As filed with the Securities and Exchange Commission on July 17, 1998
Registration No. 333-55817
Post-Effective Amendment No. 2 to Registration
Statement No. 333-22131
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1 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. [ ]
----------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed maximum Proposed maximum
Title of each Class Amount to offering price per aggregate Amount of
of Securities to be registered be registered certificate (1) offering price (1) registration fee (2)
- --------------------------------------- ------------------- ----------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
Asset Backed Certificates.............. $1,800,000,000 100% $1,800,000,000 $531,000
======================================= =================== ======================= ====================== =====================
(1) Estimated solely for the purpose of calculating the registration fee.
(2) A filing fee of $72,241 was paid with respect to the $209,500,000
remaining amount of certificates referred to below.
----------------------
</TABLE>
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. 2 to such registration statement.
==============================================================================
<PAGE>
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 1998
$[ ]
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 $[
], respectively. The Class A Certificates, the Class B Certificates, the
Collateral Interest and the Class D Interest together constitute the
"Series 199_-_ Certificates".
(Continued on next page)
Potential investors should consider, among other things, the information
set forth in "Risk Factors" commencing on page S-[12] herein and on page
[14] in the Prospectus.
THE CLASS A CERTIFICATES AND THE CLASS B CERTIFICATES WILL REPRESENT
INTERESTS IN THE TRUST ONLY AND WILL NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF THE BANK OR ANY AFFILIATE OF THE BANK. NEITHER THE CLASS A
CERTIFICATES, THE CLASS B CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR
RECEIVABLES OR ANY COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS OR THIS PROSPECTUS
SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public(1) Discount the Bank(2)
<S> <C> <C> <C>
Per Class A Certificate.......... [ ]% [ ]% [ ]%
Per Class B Certificate.......... [ ]% [ ]% [ ]%
Total............................$[ ] $[ ] $[ ]
</TABLE>
(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 [ ], 1998, 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 [ ], 1998
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 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" 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.
Collateral Initial
Invested Amount................ $[ ].
Class D Initial Invested Amount.. $[ ].
Class A Controlled Accumulation
Amount......................... For each Distribution Date with respect
to the Class A 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")
S-3
<PAGE>
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 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
S-4
<PAGE>
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 or Early
Amortization 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
S-5
<PAGE>
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 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
S-6
<PAGE>
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 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
S-7
<PAGE>
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 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 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 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...................... See "Tax Matters" in the Prospectus.
ERISA Eligibility............... [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.] [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 [ ] 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-9
<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"). The Class A Certificateholders will receive
payments of principal on each Distribution Date following the Monthly
Period in which a Pay Out Event occurs (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-10
<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 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 occurs with respect to the Series 199_-_
Certificates and the Early Amortization Period 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" 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.
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-11
<PAGE>
ACCOUNTHOLDER MONTHLY PAYMENT RATES
PROVIDIAN PORTFOLIO
Three Months
Ended Year Ended [ ],
[ ], 199[ ] [ ] [ ] [ ]
----------------- ---- ----- ----
Lowest.................. % % % %
Highest................. % % % %
Monthly Average......... % % % %
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, 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.
Revenue Experience
Gross revenues from periodic finance charges and fees billed to
accountholders on accounts contained in the Providian Portfolio for the
three months ended [ ], 199[ ] and for each of the three years ended [ ], [
], [ ] and [ ] 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-12
<PAGE>
REVENUE EXPERIENCE
PROVIDIAN PORTFOLIO
<TABLE>
<CAPTION>
Three Months
Ended Year Ended [ ],
[ ], 199[ ] [ ] [ ] [ ]
-------------- ------ ------ ------
<S> <C> <C> <C> <C>
(Dollars in Thousands)
Average Receivables Outstanding(1)...
Finance Charge and Fee Income(2).....
Average Revenue Yield(3)(4).......... % % % %
</TABLE>
(1) 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.
(2) Finance Charge and Fee Income includes Interchange and is reduced by
purchase rebates with respect to certain accounts.
(3) Average Revenue Yield is the result of dividing Finance Charge and Fee
Income by Average Receivables Outstanding during the periods
indicated.
(4) The percentage for the three months ended [ ], 199[ ] is an annualized
figure.
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
<TABLE>
<CAPTION>
At [ }, At [ ],
199[ ] [ ] [ ] [ ]
-------------------------- -------------------------- ------------------------- --------------------------
Delinquent Delinquent Delinquent Delinquent
Amount Percentage(1) Amount Percentage(1) Amount Percentage(1) Amount Percentage(1)
----------- ------------- ----------- ------------- ---------- ------------- ----------- -------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
31-60 days............ % % % %
61-90 days............ % % % %
91 days or more....... % % % %
----------- ---- ----------- ---- ---------- ---- ----
Total................. % % % %
</TABLE>
(1) The percentages are the result of dividing the Delinquent Amount by
the aggregate Receivables outstanding at the dates indicated. The
aggregate Receivables outstanding at [ ], 199[ ] and at [ ], [ ], [ ],
and [ ] were $[ ], $[ ], $[ ] and $[ ], respectively. Receivables
outstanding on any day are the sum of Principal Receivables and
Finance Charge Receivables on such day.
