of Class B Charge-Offs prior to
such date, plus (e) the aggregate amount of Available Finance Charge
Collections applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) as
described under "--Application of Collections--Payments of Interest, Fees and
Other Items"; provided, however, that the Class B Invested Amount will not be
reduced below zero.
"Collateral Invested Amount" means, when used with respect to any date of
determination, an amount equal to (a) the Collateral Initial Invested Amount,
minus (b) the aggregate amount of principal payments made to the Collateral
Interest Holder prior to such date, minus (c) the aggregate amount by which the
Collateral Invested Amount has been reduced in respect of the application of
Reallocated Class B Principal Collections and Reallocated Collateral Principal
Collections on all prior Distribution Dates as described under "--Application
of Collections--Payments of Interest, Fees and Other Items", minus (d) the
aggregate amount by which the Collateral Invested Amount has been reduced on
all prior Distribution Dates as described under "--Defaulted Amounts;
Charge-Offs", plus (e) the aggregate amount of Available Finance Charge
Collections applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) as
described under "--Application of Collections-- Payments of Interest, Fees and
Other Items"; provided, however, that the Collateral Invested Amount will not
be reduced below zero.
"Class D Invested Amount" means, when used with respect to any date of
determination, an amount equal to (a) the Class D Initial Invested Amount,
minus (b) the aggregate amount of principal payments made to the Class D Holder
prior to such date, minus (c) the aggregate amount by which the Class D
Invested Amount has been reduced in respect of the application of Reallocated
Principal Collections on all prior Distribution Dates as described under
"--Application of Collections--Payments of Interest, Fees and Other Items",
minus (d) the aggregate amount by which the Class D Invested Amount has been
reduced on all prior Distribution Dates as described under "--Defaulted
Amounts; Charge-Offs", plus (e) the aggregate amount of Available Finance
Charge Collections applied on all prior Distribution Dates for the purpose of
reimbursing amounts deducted pursuant to the foregoing clauses (c) and (d) as
described under "--Application of Collections--Payments of Interest, Fees and
Other Items"; provided, however, that the Class D Invested Amount will not be
reduced below zero.
Application of Collections
Payments of Interest, Fees and Other Items. On each Distribution Date, the
Servicer will apply (if the Bank is the Servicer and the Collection Account is
maintained with the Bank) or will cause the Trustee to apply Available Finance
Charge Collections and Reallocated Principal Collections on deposit in the
Collection Account with respect to such Distribution Date to make the following
distributions:
(a) On each Distribution Date, Available Finance Charge Collections with
respect to such Distribution Date will be distributed in the following
priority:
(i) an amount equal to Class A Monthly Interest for such Distribution
Date, plus the amount of any Class A Monthly Interest previously due but
not distributed to Class A Certificateholders on any prior Distribution
Date, plus the amount of any Class A Additional Interest for such
Distribution Date and any Class A Additional Interest previously due but
not distributed to Class A Certificateholders on any prior Distribution
Date, will be distributed to the Paying Agent for payment to the Class A
Certificateholders;
(ii) an amount equal to Class B Monthly Interest for such
Distribution Date, plus the amount of any Class B Monthly Interest
previously due but not distributed to Class B Certificateholders on any
prior Distribution Date, plus the amount of any Class B Additional
Interest for such Distribution Date and any Class B Additional Interest
previously due but not distributed to Class B Certificateholders on any
prior Distribution Date, will be distributed to the Paying Agent for
payment to the Class B Certificateholders;
S-25
<PAGE>
(iii) an amount equal to the Monthly Investor Servicing Fee for such
Distribution Date, plus the amount of any Monthly Investor Servicing Fee
previously due but not distributed to the Servicer on any prior
Distribution Date, will be distributed to the Servicer (unless such amount
has been netted against deposits to the Collection Account in accordance
with the Pooling Agreement);
(iv) an amount equal to the Class A Defaulted Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(v) an amount equal to the aggregate amount of Class A Charge-Offs
that have not been previously reimbursed will be treated as a portion of
Available Principal Collections for such Distribution Date;
(vi) an amount equal to accrued and unpaid interest (including any
interest on amounts due but not paid pursuant to this paragraph on a prior
Distribution Date) at the Class B Certificate Rate on the excess, if any,
of the outstanding principal balance of the Class B Certificates over the
Class B Invested Amount will be distributed to the Paying Agent for
payment to the Class B Certificateholders;
(vii) an amount equal to the Class B Defaulted Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections for such Distribution Date;
(viii) an amount equal to the aggregate amount by which the Class B
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class B Invested Amount" above (but not in excess of the
aggregate amount of such reductions that have not been previously
reimbursed) will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(ix) an amount equal to Collateral Monthly Interest for such
Distribution Date, plus the amount of any Collateral Monthly Interest
previously due but not paid to the Collateral Interest Holder on any prior
Distribution Date, will be paid to the Collateral Interest Holder for
application in accordance with the Collateral Agreement;
(x) an amount equal to the Collateral Defaulted Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(xi) if the Reserve Account is being funded, on each Distribution
Date from and after the Reserve Account Funding Date, but prior to the
date on which the Reserve Account terminates pursuant to the Series 199_-_
Supplement, an amount up to the excess, if any, of the Required Reserve
Account Amount over the Available Reserve Account Amount will be deposited
into the Reserve Account;
(xii) an amount equal to the aggregate amount by which the Collateral
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Collateral Invested Amount" above (but not in excess of the
aggregate amount of such reductions that have not been previously
reimbursed) will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(xiii) an amount equal to the Class D Defaulted Amount for such
Distribution Date will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(xiv) an amount equal to the aggregate amount by which the Class D
Invested Amount has been reduced pursuant to clauses (c) and (d) of the
definition of "Class D Invested Amount" above (but not in excess of the
aggregate amount of such reductions that have not been previously
reimbursed) will be treated as a portion of Available Principal
Collections with respect to such Distribution Date;
(xv) an amount equal to the aggregate of any other amounts then due
to the Collateral Interest Holder pursuant to the Collateral Agreement (to
the extent such amounts are payable pursuant to the Collateral Agreement
out of Available Non-Principal Funds (as defined in the Collateral
Agreement)) will be distributed to the Collateral Interest Holder for
application in accordance with the Collateral Agreement; and
(xvi) the balance, if any, will constitute Additional Finance Charges
for such Distribution Date and will be available for allocation to other
Series in Group One or to the Bank as described under "Summary of Series--
Terms Sharing of Additional Finance Charges."
"Class A Additional Interest" means, with respect to any Distribution Date
and the concurrent Interest Payment Date, if the Class A Interest Shortfall
with respect to the preceding Interest Payment Date is greater than zero, an
amount equal to the product of (i) [a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is [360] [365], (ii)] the Class A Certificate Rate and [(ii)] [(iii)]
such Class A Interest Shortfall.
"Class A Defaulted Amount" means, with respect to any Distribution Date,
an amount equal to the product of (i) the Defaulted Amount for the related
Monthly Period multiplied by the Floating Allocation Percentage for such
Monthly Period and (ii) the Class A Percentage for such Monthly Period.
"Class A Interest Shortfall" means, with respect to any Interest Payment
Date, the excess, if any, of the Class A Monthly Interest for such Interest
Payment Date over the aggregate amount of funds allocated and available to pay
such Class A Monthly Interest on such Interest Payment Date.
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<PAGE>
"Class A Monthly Interest" means, with respect to any Interest Payment
Date, an amount equal to [one-twelfth of] the product of (i) [a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is [360] [365], (ii)] the Class A Certificate Rate
and [(ii)] [(iii)] the outstanding principal amount of the Class A Certificates
as of the immediately preceding Record Date.
"Class A Percentage" means, with respect to any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the Class A
Adjusted Invested Amount as of the last day of the immediately preceding
Monthly Period (or, in the case of the first Monthly Period, the Series
Issuance Date) and the denominator of which is the Adjusted Invested Amount as
of the last day of such immediately preceding Monthly Period (or, in the case
of the first Monthly Period, the Series Issuance Date).
"Class B Additional Interest" means, with respect to any Distribution Date
and the concurrent Interest Payment Date, if the Class B Interest Shortfall
with respect to the preceding Interest Payment Date is greater than zero, an
amount equal to the product of (i) [a fraction, the numerator of which is the
actual number of days in the related Interest Period and the denominator of
which is [360] [365], (ii)] the Class B Certificate Rate and [(ii)] [(iii)]
such Class B Interest Shortfall.
"Class B Defaulted Amount" means, with respect to any Distribution Date,
an amount equal to the product of (i) the Defaulted Amount for the related
Monthly Period multiplied by the Floating Allocation Percentage for such
Monthly Period and (ii) the Class B Percentage for such Monthly Period.
"Class B Interest Shortfall" means, with respect to any Interest Payment
Date, the excess, if any, of the Class B Monthly Interest for such Interest
Payment Date over the aggregate amount of funds allocated and available to pay
such Class B Monthly Interest on such Interest Payment Date.
"Class B Monthly Interest" means, with respect to any Interest Payment
Date, an amount equal to [one-twelfth of] the product of (i) [a fraction, the
numerator of which is the actual number of days in the related Interest Period
and the denominator of which is [360] [365], (ii)] the Class B Certificate Rate
and [(ii)] [(iii)] the Class B Invested Amount as of the immediately preceding
Record Date.
"Class B Percentage" means, with respect to any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the Class B
Adjusted Invested Amount as of the last day of the immediately preceding
Monthly Period (or, in the case of the first Monthly Period, the Series
Issuance Date) and the denominator of which is the Adjusted Invested Amount as
of the last day of such immediately preceding Monthly Period (or, in the case
of the first Monthly Period, the Series Issuance Date).
"Class D Defaulted Amount" means, with respect to each Distribution Date,
an amount equal to the product of (i) the Defaulted Amount for the related
Monthly Period multiplied by the Floating Allocation Percentage for such
Monthly Period and (ii) the Class D Percentage for such Monthly Period.
"Class D Percentage" means, with respect to any Monthly Period, 100% minus
the sum of the Class A Percentage, the Class B Percentage and the Collateral
Percentage.
"Collateral Agreement" means the agreement between the Bank, the Servicer
and the Trustee, relating to the Collateral Interest, as amended, supplemented
or modified from time to time.
"Collateral Defaulted Amount" means, with respect to each Distribution
Date, an amount equal to the product of (i) the Defaulted Amount for the
related Monthly Period multiplied by the Floating Allocation Percentage for
such Monthly Period and (ii) the Collateral Percentage for such Monthly Period.
"Collateral Monthly Interest" means, with respect to any Distribution
Date, [one-twelfth of] the product of (i) [a fraction, the numerator of which
is the actual number of days in the related Interest Period and the denominator
of which is [360] [365], (ii) [a floating rate determined as follows ______],
or such lesser rate as may be designated as the "Collateral Interest Rate" in
the Collateral Agreement, and (iii) the Collateral Invested Amount as of the
last business day of the preceding Monthly Period.
"Collateral Percentage" means, with respect to any Monthly Period, the
percentage equivalent of a fraction, the numerator of which is the Collateral
Invested Amount as of the last day of the immediately preceding Monthly Period
(or, in the case of the first Monthly Period, the Series Issuance Date) and the
denominator of which is the Adjusted Invested Amount as of the last day of such
immediately preceding Monthly Period (or, in the case of the first Monthly
Period, the Series Issuance Date).
"Interest Period" means, with respect to any Interest Payment Date, the
period from and including the preceding Interest Payment Date to but excluding
such Interest Payment Date; provided, however, that the initial Interest Period
will commence on and include the Series Issuance Date and end on but exclude
the first Interest Payment Date following the Series Issuance Date, which first
Interest Payment Date will be [ ], 199[ ].