S-13
<PAGE>
LOSS EXPERIENCE
PROVIDIAN PORTFOLIO
<TABLE>
<CAPTION>
Three Months
Ended Year Ended [ ],
[ ], 199[ ] [ ] [ ] [ ]
--------------- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Average Receivables Outstanding(1)....
Gross Charge-offs(2)..................
Recoveries............................
Net Charge-offs(3)....................
Net Charge-offs as a Percentage of
Average Receivables(4)............. % % % %
</TABLE>
- --------------------
(1) 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.
(2) 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).
(3) Gross Charge-offs less the total amount of recoveries on previously
Charged-off Accounts.
(4) The percentage for the three months ended [ ], 199[ ] is an annualized
figure.
COMPOSITION OF THE ACCOUNTS
The 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, which Accounts are
included in all figures set forth in this paragraph) included $[ ] of
Finance Charge Receivables and $[ ] of Principal Receivables (which amounts
include overdue Finance Charge Receivables and overdue Principal
Receivables, respectively). As of [ ], 199[ ], there were [ ] Accounts
(including [ ] closed Accounts with a zero balance and [ ] charged-off
Accounts). As of [ ], 199[ ], the Accounts had an average total Principal
Receivables balance of $[ ] (excluding [ ] Accounts with a zero or credit
balance and charged-off Accounts) and an average credit limit of $[ ]
(excluding [ ] closed Accounts with a zero balance and charged-off
Accounts). As of [ ], 199[ ], the average total Principal Receivables
balance in the Accounts as a percentage of the average credit limit with
respect to the Accounts (excluding [ ] Accounts with a zero or credit
balance and charged-off Accounts in the case of average total Principal
Receivables balance, and with respect to average credit limit, excluding [
] closed Accounts with a zero balance and charged-off Accounts) was
approximately [ ]%. As of [ ], 199[ ], the weighted average age of the
Accounts was [ ] 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.
The following tables summarize the Accounts by various criteria as of
[ ], 199[ ]. 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-14
<PAGE>
COMPOSITION OF ACCOUNTS BY ACCOUNT BALANCE
(As of [ ], 199[ ])(1)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number Number Receivables Total Receivables
Account Balance Accounts(2) of Accounts Outstanding(2) Outstanding
<S> <C> <C> <C> <C>
(Dollars In Thousands)
Credit Balance(3)............. % %
No Balance(4)................. % %
$0.01 to $1,499.99............ % %
$1,500.00 to $2,999.99........ % %
$3,000.00 to $4,499.99........ % %
$4,500.00 to $5,999.99........ % %
$6,000.00 to $7,499.99........ % %
$7,500.00 to $8,999.99........ % %
$9,000.00 to $10,499.99....... % %
$10,500.00 and above.......... % %
---------- ------ ----------- -------
Total..................... 100.00% [ ] 100.00%
========== ====== =========== ======
</TABLE>
(1) Includes approximately $[ ] of Receivables in Accounts added to the
Trust after [ ], 1 99[ ] and on or prior to the Series Issuance Date.
(2) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] closed Accounts with
a zero balance and [ ] 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.
(3) 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.
(4) Accounts with no balance are included, as Receivables may be generated
with respect thereto in the future.
COMPOSITION OF ACCOUNTS BY CREDIT LIMIT
(As of [ ], 199[ ])(1)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number Number Receivables Total Receivables
Credit Limit Accounts(2) of Accounts Outstanding(2) Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
$0.01 to $1,499.99.......... % %
$1,500.00 to $2,999.99...... % %
$3,000.00 to $4,499.99...... % %
$4,500.00 to $5,999.99...... % %
$6,000.00 to $7,499.99...... % %
$7,500.00 to $8,999.99...... % %
$9,000.00 to $10,499.99..... % %
$10,500.00 and above........ % %
------------ ----------- -------------- ----------------
Total................... [ ] 100.00% [ ] 100.00%
============ =========== ============== ================
</TABLE>
(1) Includes approximately $[ ] of Receivables in Accounts added to the
Trust after [ ], 199[ ] and on or prior to the Series Issuance Date.
(2) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] closed Accounts with
a zero balance and [ ] 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.