(b) On each Distribution Date, following the application of Available
Finance Charge Collections as described above, if the Required Amount is
greater than zero, Reallocated Class D Principal Collections for the related
Monthly Period will be distributed to fund any deficiency pursuant to
paragraphs (a)(i), (a)(ii), (a)(iii), (a)(iv), (a)(vii) and (a)(x) above, in
the priority set forth in such paragraphs, and the Class D Invested Amount
(after giving effect to reductions in the Class D Invested Amount on such
Distribution Date as described in the first paragraph under
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<PAGE>
"--Defaulted Amounts; Charge-Offs" in respect of the amount by which the Class
D Defaulted Amount exceeded the amount of Available Finance Charge Collections
available to fund the Class D Defaulted Amount) will be reduced by the amount
of Reallocated Class D Principal Collections so distributed;
(c) On each Distribution Date, following the application of Available
Finance Charge Collections as described above and the application of
Reallocated Class D Principal Collections on such Distribution Date to fund the
Required Amount, if any, as described in the immediately preceding paragraph,
Reallocated Collateral Principal Collections for the related Monthly Period
will be distributed to fund any deficiency pursuant to paragraphs (a)(i),
(a)(ii), (a)(iii), (a)(iv) and (a)(vii) above, in the priority set forth in
such paragraphs, and the Class D Invested Amount (after giving effect to
reductions in the Class D Invested Amount on such Distribution Date (i) as
described in paragraph (b) above in respect of the application of the
Reallocated Class D Principal Collections and (ii) as described in the first
paragraph under "--Defaulted Amounts; Charge-Offs" in respect of the amount by
which the Class D Defaulted Amount exceeded the amount of Available Finance
Charge Collections available to fund the Class D Defaulted Amount) will be
reduced by the amount of Reallocated Collateral Principal Collections so
distributed. If such reduction would cause the Class D Invested Amount to be
reduced below zero, the Class D Invested Amount will be reduced to zero and the
Collateral Invested Amount (after giving effect to reductions in the Collateral
Invested Amount on such Distribution Date as described in the first paragraph
under "--Defaulted Amounts; Charge-Offs" in respect of the amount by which the
Collateral Defaulted Amount exceeded the amount of Available Finance Charge
Collections available to fund the Collateral Defaulted Amount) will be reduced
by the amount by which the Class D Invested Amount would have been reduced
below zero; and
(d) On each Distribution Date, following the application of Available
Finance Charge Collections as described above and the application of
Reallocated Class D Principal Collections and Reallocated Collateral Principal
Collections for the related Monthly Period as described in the two immediately
preceding paragraphs, Reallocated Class B Principal Collections will be
distributed to fund any deficiency pursuant to paragraphs (a)(i), (a)(iii) and
(a)(iv) above, in the priority set forth in such paragraphs, and the Class D
Invested Amount (after giving effect to reductions in the Class D Invested
Amount on such Distribution Date (i) as described in paragraph (b) above in
respect of the application of the Reallocated Class D Principal Collections,
(ii) as described in paragraph (c) above in respect of the application of the
Reallocated Collateral Principal Collection and (iii) as described in the first
paragraph under "--Defaulted Amounts; Charge-Offs" in respect of the amount by
which the Class D Defaulted Amount exceeded the amount of Available Finance
Charge Collections available to fund the Class D Defaulted Amount) will be
reduced by the amount of Reallocated Class B Principal Collections so
distributed. If such reduction would cause the Class D Invested Amount to be
reduced below zero, the Class D Invested Amount will be reduced to zero and the
Collateral Invested Amount (after giving effect to reductions in the Collateral
Invested Amount on such Distribution Date (i) as described in paragraph (c)
above in respect of the application of the Reallocated Collateral Principal
Collections and (ii) as described in the first paragraph under "--Defaulted
Amounts; Charge-Offs" in respect of the amount by which the Collateral
Defaulted Amount exceeded the amount of Available Finance Charge Collections
available to fund the Collateral Defaulted Amount) will be reduced by the
amount so distributed. If such reduction would cause the Collateral Invested
Amount to be reduced below zero, the Collateral Invested Amount will be reduced
to zero and the Class B Invested Amount (after giving effect to reductions in
the Class B Invested Amount on such Distribution Date as described in the third
paragraph under "--Defaulted Amounts; Charge-Offs" in respect of the amount by
which the Class B Defaulted Amount exceeded the amount of Available Finance
Charge Collections, Reallocated Class D Principal Collections and Reallocated
Collateral Principal Collections available to fund the Class B Defaulted
Amount) will be reduced by the amount by which the Collateral Invested Amount
would have been reduced below zero.
"Reallocated Class B Principal Collections" means, with respect to any
Monthly Period, the lesser of (i) an amount equal to the excess, if any, of the
full amount required to be paid pursuant to paragraphs (a)(i), (a)(iii) and
(a)(iv) above over Available Finance Charge Collections, Reallocated Collateral
Principal Collections and Reallocated Class D Principal Collections applied
with respect thereto for such Monthly Period and (ii) the sum for each day of
the related Monthly Period of the product obtained by multiplying (A) the
Principal Allocation Percentage with respect to such day, (B) the amount of
such day's collections of Principal Receivables and (C) the Class B Percentage
as of the last day of the immediately preceding Monthly Period.
"Reallocated Class D Principal Collections" means, with respect to any
Monthly Period, the lesser of (i) the Required Amount and (ii) the sum for each
day of the related Monthly Period of the product obtained by multiplying (A)
the Principal Allocation Percentage with respect to such day, (B) the amount of
such day's collections of Principal Receivables and (C) the Class D Percentage
as of the last day of the immediately preceding Monthly Period.
"Reallocated Collateral Principal Collections" means, with respect to any
Monthly Period, the lesser of (i) an amount equal to the excess, if any, of the
full amount required to be paid pursuant to paragraphs (a)(i), (a)(ii),
(a)(iii), (a)(iv) and (a)(vii) above over Available Finance Charge Collections
and Reallocated Class D Principal Collections applied with respect thereto for
such Monthly Period and (ii) the sum for each day of the related Monthly Period
of the product obtained by multiplying (A) the Principal Allocation Percentage
with respect to such day, (B) the amount of such day's collections of Principal
Receivables and (C) the Collateral Percentage as of the last day of the
immediately preceding Monthly Period.
"Reallocated Principal Collections" means, with respect to any Monthly
Period, the sum of (i) Reallocated Class B Principal Collections with respect
to such Monthly Period, (ii) Reallocated Collateral Principal Collections with
respect to such Monthly Period and (iii) Reallocated Class D Principal
Collections with respect to such Monthly Period.
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<PAGE>
Payments of Principal. On each Distribution Date, the Servicer will apply
(if the Bank is the Servicer and the Collection Account is maintained with the
Bank) or will cause the Trustee to apply Available Principal Collections then
on deposit in the Collection Account to make the following distributions:
(a) On each Distribution Date during the Revolving Period, an amount equal
to the Available Principal Collections deposited in the Collection Account for
the related Monthly Period will be distributed in the following priority:
(i) an amount equal to Collateral Monthly Principal, if any, for such
Distribution Date will be distributed to the Collateral Interest Holder
for application in accordance with the Collateral Agreement; and
(ii) the balance, if any, of Available Principal Collections then on
deposit in the Collection Account will be treated as Shared Principal
Collections and applied in accordance with the Pooling Agreement.
(b) On each Distribution Date during the period beginning on the earlier
to occur of (w) the first Distribution Date with respect to the Class A
Accumulation Period and (x) the first Special Payment Date and ending on the
earlier to occur of (y) the date on which the Invested Amount has been paid in
full to the Series 199_-_ Certificateholders and (z) the Series Termination
Date, an amount equal to the Available Principal Collections deposited in the
Collection Account for the related Monthly Period will be distributed in the
following priority:
(i) an amount equal to Class A Monthly Principal for such
Distribution Date will be deposited in the Principal Funding Account, and
on the Class A Expected Final Payment Date and each Special Payment Date
such amounts will be paid to Class A Certificateholders;
(ii) an amount equal to Class B Monthly Principal for such
Distribution Date will be deposited in the Principal Funding Account, and
on the Class B Expected Final Payment Date and each Special Payment Date
such amounts will be paid to Class B Certificateholders;
(iii) an amount equal to the Collateral Monthly Principal, if any,
for such Distribution Date will be distributed to the Collateral Interest
Holder for application in accordance with the Collateral Agreement;
(iv) an amount equal to the Class D Monthly Principal, if any, for
such Distribution Date will be distributed to the Class D Interest Holder;
and
(v) the balance, if any, of Available Principal Collections then on
deposit in the Collection Account will be treated as Shared Principal
Collections and applied in accordance with the Pooling Agreement.
"Available Principal Collections" means, with respect to any Distribution
Date, an amount equal to (i) the sum of (x) an aggregate amount equal to the
sum for each day in the related Monthly Period of the product of the Principal
Allocation Percentage with respect to such day and the amount of such day's
collections of Principal Receivables, (y) any Shared Principal Collections with
respect to other Series that are allocated to Series 199_-_ with respect to
such Monthly Period and (z) any other amounts treated as Available Principal
Collections pursuant to the Series 199_-_ Supplement with respect to such
Distribution Date, minus (ii) Reallocated Principal Collections with respect to
such Monthly Period.
"Class A Controlled Accumulation Amount" means, for any Distribution Date
with respect to the Class A Accumulation Period, $[ ]; provided, however, that
if the Servicer elects to postpone the commencement of the Class A Accumulation
Period as described above under "--Principal", the Class A Controlled
Accumulation Amount for each Distribution Date with respect to the Class A
Accumulation Period will be an amount determined by the Servicer such that the
sum of the Class A Controlled Accumulation Amounts for all such Distribution
Dates will not be less than the Class A Initial Invested Amount.
"Class A Controlled Deposit Amount" means, for any Distribution Date with
respect to the Class A Accumulation Period, an amount equal to the sum of the
Class A Controlled Accumulation Amount for such Distribution Date and any Class
A Deficit Controlled Accumulation Amount for the preceding Distribution Date.
"Class A Deficit Controlled Accumulation Amount" means, (i) on the first
Distribution Date with respect to the Class A Accumulation Period, the excess,
if any, of the Class A Controlled Accumulation Amount for such Distribution
Date over the amount deposited in the Principal Funding Account as Class A
Monthly Principal for such Distribution Date and (ii) on each subsequent
Distribution Date with respect to the Class A Accumulation Period, the excess,
if any, of the Class A Controlled Accumulation Amount for such subsequent
Distribution Date and any Class A Deficit Controlled Accumulation Amount for
the prior Distribution Date over the amount deposited in the Principal Funding
Account as Class A Monthly Principal on such subsequent Distribution Date.
"Class A Monthly Principal" means, beginning with the first to occur of
(i) the first Special Payment Date, if any, and (ii) the first Distribution
Date with respect to the Class A Accumulation Period, an amount equal to the
least of (x) Available Principal Collections on deposit in the Collection
Account with respect to such Distribution Date, (y) for each Distribution Date
with respect to the Class A Accumulation Period, the Class A Controlled Deposit
Amount for such Distribution Date and (z) the Class A Adjusted Invested Amount
on such Distribution Date.
"Class B Controlled Accumulation Amount" means, for any Distribution Date
with respect to the Class B Accumulation Period, $[ ], or such other amount as
the Servicer may determine upon written notice to the
S-29
<PAGE>
Trustee prior to the commencement of the Class B Accumulation Period; provided,
however, that the Class B Controlled Accumulation Amount for each Distribution
Date with respect to the Class B Accumulation Period will be an amount
determined by the Servicer such that the sum of the Class B Controlled
Accumulation Amounts for all such Distribution Dates will not be less than the
Class B Initial Invested Amount.
"Class B Controlled Deposit Amount" means, for any Distribution Date with
respect to the Class B Accumulation Period, an amount equal to the sum of the
Class B Controlled Accumulation Amount for such Distribution Date and any Class
B Deficit Controlled Accumulation Amount for the preceding Distribution Date.
"Class B Deficit Controlled Accumulation Amount" means, (i) on the first
Distribution Date with respect to the Class B Accumulation Period, the excess,
if any, of the Class B Controlled Accumulation Amount for such Distribution
Date over the amount deposited in the Principal Funding Account as Class B
Monthly Principal for such Distribution Date and (ii) on each subsequent
Distribution Date with respect to the Class B Accumulation Period, the excess,
if any, of the Class B Controlled Accumulation Amount for such subsequent
Distribution Date and any Class B Deficit Controlled Accumulation Amount for
the prior Distribution Date over the amount deposited in the Principal Funding
Account as Class B Monthly Principal on such subsequent Distribution Date.
"Class B Monthly Principal" means, beginning with the Class B Principal
Commencement Date, an amount equal to the least of (x) Available Principal
Collections on deposit in the Collection Account with respect to such
Distribution Date (less the portion of Available Principal Collections applied
to Class A Monthly Principal on such Distribution Date), (y) for each
Distribution Date with respect to the Class B Accumulation Period, the Class B
Controlled Deposit Amount for such Distribution Date and (z) the Class B
Adjusted Invested Amount on such Distribution Date.