S-15
<PAGE>
COMPOSITION OF ACCOUNTS BY PAYMENT STATUS
(As of [ ], 199[ ])(1)
<TABLE>
<CAPTION>
Percentage Percentage of
of Total Percentage of
Number of Number Receivables Total Receivables
Payment Status Accounts(2) of Accounts Outstanding(2) Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Current (3)................. % %
31-60 Days Delinquent....... % %
61-90 Days Delinquent....... % %
91 Days Delinquent or more.. % %
------------ ------------- -------------- --------------
Total....................... [ ] 100.00% [ ] 100.00%
============ ============= ============== ==============
</TABLE>
- ----------------------
(1) Includes approximately $[ ] of Receivables in Accounts added to the
Trust after [ ], 199[ ] and on or prior to the Series Issuance Date.
(2) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] closed Accounts with
a zero balance and [ ] 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.
(3) Includes Accounts on which the minimum payment has not been received
prior to the second billing date following issuance of the related
billing statement.
COMPOSITION OF ACCOUNTS BY ACCOUNT AGE
(As of [ ], 199[ ])(1)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number of Number Receivables Total Receivables
Account Age Accounts(2) of Accounts Outstanding(2) Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
0 to 6 months old........... % %
Over 6 to 12 months......... % %
Over 12 to 24 months........ % %
Over 24 to 36 months........ % %
Over 36 to 48 months........ % %
Over 48 months.............. % %
-------------- ----------- -------------- ---------------
Total....................... [ ] 100.00% $[ ] 100.00%
============== =========== ============== ===============
</TABLE>
- ---------------------
(1) Includes approximately $[ ] of Receivables in Accounts added to the
Trust after [ ], 199[ ]
and on or prior to the Series Issuance Date.
(2) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] closed Accounts with
a zero balance and [ ] 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.
S-16
<PAGE>
COMPOSITION OF ACCOUNTS BY GEOGRAPHIC DISTRIBUTION(1)
(As of [ ], 199[ ])(2)
<TABLE>
<CAPTION>
Percentage
of Total Percentage of
Number of Number Receivables Total Receivables
State Accounts(3) of Accounts Outstanding(2) Outstanding
(Dollars In Thousands)
<S> <C> <C> <C> <C>
% %
% %
All Others (4)(5)........... % %
-------------- ------ -------------- ----------------
Subtotal.................... [ ] 100.00% [ ] 100.00%
=============== ====== ============== ================
</TABLE>
(1) Determined on the basis of accountholders' telephone area codes.
(2) Includes approximately $[ ] of Receivables in Accounts added to the
Trust after [ ], 199[ ] and on or prior to the Series Issuance Date.
(3) Receivables outstanding are the sum of Principal Receivables and
Finance Charge Receivables. Does not include [ ] closed Accounts with
a zero balance and [ ] 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.
(4) No state other than those listed has more than [ ]% of the total
Receivables Outstanding, excluding Accounts for which computer records
show "unknown" in the state field.
(5) Includes Accounts representing [ ]% of the total Receivables
Outstanding for which computer records show "unknown" in the state
field.
THE BANK
As of the Bank's [ ], 199[ ] Call Report, the Bank had total deposits
of approximately $[ ] million, total assets of approximately $[ ] million
and total equity of approximately $737 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.
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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 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), 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
Payout Event will occur and the 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 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" herein and
see "--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.
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 Sellers' 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
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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 as of the last day of the
preceding Monthly Period and (b) during the Class A Accumulation Period,
the Class B Accumulation 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;
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<PAGE>
(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;
(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.
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<PAGE>
"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.
"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).
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<PAGE>
"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
"--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
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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.
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
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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 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, 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 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 sum of the Class
A Adjusted Invested Amount and the Class B Adjusted Invested Amount 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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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 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
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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 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
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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;
(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
S-27
<PAGE>
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.
S-28
<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.
S-29
<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-30
<PAGE>
GLOSSARY FOR PROSPECTUS SUPPLEMENT
Term Page
Accounts.......................................... S-1
Adjusted Invested Amount.......................... S-5
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 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
Term Page
Class D Holder.................................... 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 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
Floating Allocation Percentage.................... S-22
Highest Bid....................................... S-33
Initial Invested Amount........................... S-4
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-31
<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
A-1
<PAGE>
PROSPECTUS
Providian Master Trust
Asset Backed Certificates
Providian National Bank
Seller and Servicer
--------------
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.
--------------
THE CERTIFICATES WILL REPRESENT INTERESTS IN THE TRUST ONLY AND WILL NOT
REPRESENT INTERESTS IN OR OBLIGATIONS OF THE BANK OR ANY AFFILIATE OF THE
BANK. NEITHER THE CERTIFICATES NOR THE UNDERLYING ACCOUNTS OR RECEIVABLES
OR ANY COLLECTIONS THEREON ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------
Certificates may be sold by the Bank directly to purchasers, through
agents designated from time to time, through underwriting syndicates led by
one or more managing underwriters or through one or more underwriters
acting alone. If underwriters or agents are involved in the offering of the
Certificates of any Series offered hereby, the name of the managing
underwriter or underwriters or agents will be set forth in the related
Prospectus Supplement. If an underwriter, agent or dealer is involved in
the offering of the Certificates of any Series offered hereby, the
underwriter's discount, agent's commission or dealer's purchase price will
be set forth in, or may be calculated from, the related Prospectus
Supplement, and the net proceeds to the Bank from such offering will be the
public offering price of such Certificates less such discount in the case
of an underwriter, the purchase price of such Certificates less such
commission in the case of an agent or the purchase price of such
Certificates in the case of a dealer, and less, in each case, the other
expenses of the Bank associated with the issuance and distribution of such
Certificates. See "Plan of Distribution". This Prospectus may not be used
to consummate sales of Certificates of any Series unless accompanied by the
related Prospectus Supplement.