"Class B Principal Commencement Date" means (a) if the Class A Invested
Amount is paid in full on the Class A Expected Final Payment Date and the Early
Amortization Period has not commenced [and the Accelerated Principal Payment
Period has not commenced], the Distribution Date following the Class A Expected
Final Payment Date and (b) otherwise, the Distribution Date on which the Class
A Invested Amount is paid in full.
"Class D Monthly Principal" means for any Distribution Date beginning with
the Distribution Date on which the Class A Invested Amount, the Class B
Invested Amount and the Collateral Invested Amount are paid in full, an amount
equal to the lesser of (x) Available Principal Collections (minus the portion
of Available Principal Collections applied to Class A Monthly Principal, Class
B Monthly Principal or Collateral Monthly Principal on such Distribution Date)
and (y) the Class D Invested Amount for such Distribution Date.
"Collateral Monthly Principal" means (i) for any Distribution Date prior
to the Distribution Date on which the Class A Invested Amount and the Class B
Invested Amount are paid in full, an amount equal to the lesser of (x)
Available Principal Collections not applied to Class A Monthly Principal or
Class B Monthly Principal on such Distribution Date and (y) the excess, if any,
of the Collateral Invested Amount over the Required Collateral Invested Amount
(after giving effect to any adjustments made to the Required Collateral
Invested Amount on such Distribution Date) and (ii) for any remaining
Distribution Date beginning with the Distribution Date on which the Class A
Invested Amount and the Class B Invested Amount are paid in full, an amount
equal to the lesser of (x) Available Principal Collections (minus the portion
of Available Principal Collections applied to Class A Monthly Principal or
Class B Monthly Principal on such Distribution Date) and (y) the Collateral
Invested Amount for such Distribution Date.
"Required Class D Invested Amount" means $[ ].
"Required Collateral Invested Amount" means the excess, if any, of (i) the
Required Enhancement Amount over (ii) the Required Class D Invested Amount.
"Required Enhancement Amount" means, with respect to any Distribution
Date, [ ]% of the Initial Invested Amount or, with the consent of the
Collateral Interest Holder, [ ]% of the Adjusted Invested Amount on such
Distribution Date after taking into account any adjustments to the Adjusted
Invested Amount on such Distribution Date, but not less than $[ ]; provided,
however, that (x) if a Pay Out Event with respect to Series 199_-_ has
occurred, the Required Enhancement Amount will thereafter equal the Required
Enhancement Amount for the Distribution Date immediately preceding such Pay Out
Event, (y) in no event shall the Required Enhancement Amount exceed the
outstanding principal amount of the Class A Certificates and the Class B
Certificates and (z) the Required Enhancement Amount may be reduced at the
Bank's option at any time, subject to the approval of each Rating Agency that
has rated the Class A Certificates and the Class B Certificates and subject to
certain requirements to notify the Servicer and the Trustee and obtain the
consent of the Collateral Interest Holder.
The Series 199_-_ Supplement may be amended by the Bank to reduce the
Required Class D Invested Amount or the Required Collateral Invested Amount
provided that the Required Enhancement Amount is not reduced. Any such
amendment to the Series 199_-_ Supplement will not require the consent of the
Class A Certificateholders or the Class B Certificateholders but will be
subject to the approval of each Rating Agency that has rated the Class A
Certificates or the Class B Certificates and the consent of the Collateral
Interest Holder.
Principal Funding Account
The Servicer will establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the Class A
Certificateholders and the Class B Certificateholders (the "Principal Funding
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<PAGE>
Account"). Principal will be deposited in the Principal Funding Account on each
Distribution Date with respect to the Class A Accumulation Period, for the
Class A Certificates, and with respect to the Class B Accumulation Period, for
the Class B Certificates, as described above under "Application of
Collections--Payments of Principal". All amounts on deposit in the Principal
Funding Account (the "Principal Funding Account Balance") with respect to any
Distribution Date (after giving effect to any deposits to, or withdrawals from,
the Principal Funding Account to be made before or on such Distribution Date)
will be invested to the business day immediately preceding the following
Distribution Date by the Trustee at the direction of the Servicer in Eligible
Investments.
On each Distribution Date with respect to the Class A Accumulation Period
and the Class B Accumulation Period and on the first Special Payment Date, the
interest and other investment income (net of investment expenses and losses)
earned on such investments (the "Principal Funding Investment Proceeds") will
be withdrawn from the Principal Funding Account and will be included in
Available Finance Charge Collections as described above under "--Interest". If
such investments for any Distribution Date with respect to the Class A
Accumulation Period or the first Special Payment Date (on or prior to the Class
A Expected Final Payment Date) yield less than the Class A Certificate Rate for
the related Interest Period, the Principal Funding Investment Proceeds with
respect to such Distribution Date will be less than the Covered Amount for such
Distribution Date. It is intended that any such shortfall will be funded from
Available Finance Charge Collections available therefor (including, if
necessary, a withdrawal from the Reserve Account) or from Reallocated Principal
Collections, as described above under "--Application of Collections--Payments
of Interest, Fees and Other Items". Additionally, if such investments for any
Distribution Date with respect to the Class B Accumulation Period or the first
Special Payment Date (after the Class A Expected Final Payment Date) yield less
than the Class B Certificate Rate for the related Interest Period, the
Principal Funding Investment Proceeds with respect to such Distribution Date
will be less than the amount of interest due Class B Certificateholders
relating to amounts on deposit in the Principal Funding Account in respect of
the Class B Certificates. It is intended that any such shortfall will be funded
from Available Finance Charge Collections available therefor, Reallocated Class
D Principal Collections or Reallocated Collateral Principal Collections, as
described above under "--Application of Collections--Payments of Interest, Fees
and Other Items". Such available amounts at any time will be limited and there
can be no assurance that sufficient funds will be available to fund any such
shortfall.
The Principal Funding Account Balance, if any, in respect of the Class A
Certificates will be distributed to Class A Certificateholders on the Class A
Expected Final Payment Date or, if earlier, the first Special Payment Date and
the Principal Funding Account Balance, if any, in respect of the Class B
Certificates will be distributed to Class B Certificateholders on the Class B
Expected Final Payment Date or, if earlier, the first Special Payment Date
(after the Class A Expected Final Payment Date), in each case as described
under "--Distributions".
Reserve Account
The Servicer may establish and maintain in the name of the Trustee, on
behalf of the Trust, an Eligible Deposit Account for the benefit of the Class A
Certificateholders (the "Reserve Account"). If the Servicer elects to fund the
Reserve Account, on each Distribution Date from and after the Reserve Account
Funding Date, but prior to the termination of the Reserve Account, the Trustee,
acting pursuant to the Servicer's instructions, will apply Available Finance
Charge Collections (to the extent described above under "--Application of
Collections--Payment of Interest, Fees and Other Items") to increase the amount
on deposit in the Reserve Account (to the extent such amount is less than the
Required Reserve Account Amount). The "Reserve Account Funding Date", if any,
will be determined by the Servicer such that the Reserve Account may be funded
from Available Finance Charge Collections, to the extent available for such
purpose, before beginning the Class A Accumulation Period (as it may have been
postponed at the election of the Servicer as described under "--Principal").
The "Required Reserve Account Amount" for any Distribution Date after the
Reserve Account Funding Date will be equal to the product of a percentage
between [ ]% and [ ]% and the Class A Initial Invested Amount as of such
Distribution Date, as provided in the Servicer's instructions to the Trustee.
On each Distribution Date, after giving effect to any deposit to be made to,
and any withdrawal to be made from, the Reserve Account on such Distribution
Date, the Trustee will withdraw from the Reserve Account an amount equal to the
excess, if any, of the amount on deposit in the Reserve Account over the
Required Reserve Account Amount and will distribute such excess to or at the
direction of the Bank.
Provided that the Reserve Account has not been terminated as described
below, all amounts on deposit in the Reserve Account with respect to any
Distribution Date (after giving effect to any deposits to, or withdrawals from,
the Reserve Account to be made on such Distribution Date) will be invested to
the business day immediately preceding the following Distribution Date by the
Trustee at the direction of the Servicer in Eligible Investments. The interest
and other investment income (net of investment expenses and losses) earned on
such investments will be retained in the Reserve Account (to the extent the
amount on deposit therein is less than the Required Reserve Account Amount) or
distributed to or at the direction of the Bank.
On or before each of the Distribution Dates with respect to the Class A
Accumulation Period and the first Special Payment Date (on or prior to the
Class A Expected Final Payment Date), funds, if any, on deposit in the Reserve
Account will be withdrawn from the Reserve Account, deposited in the Collection
Account and included in Available Finance Charge Collections as described above
under "--Interest", in an amount equal to the lesser of (a) the Available
Reserve Account Amount with respect to such Distribution Date or Special
Payment Date and (b) the excess, if any, of the Covered Amount with respect to
such Distribution Date or Special Payment Date over the Principal Funding
Investment Proceeds with respect to such Distribution Date or Special Payment
Date; provided, however, that the amount of such withdrawal will be reduced to
the extent that funds otherwise would be available to
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<PAGE>
be deposited in the Reserve Account on such Distribution Date or Special
Payment Date. On the business day immediately preceding each Distribution Date,
the amount available to be withdrawn from the Reserve Account (the "Available
Reserve Account Amount") will be equal to the lesser of the amount on deposit
in the Reserve Account (before giving effect to any deposit to be made to the
Reserve Account on such Distribution Date) and the Required Reserve Account
Amount for such Distribution Date. The "Covered Amount" for any Distribution
Date with respect to the Class A Accumulation Period or the first Special
Payment Date (on or prior to the Class A Expected Final Payment Date) will be
equal to the product of (a) a fraction, the numerator of which is the actual
number of days in the related Interest Period and the denominator of which is
360, (b) the Class A Certificate Rate and (c) the Principal Funding Account
Balance, if any, with respect to the Class A Certificates as of the preceding
Distribution Date.
The Reserve Account will not be available for the benefit of Class B
Certificateholders to fund any deficiency with respect to the yield on the
Principal Funding Account during the Class B Accumulation Period. The Reserve
Account will be terminated following the earliest to occur of (a) the date on
which the Class A Certificates are paid in full, (b) the business day
immediately preceding the first Special Payment Date (on or prior to the Class
A Expected Final Payment Date) and (c) the business day immediately preceding
the Class A Expected Final Payment Date. Upon the termination of the Reserve
Account, all amounts on deposit therein (after giving effect to any withdrawal
from the Reserve Account on such date as described above) will be distributed
to or at the direction of the Bank. Any amounts withdrawn from the Reserve
Account and distributed to or at the direction of the Bank as described above
will not be available for distribution to the Class A Certificateholders.
Defaulted Amounts; Charge-Offs
If, on any Distribution Date, the Class D Defaulted Amount exceeds the
amount of Available Finance Charge Collections available to fund the Class D
Defaulted Amount on such Distribution Date as described in paragraph (a)(xiii)
under "--Application of Collections--Payments of Interest, Fees and Other
Items" above, then the Class D Invested Amount will be reduced by the amount of
such excess; provided, however, that the Class D Invested Amount will not be
reduced below zero. Such reductions will thereafter be reimbursed and the Class
D Invested Amount increased (but not by an amount in excess of the aggregate
unreimbursed reductions) on any Distribution Date by the amount of Available
Finance Charge Collections available for that purpose as described in paragraph
(a)(xiv) under "--Application of Collections--Payments of Interest, Fees and
Other Items" above.
If, on any Distribution Date, the Class A Defaulted Amount for the related
Monthly Period exceeds the amount of Available Finance Charge Collections and
Reallocated Principal Collections applied thereto on such Distribution Date,
the Class D Invested Amount (after giving effect to reductions in the Class D
Invested Amount on such Distribution Date (a) as described in paragraphs (b),
(c) and (d) under "--Application of Collections--Payments of Interest, Fees and
Other Items" above in respect of the application of the Reallocated Principal
Collections and (b) as described in the immediately preceding paragraph in
respect of the amount by which the Class D Defaulted Amount exceeded the amount
of Available Finance Charge Collections available to fund the Class D Defaulted
Amount) will be reduced by the amount of such excess. If such reduction would
cause the Class D Invested Amount to be reduced below zero, the Class D
Invested Amount will be reduced to zero and the Collateral Invested Amount
(after giving effect to reductions in the Collateral Invested Amount on such
Distribution Date (a) as described in paragraphs (c) and (d) under
"--Application of Collections--Payments of Interest, Fees and Other Items"
above in respect of the application of the Reallocated Class B Principal
Collections and Reallocated Collateral Principal Collections and (b) as
described in the second immediately following paragraph in respect of the
amount by which the Collateral Defaulted Amount exceeded the amount of
Available Finance Charge Collections and Reallocated Class D Principal
Collections available to fund the Collateral Defaulted Amount) will be reduced
by the amount of such excess. If such reduction would cause the Collateral
Invested Amount to be reduced below zero, the Collateral Invested Amount will
be reduced to zero and the Class B Invested Amount (after giving effect to
reductions in the Class B Invested Amount on such Distribution Date (a) as
described in paragraph (d) under "--Application of Collections--Payments of
Interest, Fees and Other Items" above in respect of the application of the
Reallocated Class B Principal Collections and (b) as described in the
immediately following paragraph in respect of the amount by which the Class B
Defaulted Amount exceeded the amount of Available Finance Charge Collections,
Reallocated Class D Principal Collections and Reallocated Collateral Principal
Collections available to fund the Class B Defaulted Amount) will be reduced by
the amount by which the Collateral Invested Amount would have been reduced
below zero. In the event that such reduction would cause the Class B Invested
Amount to be reduced below zero, the Class A Invested Amount will be reduced by
the amount by which the Class B Invested Amount would have been reduced below
zero (a "Class A Charge-Off"). Class A Charge-Offs will thereafter be
reimbursed and the Class A Invested Amount increased (but not by an amount in
excess of the aggregate unreimbursed Class A Charge-Offs) on any Distribution
Date by the amount of Available Finance Charge Collections available for that
purpose as described in paragraph (a)(v) under "--Application of
Collections--Payments of Interest, Fees and Other Items" above.
If, on any Distribution Date, the Class B Defaulted Amount for the related
Monthly Period exceeds the amount of the Available Finance Charge Collections,
Reallocated Class D Principal Collections and Reallocated Collateral Principal
Collections applied thereto on such Distribution Date, the Class D Invested
Amount (after giving effect to reductions in the Class D Invested Amount on
such Distribution Date (a) as described in paragraphs (b), (c) and (d) under
"--Application of Collections--Payments of Interest, Fees and Other Items"
above in respect of the application of the Reallocated Principal Collections,
(b) as described in the second immediately preceding paragraph in respect of
the amount by which the Class D Defaulted Amount exceeded the amount of
Available Finance Charge Collections available to fund the Class D Defaulted
Amount and (c) as described in the immediately preceding paragraph in respect
of the amount by which the Class A Defaulted Amount exceeded the amount of
Available Finance Charge Collections and Reallocated Principal Collections
available to fund the Class A Defaulted Amount) will be reduced by the amount
of such excess. If such reduction would cause the Class D Invested Amount to be
reduced below zero, the
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Class D Invested Amount will be reduced to zero and the Collateral Invested
Amount (after giving effect to reductions in the Collateral Invested Amount on
such Distribution Date (a) as described in paragraphs (c) and (d) under
"--Application of Collections--Payments of Interest, Fees and Other Items"
above in respect of the application of the Reallocated Class B Principal
Collections and Reallocated Collateral Principal Collections, (b) as described
in the immediately following paragraph in respect of the amount by which the
Collateral Defaulted Amount exceeded the amount of Available Finance Charge
Collections available to fund the Collateral Defaulted Amount and (c) as
described in the immediately preceding paragraph in respect of the amount by
which the Class A Defaulted Amount exceeded the amount of Available Finance
Charge Collections and Reallocated Principal Collections available to fund the
Class A Defaulted Amount) will be reduced by the amount of such excess. If such
reduction would cause the Collateral Invested Amount to be reduced below zero,
the Collateral Invested Amount will be reduced to zero and the Class B Invested
Amount will be reduced by the amount by which the Collateral Invested Amount
would have been reduced below zero (any reduction in the Class B Invested
Amount as described in this paragraph or the immediately preceding paragraph, a
"Class B Charge-Off"). Class B Charge-Offs will thereafter be reimbursed and
the Class B Invested Amount increased (but not by an amount in excess of the
aggregate unreimbursed Class B Charge-Offs) on any Distribution Date by the
amount of Available Finance Charge Collections available for that purpose as
described in paragraph (a)(viii) under "--Application of Collections--Payments
of Interest, Fees and Other Items" above.
If, on any Distribution Date, the Collateral Defaulted Amount for the
related Monthly Period exceeds the amount of the Available Finance Charge
Collections and Reallocated Class D Principal Collections applied thereto on
such Distribution Date, the Class D Invested Amount (after giving effect to
reductions in the Class D Invested Amount on such Distribution Date (a) as
described in paragraphs (b), (c) and (d) under "--Application of
Collections--Payments of Interest, Fees and Other Items" above in respect of
the application of the Reallocated Principal Collections, (b) as described in
the third immediately preceding paragraph in respect of the amount by which the
Class D Defaulted Amount exceeded the amount of Available Finance Charge
Collections available to fund the Class D Defaulted Amount, (c) as described in
the second immediately preceding paragraph in respect of the amount by which
the Class A Defaulted Amount exceeded the amount of Available Finance Charge
Collections and Reallocated Principal Collections available to fund the Class A
Defaulted Amount and (c) as described in the immediately preceding paragraph in
respect of the amount by which the Class B Defaulted Amount exceeded the amount
of Available Finance Charge Collections, Reallocated Class D Principal
Collections and Reallocated Collateral Principal Collections available to fund
the Class B Defaulted Amount) will be reduced by the amount of such excess. If
such reduction would cause the Class D Invested Amount to be reduced below
zero, the Class D Invested Amount will be reduced to zero and the Class B
Invested Amount will be reduced by the amount by which the Class D Invested
Amount would have been reduced below zero; provided, however, that the
Collateral Invested Amount will not be reduced below zero. Such reductions will
thereafter be reimbursed and the Collateral Invested Amount increased (but not
by an amount in excess of the aggregate unreimbursed reductions) on any
Distribution Date by the amount of Available Finance Charge Collections
available for that purpose as described in paragraph (a)(xii) under
"--Application of Collections--Payments of Interest, Fees and Other Items"
above.
Pay Out Events
The Pay Out Events with respect to the Series 199_-_ Certificates will
include each of the events specified in the Prospectus under "Description of
the Certificates--Pay Out Events" and the following: the failure to pay in full
the Class A Invested Amount on the Class A Expected Final Payment Date or the
Class B Invested Amount on the Class B Expected Final Payment Date.
For purposes of the Pay Out Event described in clause (f) under
"Description of the Certificates--Pay Out Events" in the Prospectus, the terms
"Base Rate" and "Portfolio Yield" will be defined as follows with respect to
the Series 199_-_ Certificates:
"Base Rate" means, with respect to any Monthly Period, the annualized
percentage equivalent of a fraction, the numerator of which is equal to the sum
of the Class A Monthly Interest, the Class B Monthly Interest and the
Collateral Monthly Interest and the Monthly Investor Servicing Fee based on an
assumed Series Servicing Fee Percentage of [ ]% per annum, in each case with
respect to the related Distribution Date, and the denominator of which is the
Invested Amount of the last day of the immediately preceding Monthly Period.
"Portfolio Yield" means, with respect to any Monthly Period, the
annualized percentage equivalent of a fraction, the numerator of which is equal
to (a) Available Finance Charge Collections for the Distribution Date with
respect to such Monthly Period, minus (b) the Series 199_-_ Defaulted Amount
for the Distribution Date with respect to such Monthly Period, and the
denominator of which is the Invested Amount as of the last day of the
immediately preceding Monthly Period.
Distributions
Payments to the Class A Certificateholders and the Class B
Certificateholders will be made from the Collection Account and the Principal
Funding Account. The Servicer will instruct the Trustee to apply the funds on
deposit in such accounts to make the following distributions:
(a) on each Interest Payment Date and Special Payment Date with
respect to the Class A Certificates, all amounts on deposit in the
Collection Account that are allocated and available to pay interest on the
Class A Certificates (as described under "--Application of Collections")
will be distributed to the Class A Certificateholders;
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<PAGE>
(b)(i) on the first Special Payment Date (on or prior to the Class A
Expected Final Payment Date) and on the Class A Expected Final Payment
Date, the Principal Funding Account Balance, if any, with respect to the
Class A Certificates and (ii) on each Special Payment Date (on or prior to
the Class B Principal Commencement Date), all amounts on deposit in the
Collection Account and the Principal Funding Account that are allocated
and available to pay principal of the Class A Certificates (as described
under "--Application of Collections") will be distributed to Class A
Certificateholders up to a maximum amount on any such date equal to the
Class A Invested Amount on such date (unless there has been an optional
repurchase of the Series 199_-_ Certificateholders' Interest due to the
failure to find a successor Servicer upon a Servicer Default (as described
in the Prospectus under "The Pooling Agreement Generally--Servicer
Default"), in which event, the foregoing limitation will not apply);
(c) on each Interest Payment Date and Special Payment Date with
respect to the Class B Certificates, all amounts on deposit in the
Collection Account that are allocated and available to pay interest on the
Class B Certificates (as described under "--Application of Collections")
will be distributed to the Class B Certificateholders; and
(d)(i) on the first Special Payment Date (after the Class A Expected
Final Payment Date) and on the Class B Expected Final Payment Date, the
Principal Funding Account Balance, if any, with respect to the Class B
Certificates and (ii) on each Special Payment Date (on or after the Class
B Principal Commencement Date), all amounts on deposit in the Collection
Account that are allocated and available to pay principal of the Class B
Certificates (as described under "--Application of Collections") will be
distributed to Class B Certificateholders up to a maximum amount on any
such date equal to the Class B Invested Amount on such date (unless there
has been an optional repurchase of the Series 199_-_ Certificateholders'
Interest due to the failure to find a successor Servicer upon a Servicer
Default (as described in the Prospectus under "The Pooling Agreement
Generally-- Servicer Default"), in which event, the foregoing limitation
will not apply).
Paired Series
The Series 199_-_ Certificates may be paired with one or more other Series
(each, a "Paired Series") at or after the commencement of the Class A
Accumulation Period. Each Paired Series either (a) will be refunded in whole or
in part with an initial deposit to a prefunding account in an amount up to the
initial principal balance of such Paired Series and primarily from the proceeds
of the offering of such Paired Series or (b) will have a variable principal
amount. Any such prefunding account will be held for the benefit of such Paired
Series and not for the benefit of Series 199_-_ Certificateholders. As funds
are accumulated in the Principal Funding Account, either (i) in the case of a
refunded Paired Series, an equal or lesser amount of funds on deposit in any
prefunding account for such refunded Paired Series may be released (which funds
will be distributed to or at the direction of the Bank) or (ii) in the case of
a Paired Series having a variable principal amount, an interest in such
variable Paired Series in an equal or lesser amount may be sold by the Trust
(and the proceeds thereof will be distributed to or at the direction of the
Bank), and, in either case, the Invested Amount in the Trust of such Paired
Series will increase by up to a corresponding amount. In addition, it is
expected that any Paired Series will be excluded from the calculation of the
Required Principal Balance as described under "Special Considerations--Payments
and Maturity" in the Prospectus. The issuance of a Paired Series will be
subject to the conditions described under "Description of the Certificates--New
Issuances" in the Prospectus. There can be no assurance, however, that the
terms of any Paired Series might not have an impact on the timing or amount of
payments received by a Class A Certificateholder or a Class B
Certificateholder. See "Risk Factors--Issuance of Additional Series" in the
Prospectus.
Series Termination
If, on the [ ] Distribution Date, two months prior to the Series
Termination Date, the Invested Amount (after giving effect to all changes
therein on such Distribution Date) exceeds zero, the Servicer will, within the
40-day period beginning on such date, solicit bids for the sale of interests in
certain Principal Receivables, together in each case with the related Finance
Charge Receivables, in an amount equal to the Invested Amount at the close of
business on the last day of the Monthly Period preceding the Series Termination
Date (after giving effect to all distributions required to be made on the
Series Termination Date). The Bank and the Collateral Interest Holder will be
entitled to participate in, and to receive notice of each bid submitted in
connection with, such bidding process. Upon the expiration of such 40-day
period, the Trustee will determine (a) which bid is the highest cash purchase
offer (the "Highest Bid") and (b) the amount (the "Available Final Distribution
Amount") which otherwise would be available in the Collection Account on the
Series Termination Date for distribution to the Series 199_-_
Certificateholders. The Servicer will sell such Receivables on the Series
Termination Date to the bidder who provided the Highest Bid and will deposit
the proceeds of such sale in the Collection Account for allocation (together
with the Available Final Distribution Amount) to the Series 199_-_
Certificateholders' Interest.