--------------
The date of this Prospectus is , .
<PAGE>
AVAILABLE INFORMATION
The Bank, as originator of the Trust, has filed a Registration
Statement under the Securities Act of 1933, as amended (the "Act"), with
the Securities and Exchange Commission (the "Commission") on behalf of the
Trust with respect to the Certificates offered hereby. This Prospectus,
which forms a part of the Registration Statement, omits certain information
contained in such Registration Statement pursuant to the rules and
regulations of the Commission. For further information, reference is made
to the Registration Statement (including any amendments thereof and
exhibits thereto) and any reports and other documents incorporated herein
by reference as described below under "Incorporation of Certain Documents
by Reference", which are available for inspection without charge at the
public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; 7 World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. In addition, any such reports
or other documents filed with the Commission through its Electronic Data
Gathering, Analysis and Retrieval system are publicly available through the
Commission's web site (http://www.sec.gov).
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates are issued, Monthly Reports,
which contain unaudited information concerning the Trust and are prepared
by the Servicer, will be sent on behalf of the Trust to Cede & Co.
("Cede"), as nominee of The Depository Trust Company ("DTC") and registered
holder of the Certificates offered hereby, pursuant to the Pooling
Agreement. 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 Generally--Book-Entry Registration"
and"--Evidence as to Compliance". Such reports will not constitute
financial statements prepared in accordance with generally accepted
accounting principles. The Pooling Agreement will not require the sending
of, and the Bank does not intend to send, any of its financial reports to
holders of interests in Certificates 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, 1997 and the Current Reports on Form 8-K filed
since December 31, 1997. Any statement contained herein or in a document
deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained in any other subsequently filed document which also is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be
deemed, except as modified or superseded, to constitute a part of this
Prospectus.
The Servicer will provide without charge to each person, including any
beneficial owner of Certificates, to whom a copy of this Prospectus is
delivered, on the written or oral request of any such person, a copy of any
of or all the documents incorporated herein by reference (other than
exhibits to such documents). Written requests for such copies should be
directed to Providian National Bank, in care of Providian Financial
Corporation, 201 Mission Street, San Francisco, CA 94105, attention: Chief
Financial Officer. Telephone requests for such copies should be directed to
the Servicer (in care of Providian Financial Corporation, attention: Chief
Financial Officer) at (415) 543-0404.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and in any
accompanying Prospectus Supplement. Reference is made to the Glossary,
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
Generally--The Bank's Certificate;
Additional Sellers", the Bank may
designate one or more affiliates of the
Bank to sell Receivables or Participations
to the Trust from time to time. Additional
Sellers will generally have the same
rights and obligations as those of the
Bank described herein.
Trustee.........................Bankers Trust Company.
The Accounts....................The Accounts consist of the Initial
Accounts and any Additional Accounts but
will not include any Removed Accounts. The
Bank has conveyed to the Trust all
Receivables existing on a specified date
prior to the issuance of the first Series
(the "Trust Cut-Off Date") in certain
consumer revolving credit card accounts and
other consumer revolving credit accounts
(the "Initial Accounts") and all
Receivables arising in the Initial Accounts
from time to time thereafter until the
termination of the Trust. Since the Trust
Cut-Off Date, the Bank has conveyed to the
Trust Receivables in certain Additional
Accounts in accordance with the provisions
of the Pooling Agreement. Pursuant to the
Pooling
3
<PAGE>
Agreement, the Bank expects (subject to
certain limitations and conditions), and in
some circumstances will be obligated, to
designate Additional Accounts the
Receivables in which will be included in
the Trust or, in lieu thereof or in
addition thereto, to include Participations
in the Trust. The Bank will convey to the
Trust all Receivables in Additional
Accounts, whether such Receivables are then
existing or thereafter created. The
addition to the Trust of Receivables in
Additional Accounts (other than Automatic
Additional Accounts) or Participations will
be subject to certain conditions,
including, among others, that (a) such
addition will not result in a Ratings
Effect and (b) the Bank shall have
delivered to the Trustee and certain
providers of Series Enhancement a
certificate of an authorized officer to the
effect that, in the reasonable belief of
the Bank, such addition will not, based on
the facts known to such officer at the time
of such certification, cause a Pay Out
Event to occur with respect to any Series.