[Extension of Accelerated Principal Payment Date
Unless an Early Amortization Event has occurred, principal [(other than,
if applicable, principal payments made from amounts on deposit in the
Prefunding Account on the first Distribution Date following the end of the
Funding Period)] with respect to the Class A Certificates is expected to be
paid on the Class A Expected Final Payment Date and principal with respect to
the Class B Certificates is expected to be paid on the Class B Expected Final
Payment Date, provided, that the Certificateholders will receive payments of
principal earlier than such dates if the Servicer elects not to extend the
Accelerated Principal Payment Date. The Accelerated Principal Payment Date will
initially be the [ ] Distribution Date, but will successively be extended to
the next Distribution Date after the then-current Accelerated Principal Payment
Date unless the Seller, on or prior to the first day of the Monthly Period
Immediately preceding the then-current Accelerated Principal Payment
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<PAGE>
Date, elects not to cause such extension. In the event that the Seller elects
not to extend the Accelerated Principal Payment Date, the Revolving Period or
the Accumulation Period, as applicable, will end, and the Accelerated Principal
Payment Period will commence. During the Accelerated Principal Payment Period,
interest will be paid monthly on each Distribution Date, and amounts then on
deposit in the Principal Funding Account, if any, and Available Principal
Collections with respect to each Distribution Date commencing on the
Accelerated Principal Payment Date will be paid first to the Class A
Certificateholders until the earlier of the date on which the Class A Invested
Amount is paid in full or the Series Termination Date, and, after payment in
full to the Class A Certificateholders, then to the Class B Certificateholders
until the earlier of the date on which the Class B Invested Amount is paid in
full or the Series Termination Date.
The duration of the Accelerated Principal Payment Period is dependent on
the amounts on deposit in the Principal Funding Account, if any, on the
Accelerated Principal Payment Date and the amount of Available Principal
Collections available to pay principal with respect to the Series 199_-_
Certificates on the Accelerated Principal Payment Date and subsequent
Distribution Dates. The Principal Shortfall for Series 199_-_ will be
determined such that the Series 199_-_ Certificates will be subordinated in the
right to receive Shared Principal Collections to other, non-extendable Series
during the Accelerated Principal Payment Period and as a result such other,
non-extendable Series will have priority over the Series_-_ Certificates in the
allocation of Shared Principal Collections. See "Description of the
Certificates--Shared Principal Collections" in the Prospectus.
The Seller will cause the Trustee to provide written notice to each
Certificateholder, the Servicer, each Rating Agency and the Collateral Interest
Holder of any election by the Seller not to extend the Accelerated Principal
Payment Date. The Seller will cause the Trustee to provide such notice on or
prior to the first day of the Monthly Period immediately preceding such
Accelerated Principal Payment Date but not more than 60 days prior to such
Accelerated Principal Payment Date.]
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<PAGE>
UNDERWRITING
[Each of the][The] underwriter[s] named below (the "Class A
Underwriter[s]") has severally agreed to purchase from the Bank the principal
amount of the Class A Certificates set forth opposite its name:
Principal Amount of
Class A Underwriter[s] Class A Certificates
[ ]................................. $
Total............................................. $
The underwriting agreement (the "Underwriting Agreement") between the Bank
and the Underwriter[s] provides that the obligations of the Class A
Underwriter[s] to pay for and accept delivery of the Class A Certificates are
subject to the approval of certain legal matters by their counsel and to
certain other conditions. The Class A Underwriter[s] are committed to purchase
and pay for all of the Class A Certificates if any are purchased.
The Class A Underwriter[s] propose initially to offer the Class A
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less a concession not in excess of [ ]% of
the aggregate principal amount of the Class A Certificates. The Class A
Underwriter[s] may allow, and such dealers may reallow, a concession not in
excess of [ ]% of such aggregate principal amount to certain brokers and
dealers. After the initial public offering, the public offering price and
other selling terms may be changed by the Class A Underwriter[s].
[Each of the][The] underwriter[s] named below (the "Class B
Underwriter[s]", and together with the Class A Underwriter[s], "the
Underwriter[s]") has severally agreed to purchase from the Bank the principal
amount of the Class B Certificates set forth opposite its name:
Principal Amount of
Class B Underwriter[s] Class B Certificates
[ ]................................ $
Total............................................. $
The Underwriting Agreement provides that the obligations of the Class B
Underwriter[s] to pay for and accept delivery of the Class B Certificates are
subject to the approval of certain legal matters by their counsel and to
certain other conditions. The Class B Underwriter[s] are committed to purchase
and pay for all of the Class B Certificates if any are purchased.
The Class B Underwriter[s] propose initially to offer the Class B
Certificates to the public at the price set forth on the cover page hereof and
to certain dealers at such price less a concession not in excess of [ ]% of the
aggregate principal amount of the Class B Certificates. The Class B
Underwriter[s] may allow, and such dealers may reallow, a concession not in
excess of [ ]% of such aggregate principal amount to certain brokers and
dealers. After the initial public offering, the public offering price and other
selling terms may be changed by the Class B Underwriter[s].
[Each][The] Underwriter will represent and agree that:
(a) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the Class A Certificates and the Class B Certificates in, from
or otherwise involving the United Kingdom;
(b) it has only issued, distributed or passed on and will only issue,
distribute or pass on in the United Kingdom any document received by it in
connection with the issue of the Class A Certificates and the Class B
Certificates to a person who is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or is a person to whom such document may otherwise lawfully be
issued, distributed or passed on;
(c) if it is an authorized person under Chapter III of Part I of the
Financial Services Act 1986, it has only promoted and will only promote
(as that term is defined in Regulation 1.02(2) of the Financial Services
(Promotion of Unregulated Schemes) Regulations 1991) to any person in the
United Kingdom the scheme described in this Prospectus Supplement and the
Prospectus if that person is a kind described either in Section 76(2) of
the Financial Services Act 1986 or in Regulation 1.04 of the Financial
Services (Promotion of Unregulated Schemes) Regulations 1991; and
(d) it is a person of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The Bank will indemnify the Underwriter[s] against certain liabilities,
including liabilities under the Act, or contribute to payments the
Underwriter[s] may be required to make in respect thereof.
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<PAGE>
In the ordinary course of business, the Underwriter[s] and their
affiliates have engaged and may engage in investment banking and/or commercial
banking transactions with the Bank, its affiliates and the Trust. In addition,
the Underwriter[s] may from time to time take positions in the Certificates
issued by the Trust.
If the Underwriter[s] create a short position in the Class A Certificates
or the Class B Certificates in connection with the offering, i.e., if they sell
more Class A Certificates or Class B Certificates than are set forth on the
cover page of this Prospectus Supplement, the Underwriter[s] may reduce that
short position by purchasing Class A Certificates or Class B Certificates, as
the case may be, in the open market.
In general, the purchase of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchase.
None of the Bank, the Servicer, or the Underwriter[s] makes any
representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the prices of the Class A
Certificates or the Class B Certificates. In addition, none of the Bank, the
Servicer, or the Underwriter[s] makes any representation that the
Underwriter[s] will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
S-37
<PAGE>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
Term Page
Accounts.......................................... S-1
Accelerated Principal Payment Date................ S-3
[Accelerated Principal Payment Event.............. S-3]
[Accelerated Principal Payment Period............. S-3]
Adjusted Invested Amount.......................... S-5
Acquired Portfolios...............................
Available Final Distribution Amount............... S-33
Available Finance Charge Collections.............. S-20
Available Principal Collections................... S-26
Available Reserve Account Amount.................. S-30
Bank.............................................. S-1
Base Rate......................................... S-32
Business Day...................................... S-3
Class A Accumulation Period....................... S-9
Class A Accumulation Period Length................ S-21
Class A Additional Interest....................... S-24
Class A Adjusted Invested Amount.................. S-5
Class A Certificates.............................. S-1
Class A Certificateholders........................ S-2
Class A Certificateholders' Interest.............. S-4
Class A Certificate Rate.......................... S-2
Class A Charge-Off................................ S-31
Class A Controlled Accumulation Amount............ S-27
Class A Controlled Deposit Amount................. S-26
Class A Defaulted Amount.......................... S-24
Class A Deficit Controlled Accumulation
Amount......................................... S-27
Class A Initial Invested Amount................... S-3
Class A Invested Amount........................... S-22
Class A Interest Shortfall........................ S-24
Class A Monthly Interest.......................... S-24
Class A Monthly Principal......................... S-27
Class A Percentage................................ S-24
Class A Underwriters.............................. S-34
Class B Accumulation Period....................... S-9
Class B Additional Interest....................... S-24
Class B Adjusted Invested Amount.................. S-5
Class B Certificates.............................. S-1
Class B Certificateholders........................ S-2
Class B Certificateholders' Interest.............. S-4
Class B Certificate Rate.......................... S-2
Class B Charge-Off................................ S-31
Class B Controlled Accumulation Amount............ S-27
Class B Controlled Deposit Amount................. S-27
Class B Deficit Controlled Accumulation
Amount.......................................... S-27
Class B Defaulted Amount.......................... S-24
Class B Interest Shortfall........................ S-24
Class B Initial Invested Amount................... S-3
Class B Invested Amount........................... S-23
Class B Monthly Interest.......................... S-24
Class B Monthly Principal......................... S-27
Class B Percentage................................ S-24
Class B Principal Commencement Date............... S-27
Class B Underwriters.............................. S-34
Class D Defaulted Amount ......................... S-23
Class D Holder.................................... S-4
Class D Initial Invested Amount................... S-4
Class D Interest.................................. S-4
Class D Invested Amount........................... S-2
Class D Monthly Principal......................... S-29
Class D Percentage................................ S-23
Collateral Agreement.............................. S-25
Collateral Defaulted Amount....................... S-25
Collateral Initial Invested Amount................ S-4
Collateral Interest............................... S-4
Collateral Interest Holder........................ S-4
Collateral Interest Rate.......................... S-25
Collateral Invested Amount........................ S-22
Collateral Monthly Interest....................... S-25
Collateral Monthly Principal...................... S-28
Collateral Percentage............................. S-25
Covered Amount.................................... S-30
Early Amortization Period......................... S-12
First Union Portfolios............................ S-13
First Union Filings............................... S-13
Floating Allocation Percentage.................... S-22
Highest Bid....................................... S-33
Initial Invested Amount........................... S-4
Accelerated Principal Payment Date................ S-3
Interest Payment Date............................. S-2
Interest Period................................... S-25
Invested Amount................................... S-22
Paired Series..................................... S-33
Portfolio Yield................................... S-32
Principal Allocation Percentage................... S-22
Principal Funding Account......................... S-29
Principal Funding Account Balance................. S-29
Principal Funding Investment Proceeds............. S-29
Reallocated Class D Principal Collections......... S-26
Reallocated Class B Principal Collections......... S-25
Reallocated Collateral Principal
Collections................................... S-26
Reallocated Principal Collections................. S-26
Receivables....................................... S-1
Representative.................................... S-35
Required Amount................................... S-6
Required Class D Invested Amount.................. S-28
Required Collateral Invested Amount............... S-28
Required Enhancement Amount....................... S-28
Required Reserve Account Amount................... S-30
Reserve Account................................... S-30
Reserve Account Funding Date...................... S-30
Revolving Period.................................. S-9
Series 199_-_ Certificateholder's Interest........ S-4
Series 199_-_ Certificates........................ S-1
Series 199_-_ Supplement.......................... S-20
Special Payment Date.............................. S-12
Trust............................................. S-1
Underwriters...................................... S-34
Underwriting Agreement............................ S-34
S-38
<PAGE>
ANNEX I
OTHER ISSUANCES OF CERTIFICATES
The table below sets forth the principal characteristics of the Asset
Backed Certificates, Series [ ], the only Series heretofore issued by the
Trust and still outstanding. For more specific information with respect to any
Series, any prospective investor should contact the Servicer (in care of
Providian Financial Corporation, attention: Chief Financial Officer) at (415)
543-0404. The Servicer will provide, without charge, to any prospective
purchaser of the Class A Certificates and the Class B Certificates a copy of
the Prospectus Supplement for any previous publicly-issued Series.
Previous Issuance of Certificates
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PROSPECTUS
Providian Master Trust
Asset Backed Certificates
Providian National Bank
Seller and Servicer
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This Prospectus relates to certain asset backed certificates (the
"Certificates") that may be issued from time to time by the Providian Master
Trust, formerly known as the First Deposit Master Trust (the "Trust") in one
or more Series (each a "Series"). The Trust was formed pursuant to a Pooling
and Servicing Agreement (the "Pooling Agreement") among Providian National
Bank (the "Bank"), as seller and servicer, 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
owned by the Seller (the "Accounts"), collections thereon and certain other
property, as more fully described herein and, with respect to any Series, in
an accompanying prospectus supplement (a "Prospectus Supplement") relating to
such Series.
Certificates will be sold from time to time under this Prospectus on terms
determined for each Series at the time of the sale and described in the
related Prospectus Supplement. Each Series will consist of one or more classes
of Certificates (each a "Class"). Each Certificate will represent an undivided
interest in the Trust and the interest of the Certificateholders of each Class
or Series will include the right to receive a varying percentage of each
month's collections with respect to the Receivables at the times, in the
manner and to the extent described herein and, with respect to any Series
offered hereby, in the related Prospectus Supplement. Interest and principal
payments with respect to each Series offered hereby will be made as specified
in the related Prospectus Supplement. One or more Classes of a Series offered
hereby may be entitled to the benefits of a cash collateral account, letter of
credit, surety bond, insurance policy or other form of enhancement as
specified in the Prospectus Supplement relating to such Series. In addition,
any Series offered hereby may include one or more Classes which are
subordinated in right and priority to payment of principal of, and/or interest
on, one or more other Classes of such Series or another Series, in each case
to the extent described in the related Prospectus Supplement.
While the specific terms of any Series in respect of which this Prospectus
is being delivered will be described in the related Prospectus Supplement, the
terms of such Series will not be subject to prior review by, or consent of,
the holders of the Certificates of any previously issued Series.
Potential investors should consider, among other things, the information
set forth in "Risk Factors" commencing on page 14 herein and in the related
Prospectus Supplement.
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THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS
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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 , .
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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. If Definitive
Certificates are issued, such Monthly Reports will be sent on behalf of the
Trust to registered holders of the Certificates (the "Certificateholders").
See "Description of the Certificates--Reports" and "The Pooling Agreement
- --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 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 (currently Providian
National Bank) 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, 1998 and
the Current Reports on Form 8-K filed since December 31, 1998. 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
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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.
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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,
beginning on page 62, 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, as a master trust,
has issued other Series (described in Annex I to the
Prospectus Supplement) and is expected to issue
additional Series from time to time. The assets of the
Trust (the "Trust Assets") include a portfolio of
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, 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 --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 Accounts.......... The Accounts consist of the Initial Accounts and any
Additional Accounts but will not include any Removed
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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 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".
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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.
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--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 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
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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 -- 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 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
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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. Collections of Finance Charge Receivables
and certain other amounts allocable to the
Certificateholders' Interest of a Series offered
hereby will be used to the extent specified in the
related Prospectus Supplement 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.
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
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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 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
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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 and there may be 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 and there may
be 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
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principal payments to the Certificateholders of such
Series monthly on each Distribution Date beginning
with the first Special Payment Date with respect to
such Series. 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
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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".
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. The Funding Period with
respect to a Prefunded Series shall not exceed one
year.
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
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of credit, a cash collateral account, a surety bond,
an insurance policy or any other form of credit
enhancement described in the related Prospectus
Supplement. Credit Enhancement may also be provided to
a Class or Classes of a Series by subordination
provisions which require that distributions of
principal and/or interest be made with respect to the
Certificates of such Class or Classes before
distributions are made to one or more other Classes of
such Series.
The type, characteristics and amount of the Credit
Enhancement with respect to any Series will be
determined based on several factors, including the
characteristics of the Receivables and Accounts
underlying or comprising the Trust Assets as of the
Series Issuance Date with respect thereto, and will be
established on the basis of requirements of each
applicable Rating Agency. The terms of the Credit
Enhancement with respect to any Series offered hereby
will be described in the related Prospectus
Supplement. See "Description of the
Certificates--Credit Enhancement" and "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
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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
--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
--Representations and Warranties", all the Receivables
transferred by the Bank to the Trust may be reassigned
to the Bank. See "The Pooling Agreement
--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 --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............ In the opinion of Cravath, Swaine & Moore, special tax
counsel for the Bank and the Trust ("Tax Counsel"),
the Certificates of each Series offered hereby will
properly be characterized as debt for federal income
tax purposes and under current law the Trust will not
be subject to federal income tax. 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. To
the extent that
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Certificates are issued with OID, Certificateholders
may be required to report income in respect of the
Certificates on the accrual basis and such
Certificateholders may be required to report taxable
income prior to receiving corresponding cash
distribution. 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 or may
not be eligible for purchase by Benefit Plans. See
"ERISA Considerations".
Certificate Rating.... 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") or in such higher rating categories
as is necessary to receive opinions of Tax Counsel.
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".
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<PAGE>
RISK FACTORS
INVESTORS SHOULD CONSIDER THE FOLLOWING MATERIAL FACTORS IN CONNECTION WITH
THE PURCHASE OF CERTIFICATES.
Limited Liquidity. 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. 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.
Issuance of Additional Series; Effect on Timing or Amount of Payments to
Certificateholders and Voting Rights. 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".
Effect of Addition of Trust Assets on Credit Quality. 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 --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".
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<PAGE>
Characterization of Transfer of Receivables; Potential Effect of Insolvency
and Receivership of the Bank. 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
- --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 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
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<PAGE>
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".
Effect of Consumer Protection Laws on Certificateholders. 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 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 -- 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
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<PAGE>
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 --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 -- Representations and Warranties" and
"--Servicer Covenants" and "Certain Legal Aspects of the Receivables--Consumer
Protection Laws".
Timing of Principal Payments Other Than at Expected 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 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; Reduction or Withdrawal 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
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<PAGE>
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. Any such
reduction or withdrawal of a rating, if it were to occur, could adversely
affect the market value of the Certificates.
Book-Entry Registration. 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 -- Book Entry Registration" and "--Definitive
Certificates".
Risks Presented by Social, Geographic, Economic and Other Factors. Changes
in credit use and payment patterns by accountholders result from a variety of
economic, geographic and social factors. Economic factors include the rate of
inflation, unemployment levels and relative interest rates offered for various
types of loans. Adverse changes in economic conditions in any states where
cardholders are located could have a direct impact on the timing and amount of
payments on the Certificates of any Series. Social factors include changes in
consumer confidence levels and attitudes regarding incurring debt and changing
attitudes regarding personal bankruptcy. 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 economic, geographic 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; Decreases in
Finance Charges. Pursuant to the Pooling Agreement, the Bank does not transfer
to the Trust the Accounts but only
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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 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
addition, there can be no assurance that a change made in the terms of the
Accounts would not result in the downgrade or withdrawal of the rating of the
Certificates. 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 --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.
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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 unsecured credit card accounts and unsecured 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 currently include
secured and partially secured credit card accounts, home loans and, except for
the Bank's Visa Classic product, credit card accounts with lower credit limits
designed to serve individuals who have limited access to credit and are
underserved by traditional financial institutions. The Providian Portfolio
consists primarily of unsecured credit card receivables generated through Visa
and MasterCard credit cards.[1]
Secured and partially secured credit card accounts and credit card accounts
with lower credit limits designed to serve individuals who have limited access
to credit and are underserved by traditional financial institutions may be
included in the Providian Portfolio in the future. Secured and partially
secured accounts are revolving credit card accounts that are secured or
partially secured by a savings deposit established by the accountholder and
held at the Bank. The amount initially required to be deposited by the
accountholder in the savings deposit will be determined based on the
accountholder's credit profile and the amount of the credit line and may vary
from accountholder to accountholder. The amount of the required savings
deposit, as a portion of the accountholder's credit limit, may be reduced over
time or otherwise modified based on the accountholder's credit performance.
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, telemarketing and other direct marketing channels. 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.
- --------
[1] Visa and MasterCard are registered trademarks of Visa U.S.A. Inc. and
MasterCard International Incorporated, respectively.
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The Bank has acquired and may from time to time acquire accounts originated by
third parties the receivables of which may be included in the Providian
Portfolio and the Trust Portfolio. Accounts acquired by the Bank from third
parties, which are part of the Providian Portfolio, 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. During the first and second quarters of 1998 the Bank acquired
two portfolios of credit card accounts from First Union Direct Bank, N.A.
("First Union"). The credit card accounts acquired by the Bank from First
Union were principally generated through pre-approved direct-mail
solicitations sent to pre-screened lists of consumers. As part of the
pre-screening process, First Union provided a set of credit history criteria
to credit reporting agencies, which in turn generated a list of prospective
cardholders with desired attributes. First Union further refined the list by
applying additional underwriting criteria designed to predict the potential
credit risk of prospective cardholders. Consumers responding to the
solicitations were subject to a back-end verification process during which an
applicant's credit history was reviewed a second time and updated and verified
against First Union's underwriting criteria. First Union based each customer's
credit limit upon, among other things, such customer's credit profile, level
of indebtedness and demographic data. Approximately $300 million of the credit
card receivables acquired by the Bank from First Union were added to the Trust
in 1998. During the fourth quarter of 1998 the Bank acquired a portfolio of
credit card accounts from Morgan Stanley Dean Witter's Bravo card program and
during the first quarter of 1999 the Bank acquired a portfolio of credit card
accounts from H&R Block, Inc.'s "WebCard" program. Credit card receivables
acquired by the Bank from these and other credit card issuers may 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.
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 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 account solicitations from the Bank 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. The Bank
establishes pricing and credit limits on an individualized basis, based on the
customer's risk profile , loan feature preferences and price sensitivity and
on the Bank's profitability and risk guidelines.
Each accountholder is subject to an agreement governing the terms and
conditions of the
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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 customers' risk profiles, and may adjust
product features and/or pricing as the customer relationship evolves. 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 and Delinquencies
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.
Under the Bank's current collections policy, statements are sent monthly
and accountholders have approximately 30 days after the statement date to
remit payments before an account is considered past-due. The Bank uses risk
assessment and segmentation models to determine when to contact accountholders
by telephone after an account balance becomes past due, with an emphasis on
early intervention for accounts with the highest risk, and arrangements may be
made with accountholders to extend or change payment schedules. Because
collection efforts are event-driven , 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 .
The Bank's policy is to charge off the principal balance of delinquent
accounts no more than 180 days after the delinquency occurs unless prior to
the time the balance would otherwise be charged off the accountholder enters
into a payment arrangement with the Bank, which generally must include an
initial payment of no less than the total amount past due or 4% of the current
balance, whichever is greater, and monthly payments of no less than 4% of the
current balance. At the time a loan is charged off, related unpaid finance
charges and fee income are written off as a reversal of interest and fee
revenue. Accounts of deceased accountholders are written off upon
determination of uncollectibility, but in no event more than 180 days after
delinquency. Accounts of bankrupt accountholders are charged off upon
notification of bankruptcy.
Information with respect to the delinquency and loss experience of the
Bank's portfolio is contained in the Prospectus Supplement. Such information
sets forth delinquencies grouped by the number of days Receivables are
delinquent and the percentage of the portfolio which is delinquent. The loss
experience information will show charge-offs in dollars and as a percentage
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of the Receivables outstanding.
Interchange
Members participating in the Visa and MasterCard associations receive
certain fees ("Interchange") as partial compensation for taking credit risk,
absorbing fraud losses, funding receivables and servicing accountholders for a
limited period prior to initial billing. Under the Visa and MasterCard
systems, Interchange in connection with accountholder charges for merchandise
and services is passed from the banks that clear the transactions for
merchants to the credit card-issuing banks. Interchange ranges from
approximately 1% to 2% of the transaction amount, although Visa and MasterCard
may from time to time change the amount of Interchange reimbursed to banks
issuing their credit cards. Interchange paid to the 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. Interchange attributable to the Accounts as determined
above will also be included in Finance Charge Receivables for purposes of
calculating the Portfolio Yield.
Year 2000
Some older computer programs were written using two digits rather than four
to define the applicable year. As a result, those computer programs have
time-sensitive software that recognize a date using "00" as the Year 1900
rather than the Year 2000. These computer programs may fail to operate
properly in the Year 2000 and after if they are not modified or replaced to
comply with year 2000 requirements. This could result in a disruption of
operations, including, among other things, a temporary inability to process
transactions, send billing statements or engage in similar normal business
practices.