See "Description of the
Certificates--Addition of Trust Assets".
Pursuant to the Pooling Agreement, the Bank
will have the right (subject to certain
limitations and conditions) to remove the
Receivables in certain Accounts owned by it
from the Trust ("Removed Accounts"). See
"Description of the Certificates-- Removal
of Accounts".
The Receivables.................The Receivables consist of all amounts
charged by accountholders for merchandise
and services and cash advances ("Principal
Receivables") and all related periodic
finance charges, cash advance fees, late
charges and any other fees and charges
billed on the Accounts and certain
Interchange attributable to accountholder
charges for goods and services in certain
of the Accounts ("Finance Charge
Receivables"). The amount of Receivables
will fluctuate from day to day as new
Receivables are generated or added to the
Trust and as existing Receivables are
collected, charged-off as uncollectible or
otherwise adjusted.
The Certificates................The Certificates will be issued in Series,
each of which will consist of one or more
Classes. The specific terms of a Series or
Class will be established as described
herein under "Description of the
Certificates-- New Issuances". However,
while the specific terms of any Series or
Class offered hereby will be described in
the related Prospectus Supplement, the
terms of such Series or Class will not be
subject to prior review by, or consent of,
the holders of the Certificates of any
previously issued Series.
Unless otherwise specified in the related
Prospectus Supplement, the Certificates of
a Series offered hereby will be available
for purchase in minimum denominations of
$1,000 and integral multiples thereof, and
will only be available in book-entry form
except in certain limited circumstances as
described herein under "The Pooling
Agreement Generally--Definitive
Certificates". A portion of the Trust
Assets will be allocated among the
Certificateholders of a particular Series
(the "Certificateholders' Interest"), the
Certificateholders of other Series and the
interest of the Bank and its permitted
transferees (the "Seller's Interest"), as
described below. The aggregate principal
amount of the Certificateholders' Interest
of a Series offered hereby will, except as
otherwise provided herein and in the
related Prospectus Supplement, remain fixed
at the aggregate initial principal amount
of the Certificates of such Series. The
Certificateholders' Interest of a Series
will include
4
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the right to receive (but only to the
extent needed to make required payments
under the Pooling Agreement and the related
Supplement and subject to any reallocation
of such amounts if the related Supplement
so provides) varying percentages of
collections of Finance Charge Receivables
and Principal Receivables and will be
allocated a varying percentage of the
Defaulted Amount with respect to each
Monthly Period. If the Certificates of a
Series offered hereby include more than one
Class of Certificates, the Trust Assets
allocable to the Certificateholders'
Interest of such Series may be further
allocated among each Class in such Series
as described in the related Prospectus
Supplement.
The Certificates of a Series will evidence
undivided interests in the Trust Assets
allocated to the Certificateholders'
Interest of such Series. The Certificates
represent beneficial interests in the Trust
only and do not represent interests in or
obligations of the Bank or any affiliate of
the Bank. Neither the Certificates nor the
Accounts, the Receivables or any
collections thereon are insured or
guaranteed by the Federal Deposit Insurance
Corporation (the "FDIC") or any other
governmental agency or instrumentality.
The Seller's Interest...........The Seller's Interest at any time
represents the right to the Trust Assets in
excess of the Certificateholders' Interest
of all Series then outstanding. The
principal amount of the Seller's Interest
will fluctuate as the amount of the
Principal Receivables held by the Trust
changes from time to time. In addition, the
Bank intends to cause the issuance of
additional Series from time to time and any
such issuance will have the effect of
decreasing the Seller's Interest to the
extent of the Invested Amount of such
Series. See "Description of the
Certificates-- New Issuances". The Seller's
Interest is currently held exclusively by
the Bank (the interests of the Bank and any
Additional Sellers in the Seller's Interest
being the "Bank's Interest") though a
portion of the Seller's Interest may be
sold separately in one or more public or
private transactions. See "The Pooling
Agreement Generally-- The Seller's
Interest; Additional Sellers".
The Pooling Agreement provides that the
Bank will be required to make an Addition
to the Trust in the event that the Seller's
Interest is less than the Required Seller's
Participation Amount on the last business
day of any Monthly Period. See "Description
of the Certificates-- Addition of Trust
Assets". The level of the Required Seller's
Participation Amount, which may be reduced
subject to certain conditions described
under "Description of the
Certificates--Addition of Trust Assets", is
intended to enable the Seller's Interest to
absorb fluctuations in the amount of
Principal Receivables held by the Trust
from time to time (due to, among other
things, seasonal purchase and payment
habits of accountholders or adjustments in
the amount of Principal Receivables because
of rebates, refunds, fraudulent charges or
otherwise). See "Risk Factors--Payments and
Maturity" and "Description of the
Certificates--Defaulted Receivables;
Rebates and Fraudulent Charges".