The Bank's parent company, Providian Financial Corporation, has completed a
Year 2000 assessment which includes the Bank's computer systems, and has
determined that it will have to modify or replace portions of its software so
that its computer systems will function properly with respect to dates in the
Year 2000 and thereafter. Providian Financial Corporation has also initiated
formal communications with the Bank's significant vendors for the purpose of
identifying and remediating risks arising from such vendors' own Year 2000
conversion issues. The testing has commenced and is expected to be completed
by mid-July 1999.
The Bank believes that with modifications to existing software and
conversions to new software, the Year 2000 issue will not pose significant
operational problems. However, there can be no assurance that the necessary
modifications or conversions to the Bank's systems will be completed on time
or that significant vendors will timely convert their own systems.
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THE ACCOUNTS
General
The Receivables arise in certain Eligible Accounts (the "Trust Portfolio")
selected by the Bank from the Providian Portfolio as described below. See "The
Bank's Credit Card and Consumer Lending Business--Business Overview" for a
description of the Providian Portfolio and "The Pooling and Servicing
Agreement--Representations and Warranties" for a description of Eligible
Accounts.
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 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 --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
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Removed Accounts.
The Trust Portfolio currently does not include the receivables arising in
secured and partially secured accounts or accounts with lower credit limits
designed to serve individuals who have limited access to credit and are
underserved by traditional financial institutions. However, such accounts may
in the future be selected by the Bank to be designated for inclusion in the
Trust Portfolio. For a description of the Bank's secured and partially secured
accounts, see "The Bank's Credit Card and Consumer Lending Business--Business
Overview".
Additional Accounts designated after the date hereof may be accounts of a
different type from those previously included in the Trust. Therefore there
can be no assurance that such Additional Accounts will be of the same credit
quality as the Initial Accounts or the Additional Accounts the Receivables in
which have been conveyed previously to the Trust. Moreover, such Additional
Accounts may contain Receivables which consist of fees, charges and amounts
which are different from the fees, charges and amounts described below. Such
Additional Accounts may also be subject to different credit limits, balances
and ages. Consequently, there can be no assurance that the Accounts will
continue to have the characteristics described herein as Additional Accounts
are added. In addition, the inclusion in the Trust of Additional Accounts with
lower periodic finance charges may have the effect of reducing the Portfolio
Yield. The 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 may be offered a reduced annual percentage rate
(which in some cases may be as low as 0%) for an introductory period, 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 and the accrual of finance charges
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 late
fees, returned payment check
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fees, over-limit fees, and returned check fees for any checks written on the
account that the Bank returns unpaid. The Bank also charges cash advance fees
for 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 that are included in the Trust 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 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
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 or will be applied in such other manner as may be specified
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in the related Prospectus Supplement.
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 material provisions common to each Series. Information
specific to a Series will be contained in the related Prospectus Supplement.
The following summary, together with information included elsewhere in this
Prospectus and the information with respect to a specific Series contained in
the related Prospectus Supplement, describes the terms of the Certificates.
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. 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
- --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
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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.
Collections of Finance Charge Receivables and certain other amounts allocable
to the Certificateholders' Interest of a Series offered hereby will be used to
the extent specified in the related Prospectus Supplement 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
trust accounts (each an "Interest Funding Account ") and used to make interest
payments to Certificateholders of such Series or Class on the following
Interest Payment Date. 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 . 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
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than one Class of Certificates, each Class may have a separate Controlled
Amortization Amount. In addition, the related Prospectus Supplement may
describe certain priorities among such Classes with respect to such
distributions.
During the Early Amortization Period 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 but
will be subject to the conditions that (x) 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 Certificateholder and (y) such amendment
will not result in a Ratings Effect. 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
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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 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 of Accounts, the Bank will convey to the
Trust the Receivables arising in Additional Accounts 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 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 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) 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.
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In connection with an Addition of Participations, the Bank will convey the
Participations to the Trust subject to the following conditions, among others:
(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 Participations
will be included as Trust Assets, (b) the Trustee shall have received
confirmation from the Rating Agency that such Addition will not result in a
Ratings Effect and (c) prior to or on the date any such 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 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.
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 --Representations
and Warranties". Consequently, there can be no assurance that such Additional
Accounts or Participations will be of the same credit quality or have the same
payment characteristics as the Initial Accounts or the Additional Accounts
previously included in the Trust.
Additional Accounts of a type different than the Initial Accounts may
contain Receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts which have been designated as
Finance Charge Receivables and Principal Receivables herein and Participations
may be added to the Trust as Additions. In either case, the Servicer will
designate the portions of funds collected or to be collected in respect of
such Receivables or Participations to be treated for purposes of the Pooling
Agreement as Principal Receivables and Finance Charge Receivables.
Removal of Accounts
On any day of any Monthly Period 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
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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 (except the balances set
forth in such list of Removed Accounts, which shall be true and correct in all
material respects as of the Removal Notice Date); (d) the Trustee shall have
received confirmation from the Rating Agency that such removal will not result
in a Ratings Effect unless the aggregate amount of Principal Receivables
outstanding in such Removed Accounts is zero; (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. Notwithstanding the above, in
certain cases, amounts received in connection with the disposition, after
removal from the Trust, of Receivables charged-off as uncollectible prior to
removal from the Trust will be applied under the Pooling Agreement to offset
Defaulted Receivables. See "Description of the Certificates--Defaulted
Receivables; Rebates and Fraudulent Charges".
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
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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 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
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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 (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
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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 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
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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 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
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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. The Funding Period with respect to a Prefunded
Series shall not exceed one year.
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
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payment under a guaranteed rate or investment agreement or other similar
arrangement, into the Collection Account for distribution in respect of
interest on the Certificates of the related Series in the manner specified in
the related Prospectus Supplement.
Defaulted Receivables; Rebates and Fraudulent Charges
"Defaulted Receivables" for any Monthly Period are Principal Receivables
that were charged-off as uncollectible in such Monthly Period. The "Defaulted
Amount" for any Monthly Period will be an amount (not less than zero) equal to
(a) the amount of Defaulted Receivables for such Monthly Period minus (b) the
sum of (i) the amount of any Defaulted Receivables included in any Account the
Receivables in which 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.
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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, the
Credit Enhancement, if any, with respect thereto will not provide protection
against all risks of loss and will not guarantee repayment of the entire
principal balance of the Certificates and interest thereon. If losses occur
which exceed the amount covered by the Credit Enhancement or which are not
covered by the Credit Enhancement, Certificateholders will bear their
allocable share of deficiencies. In addition, if specific Credit Enhancement
is provided for the benefit of more than one Class or Series,
Certificateholders of any such Class or Series will be subject to the risk
that such Credit Enhancement will be exhausted by the claims of
Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered hereby,
the related Prospectus Supplement will include a description of (a) the amount
payable under such Credit Enhancement, (b) any conditions to payment
thereunder not otherwise described herein, (c) the conditions (if any) under
which the amount payable under such Credit Enhancement may be reduced and
under which such Credit Enhancement may be terminated or replaced and (d) any
material provisions of any agreement relating to such Credit Enhancement.
Additionally, in certain cases, the related Prospectus Supplement may set
forth certain information with respect to the provider of any third-party
Credit Enhancement (the "Credit Enhancer"), including (i) a brief description
of its principal business activities, (ii) its principal place of business,
place of incorporation and/or the jurisdiction under which it is chartered or
licensed to do business, (iii) if applicable, the identity of regulatory
agencies which exercise primary jurisdiction over the conduct of its business
and (iv) its total assets, and its stockholders' or policyholders' surplus, if
applicable, as of a date specified in the Prospectus Supplement. If so
described in the related Prospectus Supplement, Credit Enhancement with
respect to a Series offered hereby may be available to pay principal of the
Certificates of such Series following the occurrence of certain Pay Out Events
with respect to such Series. In such event, the Credit Enhancer will have an
interest in certain cash flows in respect of the Receivables to the extent
described in such Prospectus Supplement (the "Enhancement Invested Amount")
and may be entitled to the benefit of the Trustee's security interest in the
Receivables, in each case subordinated to the interest of the
Certificateholders of such Series.
Subordination. If so specified in the related Prospectus Supplement, one or
more Classes of a Series (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
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thereunder, equal to the amount described in the related Prospectus
Supplement. The amount available under a letter of credit will be reduced to
the extent of the unreimbursed payments thereunder.
Cash Collateral Account. If specified in the related Prospectus Supplement,
the Certificates of any Class or Series offered hereby may have the benefit of
a cash collateral account. A cash collateral account with respect to a Class
or Series will be funded on the Series Issuance Date with respect thereto and
the funds on deposit therein will be invested in Eligible Investments. The
amount available to be withdrawn from a cash collateral account will be the
lesser of the amount on deposit in the cash collateral account and an amount
specified in the related Prospectus Supplement. The related Prospectus
Supplement will set forth the circumstances under which such withdrawals will
be made from the Cash Collateral Account.
Surety Bond or Insurance Policy. If so specified in the related Prospectus
Supplement, insurance with respect to a Series or Class of Certificates
offered hereby may be provided by one or more insurance companies. Such
insurance will guarantee, with respect to one or more Classes of the related
Series, distributions of interest or principal in the manner and amount
specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond may be
purchased for the benefit of the holders of any Series or Class of
Certificates offered hereby to assure distributions of interest or principal
with respect to such Series or Class of Certificates in the manner and amount
specified in the related Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may be
provided by the periodic deposit of certain available excess cash flow from
the Trust Assets into an account (the "Spread Account") intended to assure the
subsequent distributions of interest and principal on the Certificates of such
Class or Series in the manner specified in the related Prospectus Supplement.
Other Series Enhancement
For any Series or for any Class of any Series, there may be, in addition to
Credit Enhancement, other Series Enhancement in the form of a guaranteed rate
agreement, maturity liquidity facility, tax protection agreement, interest
rate cap agreement, interest rate swap agreement or other similar arrangement
for the benefit of Certificateholders of such Series or Class.
Pay Out Events
As described above, the Revolving Period with respect to a Series will
continue until the commencement of the Accumulation Period or the Scheduled
Amortization Period with respect thereto, which will continue until the
Invested Amount of such Series shall have been paid in full or the Series
Termination Date with respect to such Series occurs, unless a Pay Out Event
occurs with respect to such Series prior to any of such dates. 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 --
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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.
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
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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. 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
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day of the calendar month preceding the date of such payment (each a "Record
Date"). However, the final payment on the Certificates of a Series offered
hereby will be made only upon presentation and surrender of such Certificates.
Distributions will be made to DTC in immediately available funds. See "The
Pooling Agreement --Book-Entry Registration".
Optional Termination; Final Payment of Principal
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 such other percentage as
may be specified in the related Prospectus Supplement) 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
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Servicing Fee with respect to such Series for such Monthly Period; and (i) the
available amount of Credit Enhancement with respect to such Series for such
Distribution Date.
With respect to each Interest Payment Date or Special Payment Date (each, a
"Payment Date"), as the case may be, the Monthly Report with respect to any
Series will include the following additional information with respect to the
Certificates of such Series: (a) the total amount distributed; (b) the amount
of such distribution allocable to principal on the Certificates; (c) the
amount of such distribution allocable to interest on the Certificates; and (d)
the amount, if any, by which the unpaid principal balance of the Certificates
exceeds the Invested Amount of such Series as of the Record Date with respect
to such Payment Date. On each Distribution Date, the Paying Agent, on behalf
of the Trustee, will forward to each Certificateholder of record a copy of the
Monthly Report.
On or before January 31 of each calendar year, the Paying Agent, on behalf
of the Trustee, will furnish (or cause to be furnished) to each person who at
any time during the preceding calendar year was a Certificateholder of record
a statement containing the information required to be provided by an issuer of
indebtedness under the Code for such preceding calendar year or the applicable
portion thereof during which such person was a Certificateholder, together
with such other customary information as is necessary to enable the
Certificateholders to prepare their tax returns. See "Tax Matters".
List of Investor Certificateholders
At such time, if any, as Definitive Certificates have been issued, upon
written request of any Certificateholder or group of Certificateholders of
record holding Certificates evidencing not less than 10% of the aggregate
unpaid principal amount of the Certificates of a Series or all outstanding
Series, as the case may be, the Trustee will afford such Certificateholders
access during normal business hours to the current list of Certificateholders
of such Series or all outstanding Series, as the case may be, for purposes of
communicating with other Certificateholders with respect to their rights under
the Pooling Agreement or any Supplement or Certificates. See "The Pooling
Agreement --Book-Entry Registration" and "--Definitive Certificates".