Issuance of Additional Series...The Pooling Agreement provides that,
pursuant to any one or more supplements to
the Pooling Agreement (each a
"Supplement"), the 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
5
<PAGE>
Agreement, the Bank may define, with
respect to any Series, the Principal Terms
of such Series. See "Description of the
Certificates-- New Issuances". The Bank may
offer any Series to the public or other
investors under a disclosure document (a
"Disclosure Document"), which will consist
of a Prospectus Supplement in the case of a
Series offered hereby, in transactions
either registered under the Act or exempt
from registration thereunder, directly or
through one or more underwriters or
placement agents, in fixed-price offerings
or in negotiated transactions or otherwise.
See "Plan of Distribution". The Bank
expects to offer, from time to time,
additional Series issued by the Trust.
A new Series may only be issued upon
satisfaction of the conditions described
herein under "Description of the
Certificates--New Issuances" including,
among others, that (a) such issuance will
not result in a Ratings Effect and (b) the
Bank shall have delivered to the Trustee
and certain providers of Series Enhancement
a certificate of an authorized officer to
the effect that, in the reasonable belief
of the Bank, such issuance will not, based
on the facts known to such officer at the
time of such certification, cause a Pay Out
Event to occur with respect to any Series.
Collections.....................All collections of Receivables will be
allocated by the Servicer between amounts
collected on Principal Receivables and on
Finance Charge Receivables. The Servicer
will allocate between the
Certificateholders' Interest of each Series
and the Seller's Interest all amounts
collected with respect to Finance Charge
Receivables and Principal Receivables and
the Defaulted Amount with respect to each
day during each Monthly Period. Collections
of Finance Charge Receivables and the
Defaulted Amount will be allocated to each
Series at all times based upon its Floating
Allocation Percentage. Collections of
Principal Receivables will be allocated to
each Series at all times based upon its
Principal Allocation Percentage. The
Floating Allocation Percentage and the
Principal Allocation Percentage with
respect to each Series will be determined
as set forth in the related Supplement and,
with respect to each Series offered hereby,
in the related Prospectus Supplement.
Interest........................Interest will accrue on the Invested Amount
of the Certificates of a Series or Class
offered hereby at the per annum rate either
specified in or determined in the manner
specified in the related Prospectus
Supplement. Except as otherwise provided
herein or in the related Prospectus
Supplement, collections of Finance Charge
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of a Series offered hereby will be
used to make interest payments to
Certificateholders of such Series on each
Interest Payment Date with respect thereto,
provided that if an Early Amortization
Period commences with respect to such
Series, thereafter interest will be
distributed to such Certificateholders
monthly on each Special Payment Date.
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
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<PAGE>
(the "Principal Commencement Date"), in
which case such Series will have a
Scheduled Amortization Period as described
below under "--Scheduled Amortization
Period".
If a Series has more than one Class of
Certificates, a different method of paying
principal, Expected Final Payment Date
and/or Principal Commencement Date may be
assigned to each Class. The payment of
principal with respect to the Certificates
of a Series or Class may commence earlier
than the applicable Expected Final Payment
Date or Principal Commencement Date, and
the final principal payment with respect to
the Certificates of a Series or Class may
be made later than the applicable Expected
Final Payment Date or other expected date,
if a Pay Out Event occurs with respect to
such Series or Class or under certain other
circumstances described herein. See "Risk
Factors-- Payments and Maturity" for a
description of factors that may affect the
timing of principal payments on
Certificates.
Revolving Period................The Certificates of each Series offered
hereby will have a revolving period (the
"Revolving Period"), which will commence at
the close of business on a date specified
in the related Prospectus Supplement (the
"Series Cut-Off Date") and continue until
the earlier of (a) the commencement of the
Early Amortization Period with respect to
such Series and (b) the date specified in
the related Prospectus Supplement as the
end of the Revolving Period with respect to
such Series. During the Revolving Period
with respect to a Series offered hereby,
collections of Principal Receivables and
certain other amounts otherwise allocable
to the Certificateholders' Interest of such
Series will be treated as Shared Principal
Collections and will be distributed to, or
for the benefit of, the Certificateholders
of other Series or the Bank. See
"Description of the
Certificates--Principal" and "--Shared
Principal Collections" and see "--Pay Out
Events" for a discussion of the events
which might lead to the termination of the
Revolving Period with respect to a Series
prior to its scheduled ending date.