The Pooling Agreement does not provide for any annual or other meetings of
Certificateholders.
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THE POOLING AGREEMENT
The following summary, as well as other pertinent information included
elsewhere in this Prospectus and the related Prospectus Supplement, describes
the material terms of the Pooling Agreement. A form of the Pooling Agreement
has been filed as an Exhibit to the Registration Statement of which this
Prospectus forms a part.
Book-Entry Registration
Certificateholders may initially 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
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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, 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
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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 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.
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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
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.
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
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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. 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,
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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
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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 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
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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 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
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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 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.
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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. 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
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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,
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
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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.
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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.
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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 --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 -- 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
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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 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
- --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
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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 --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 -- Representations and Warranties".
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals on
active duty in the military to cap the interest rate on debts incurred before
the call to active duty at 6%. In addition, subject to judicial discretion,
any action or court proceeding in which an individual in military service is
involved may be stayed if the individual's rights would be prejudiced by
denial of such a stay.
Application of federal and state bankruptcy and debtor relief laws would
affect the interests of the Certificateholders of all Series if such laws
result in any Receivables being charged off as uncollectible. See "Description
of the Certificates--Defaulted Receivables; Rebates and Fraudulent Charges".
TAX MATTERS
Federal Income Tax Consequences--General
Set forth below is a discussion of the material federal income tax
consequences to holders of Certificates offered hereunder. Additional federal
income tax considerations may be disclosed in the applicable Prospectus
Supplement for a particular Series or Class. 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). It is recommended that prospective
investors 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
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Prospectus Supplement.
As noted below, Tax Counsel is of the opinion that the Certificates will be
characterized as debt for federal income tax purposes and that the Trust will
not be subject to federal income tax under current law. Except as provided in
a related Prospectus Supplement, Tax Counsel will render no other opinions to
the Bank with respect to the offered Certificates or the Trust.
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, Tax Counsel believes that the holders of Certificates (through their
ownership of the Certificates) are not the owners of the Receivables for
federal income tax purposes. As a result, in the opinion of Tax Counsel, the
Certificates will properly be characterized as debt for federal income tax
purposes.
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 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.
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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. Tax Counsel can give no opinion on
this issue, because the "remote contingency" standard involves both factual
and legal uncertainties.
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.
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
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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
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agent claiming exemption from withholding of tax on income connected with the
conduct of a trade or business in the United States; provided that in any such
case (x) the applicable form is delivered pursuant to applicable procedures
and is properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the holder is a U.S. person or that any certification on the
form is false; (b) a holder of a Certificate who is a nonresident alien or
foreign corporation will not be subject to United States federal income tax on
gain realized on the sale, exchange or redemption of such Certificate,
provided that (i) such gain is not effectively connected to a trade or
business carried on by the holder in the United States, (ii) in the case of a
holder that is an individual, such holder is not present in the United States
for 183 days or more during the taxable year in which such sale, exchange or
redemption occurs, and (iii) in the case of gain representing accrued
interest, the conditions described in clause (a) are satisfied; and (c) a
Certificate held by an individual who at the time of death is a nonresident
alien will not be subject to United States federal estate tax as a result of
such individual's death if, immediately before his death, (i) the individual
did not actually or constructively own 10% or more of the voting stock of
Providian 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
Set forth below is a discussion of the material California and New
Hampshire state and local tax consequences to holders of Certificates offered
hereunder. Additional tax considerations may be disclosed in the applicable
Prospectus Supplement for a particular Series or Class. This discussion does
not purport to deal with all aspects of state and local taxation that may be
relevant to holders of Certificates in light of their personal investment
circumstances. It is recommended that prospective investors consult their own
tax advisors with regard to the state and local tax consequences of holding or
disposing of Certificates. As noted below, California Tax Counsel and New
Hampshire Tax Counsel are of the opinion that if the Certificates are treated
as debt for federal income tax purposes, California and New Hampshire
respectively, would also treat the Certificates as debt for California state
income tax purposes and New Hampshire state tax purposes. New Hampshire Tax
Counsel is further of the opinion that the Trust is not subject to the New
Hampshire Interest and Dividends Tax.
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
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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 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
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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 debt.
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 debt for federal income tax purposes, they
would also be characterized as debt 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 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.
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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
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could constitute a prohibited transaction.
Moreover, as discussed above, while Tax Counsel has given its opinion that
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 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.
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. 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.
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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. 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
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.
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GLOSSARY FOR PROSPECTUS
Term Page
Accounts ................................................................ 1
Accumulation Period...................................................... 6
Act...................................................................... 2
Addition ................................................................ 22
Additional Accounts...................................................... 23
Additional Finance Charges............................................... 28
Additional Sellers ...................................................... 36
Adjustment Payment ...................................................... 29
Aggregate Additional Limit .............................................. 23
Automatic Additional Accounts............................................ 23
Bank..................................................................... 1
Bank's Interest.......................................................... 5
Base Rate................................................................ 30
Benefit Plans............................................................ 50
California Tax Counsel................................................... 47
Cede..................................................................... 2
CEDEL.................................................................... 35
CEDEL Participants ...................................................... 35
Certificateholders ...................................................... 2
Certificateholders' Interest ............................................ 4
Certificates ............................................................ 1
Citibank................................................................. 34
Class.................................................................... 1
Code..................................................................... 44
Collection Account....................................................... 26
Commission............................................................... 2
Controlled Accumulation Amount........................................... 7
Controlled Amortization Amount........................................... 7
Controlled Deposit Amount................................................ 7
Controlled Distribution Amount........................................... 7
Cooperative.............................................................. 35
Credit Enhancement....................................................... 9
Credit Enhancer.......................................................... 29
Date of Processing....................................................... 9
Defaulted Amount......................................................... 28
Defaulted Receivables.................................................... 28
Definitive Certificates.................................................. 36
Depositaries............................................................. 34
Depository............................................................... 21
Determination Date....................................................... 9
Disclosure Document...................................................... 5
Distribution Date........................................................ 6
DOL...................................................................... 50
DTC...................................................................... 2
Early Amortization Period................................................ 7
Eligible Account......................................................... 38
Eligible Deposit Account................................................. 26
Eligible Institution..................................................... 26
Eligible Investments..................................................... 26
Eligible Receivable...................................................... 38
Enhancement Invested Amount.............................................. 29
ERISA.................................................................... 50
Euroclear................................................................ 35
Euroclear Operator....................................................... 35
Euroclear Participants................................................... 35
Exchange Act............................................................. 2
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Term Page
Expected Final Payment Date.............................................. 6
FDIA..................................................................... 43
FDIC..................................................................... 4
Final Regulation......................................................... 50
Finance Charge Receivables............................................... 4
FIRREA................................................................... 43
Floating Allocation Percentage........................................... 26
Funding Period........................................................... 8
GAO...................................................................... 12
Group.................................................................... 27
Holders.................................................................. 36
Indirect Participants.................................................... 34
Ineligible Receivables................................................... 37
Initial Accounts......................................................... 3
Initial Amount........................................................... 8
Insolvency Event......................................................... 12
Interchange.............................................................. 17
Interest Funding Account................................................. 21
Interest Payment Dates................................................... 25
Invested Amount.......................................................... 25
IRS...................................................................... 44
L/C Issuer............................................................... 29
Lending Guidelines....................................................... 14
Monthly Investor Servicing Fee........................................... 31
Monthly Period........................................................... 19
Monthly Report........................................................... 32
Moody's.................................................................. 26
Morgan................................................................... 34
New Hampshire Tax Counsel................................................ 48
New Issuance............................................................. 24
OID...................................................................... 45
OID regulations.......................................................... 45
Participants............................................................. 34
Participations........................................................... 22
Pay Out Event............................................................ 30
Payment Date............................................................. 32
Pooling Agreement........................................................ 1
Portfolio Yield.......................................................... 30
Prefunding Account....................................................... 8
Prefunding Account Balance............................................... 28
Principal Allocation Percentage.......................................... 26
Principal Commencement Date.............................................. 6
Principal Funding Account................................................ 6
Principal Receivables.................................................... 4
Principal Shortfalls..................................................... 27
Principal Terms.......................................................... 25
Prospectus Supplement.................................................... 1
Providian Portfolio...................................................... 16
Publicly-offered security................................................ 50
Rating Agency............................................................ 10
Ratings Effect........................................................... 11
Receivables.............................................................. 1
Record Date.............................................................. 31
Remarketing Firms........................................................ 51
Removal Date............................................................. 24
Removal Notice Date...................................................... 24
Removed Accounts......................................................... 4
Required Principal Balance............................................... 13
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Term Page
Required Seller's Participation Amount................................... 13
Required Seller's Percentage............................................. 13
Revolving Period......................................................... 6
Rollouts................................................................. 19
Scheduled Amortization Period............................................ 7
Seller's Interest........................................................ 4
Series................................................................... 1
Series Cut-off Date...................................................... 6
Series Enhancement....................................................... 3
Series Issuance Date..................................................... 37
Series Termination Date.................................................. 32
Service Transfer......................................................... 41
Servicer................................................................. 9
Servicer Default......................................................... 41
Servicing Fee............................................................ 31
Shared Principal Collections............................................. 27
Special Funding Account.................................................. 27
Special Payment Date..................................................... 31
Spread Account........................................................... 30
Standard & Poor's........................................................ 26
Supplement............................................................... 5
Supplemental Interest.................................................... 36
Tax Counsel.............................................................. 10
Tax Opinion.............................................................. 25
Termination Notice....................................................... 40
Terms and Conditions..................................................... 35
Total System............................................................. 16
Transfer Deposit Amount.................................................. 37
Trust.................................................................... 1
Trust Assets............................................................. 3
Trust Cut-off Date....................................................... 3
Trustee.................................................................. 1
Trust Portfolio.......................................................... 19
Trust Termination Date................................................... 37
UCC...................................................................... 11
Unallocated Principal Collections........................................ 27
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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)
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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)
4.7. Amendment No. 4 to the Pooling and Servicing Agreement, dated as of
June 1, 1998*
4.8. Amendment No. 5 to the Pooling and Servicing Agreement, dated as of
August 1, 1998 (incorporated by reference to the issuer's report on
Form 8-K filed on September 8, 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. Consent of Cravath, Swaine & Moore (included in their opinion filed
as Exhibit 1. 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 *
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*Previously filed as part of Registration No. 333-55817 on June 2, 1998, or an
Amendment thereto (except for Power of Attorney of Eric O'Brien).
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
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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 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.
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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, reasonably believes that
the security rating requirement contained in Transaction Requirement B.5. of
Form S-3 will be met by the time of the sale of the securities registered
hereunder and has duly caused this Amendment No. 2 to be signed on its behalf
by the undersigned, thereunto duly authorized, on May 18, 1999.
Providian National Bank, as originator of the
Trust and as Seller on behalf of the Trust,
By *
Name: Shailesh J. Mehta
Title: Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 has been signed by the following persons in the capacities indicated on
May 18, 1999.
Signature Title
* Chairman of the Board and Chief
Shailesh J. Mehta Executive Officer and Director
Executive Vice President
and Chief Financial Officer
/s/ David J. Petrini (Principal Financial
David J. Petrini Officer)
* Senior Vice President and Controller
Daniel Sanford (Principal Accounting Officer)
* President and Director
Dianne Peterson
* Vice President and Director
Eric O'Brien
* Director
Darrell Hotchkiss
* Director
Janice Kitchen
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* The undersigned, by signing his name hereto, does hereby sign this
Amendment No. 2 on behalf of each of those indicated above pursuant to
powers of attorney included on the signature page of the previously filed
Registration Statement.
By: /s/ David J. Petrini
----------------------
David J. Petrini
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EXHIBIT 25.1
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned
hereby constitutes and appoints David J. Petrini, Daniel Sanford,
Ellen Richey, Ronald Claveloux and Clifford Shapiro, and each of them,
his attorneys for him in his stead, in each of his offices and
capacities as an officer, director, or both of Providian National
Bank, to sign and to file with the Securities and Exchange Commission
such Registration Statements on Form S-3, and any and all amendments,
modifications, or supplements thereto, and any exhibits thereto
(including but not limited to amendments to Registration Statement No.
333-55817), 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.
/s/ Eric O'Brien
- --------------------------
Eric O'Brien
Vice President and Director
Dated: May 7, 1999