Accumulation Period.............If the related Prospectus Supplement so
specifies, unless an Early Amortization
Period commences with respect to a Series
offered hereby, the Certificates of such
Series will have an accumulation period
(the "Accumulation Period"), which will
commence at the close of business on the
date specified in such Prospectus
Supplement and continue until the earliest
of (a) the commencement of the Early
Amortization Period with respect to such
Series, (b) payment in full of the Invested
Amount of the Certificates of such Series
and (c) the Series Termination Date with
respect to such Series. During the
Accumulation Period of a Series,
collections of Principal Receivables and
certain other amounts allocable to the
Certificateholders' Interest of such Series
will be deposited on each Distribution Date
with respect to such Accumulation Period in
a trust account established for the benefit
of the Certificateholders of such Series (a
"Principal Funding Account") and used to
make principal distributions to the
Certificateholders of such Series when due.
The "Distribution Date" is the 15th day of
each month (or if such 15th day is not a
business day, the next succeeding business
day). The amount to be deposited in the
Principal Funding Account for any Series
offered hereby on any Distribution Date
may, but will not necessarily, be limited
to an amount (the "Controlled Deposit
Amount") equal to an amount specified in
the related Prospectus Supplement (the
"Controlled
7
<PAGE>
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 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
8
<PAGE>
for such Series, such collections will be
applied to cover principal payments due to
or for the benefit of Certificateholders of
another Series. Any such reallocation will
not result in a reduction in the Invested
Amount of the Series to which such
collections were initially allocated. See
"Description of the Certificates--Shared
Principal Collections".
Special Funding Account.........If on any date the Seller's Interest is
less than or equal to the Required Seller's
Participation Amount or the amount of
Principal Receivables in the Trust is less
than or equal to the Required Principal
Balance, the Servicer shall not distribute
to the Bank any Shared Principal
Collections which otherwise would be
distributed to the Bank, but shall deposit
such funds in the Special Funding Account.
Funds on deposit in the Special Funding
Account will be withdrawn and paid to the
Bank on any Distribution Date to the extent
that, after giving effect to such payment,
the Seller's Interest exceeds the Required
Seller's Participation Amount and the
amount of Principal Receivables in the
Trust exceeds the Required Principal
Balance on such date; provided, however,
that if an Accumulation Period, Scheduled
Amortization Period or Early Amortization
Period commences with respect to any
Series, any funds on deposit in the Special
Funding Account will be released and
treated as Shared Principal Collections to
the extent needed to cover principal
payments due to or for the benefit of such
Series.
Sharing of Additional Finance
Charges.........................Subject to certain limitations described
under "Description of the
Certificates--Sharing of Additional Finance
Charges", collections of Finance Charge
Receivables and certain other amounts
allocable to the Certificateholders'
Interest of any Series which is included in
a Group in excess of the amounts necessary
to make required payments with respect to
such Series (including payments to the
provider of any related Series Enhancement)
will be applied to cover any shortfalls
with respect to amounts payable from
collections of Finance Charge Receivables
allocable to any other Series included in
such Group, in each case pro rata based
upon the amount of the shortfalls, if any,
with respect to such other Series. See
"Description of the Certificates-- Sharing
of Additional Finance Charges".
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.
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<PAGE>
If so specified in the related Prospectus
Supplement, during the Funding Period,
funds on deposit in the Prefunding Account
for a Series may or, under certain
circumstances, must be withdrawn and paid
to the Bank to effect increases in the
Certificateholders' Interest. In the event
that the Certificateholders' Interest does
not equal the Initial Amount by the end of
the Funding Period, any amount remaining in
the Prefunding Account and additional
amounts specified, if any, in the related
Prospectus Supplement will be payable to
the Certificateholders of such Series in a
manner and at such time as set forth in the
related Prospectus Supplement. If so
specified in the related Prospectus
Supplement, monies in the Prefunding
Account with respect to any Series will be
invested by the Trustee in Eligible
Investments or will be subject to a
guaranteed rate or investment agreement or
other similar arrangement, and investment
earnings and any applicable payment under
any such investment arrangement will be
applied to pay interest on the Certificates
of such Series.
Credit Enhancement..............The credit enhancement with respect to a
Series offered hereby (the "Credit
Enhancement") may include a letter of
credit, a cash collateral account, a surety
bond, an insurance policy or any other form
of credit enhancement described in the
related Prospectus Supplement. Credit
Enhancement may also be provided to a Class
or Classes of a Series by subordination
provisions which require that distributions
of principal and/or interest be made with
respect to the Certificates of such Class
or Classes before distributions are made to
one or more other Classes of such Series.
The type, characteristics and amount of the
Credit Enhancement with respect to any
Series will be determined based on several
factors, including the characteristics of
the Receivables and Accounts underlying or
comprising the Trust Assets as of the
Series Issuance Date with respect thereto,
and will be established on the basis of
requirements of each applicable Rating
Agency. The terms of the Credit Enhancement
with respect to any Series offered hereby
will be described in the related Prospectus
Supplement. See "Description of 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
10
<PAGE>
Distribution Date (each, a "Determination
Date"), the Servicer will calculate the
amounts to be allocated to the
Certificateholders of each Class or Series
and the Bank as described herein in respect
of collections of Receivables received with
respect to the preceding Monthly Period.
In certain limited circumstances, the Bank
may resign or be removed as Servicer, in
which event either the Trustee or, so long
as it meets certain eligibility standards
set forth in the Pooling Agreement, a
third-party servicer may be appointed as
successor servicer. (The Bank or any such
successor servicer is referred to herein as
the "Servicer".) The Bank is permitted to
delegate any of its duties as Servicer to
any of its affiliates and to certain
third-party service providers, but any such
delegation will not relieve the Servicer of
its obligations under the Pooling Agreement
or any Supplement. The Servicer will
receive servicing fees payable with respect
to each Series offered hereby as servicing
compensation from the Trust. See
"Description of the Certificates--Servicing
Compensation and Payment of Expenses".
Mandatory Reassignment and
Transfer of Certain
Receivables.....................Pursuant to the Pooling Agreement, as of
each Series Issuance Date (and on each date
of addition) the Bank, in its capacity as
seller, has severally made or will
severally make certain representations and
warranties in the Pooling Agreement with
respect to the Accounts (or Additional
Accounts) owned by the Bank and the
Receivables (or Receivables in Additional
Accounts) transferred by the Bank to the
Trust. If the Bank breaches any such
representation and warranty, under certain
circumstances and subject to certain
conditions described under "The Pooling
Agreement Generally--Representations and
Warranties", all Receivables with respect
to the affected Account will be reassigned
to the Bank. In addition, if the Bank
breaches certain other representations and
warranties described under "The Pooling
Agreement Generally--Representations and
Warranties", all the Receivables
transferred by the Bank to the Trust may be
reassigned to the Bank. See "The Pooling
Agreement Generally--Representations and
Warranties".
The Bank has provided certain covenants in
the Pooling Agreement in its capacity as
Servicer. If the Servicer breaches any such
covenant with respect to any Receivable,
subject to certain conditions described
under "The Pooling Agreement
Generally--Servicer Covenants", all
Receivables with respect to the affected
Account will be assigned to the Servicer.
In the event of a transfer of servicing
obligations to a successor servicer, such
successor servicer, rather than the Bank,
would be responsible for any subsequent
failure to comply with the Servicer's
covenants.
Tax Status......................Except to the extent otherwise provided in
the related Prospectus Supplement, in the
opinion of 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
Certificates are issued with OID,
Certificateholders may be required to
report income
11
<PAGE>
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".
12
<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
Generally--Representations and Warranties". Consequently, there can be no
assurance that such Additional Accounts will be of the same credit quality
as the Initial Accounts or the Additional Accounts previously included in
the Trust. In addition, such Additional Accounts may consist of revolving
credit card accounts or other revolving credit accounts which have
different terms than the Initial Accounts and the Additional Accounts
previously included in the Trust, including lower periodic finance charges
and other fees and charges, which may have the effect of reducing the
average yield on the portfolio of Accounts included in the Trust. The
designation of Additional Accounts will be subject to the satisfaction of
certain conditions described herein under "Description of the
Certificates--Addition of Trust Assets", including that (a) such addition
will not result in a Ratings Effect and (b) the Bank shall have delivered
to the Trustee and certain providers of Series Enhancement a certificate of
an authorized officer to the effect that, in the reasonable belief of the
Bank, such addition will not, based on the facts known to such officer at
the time of such certification, cause a Pay Out Event to occur with respect
to any Series. Since the Trust Cut-Off Date, the Bank has conveyed to the
Trust Receivables in Additional Accounts in accordance with the terms of
the Pooling Agreement. See "Description of the Certificates-- Addition of
Trust Assets".
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
Generally--Representations and Warranties"). Nevertheless, if the transfer
of Receivables by the Bank to the
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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 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
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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 Generally--
Representations and Warranties", all Receivables in the affected Account
will be reassigned to the Bank or, in some circumstances, to the Servicer.
On the Series Issuance Date with respect to each Series and on each date of
addition, the Bank has made and (with respect to future Series and
designations of Additional Accounts) will make certain representations and
warranties relating to the validity and enforceability of the Accounts and
the related Receivables. The sole remedy if any such representation or
warranty is breached is that, subject to certain conditions described
herein under "The Pooling Agreement Generally--Representations and
Warranties", the interest of Certificateholders of all Series in the
Receivables affected thereby will be reassigned to the Bank or assigned to
the Servicer, as the case may be. In addition, in the event of the breach
of certain representations and warranties, the Bank may be obligated to
accept the reassignment of all the Receivables, which reassignment will
constitute the sole remedy available to Certificateholders with respect to
any such breach. See "The Pooling Agreement Generally--Representations and
Warranties" and "--Servicer Covenants" and "Certain Legal Aspects of the
Receivables--Consumer Protection Laws".
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
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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,
unless otherwise specified in the related Prospectus Supplement with
respect to any Class or Series offered hereby, address the likelihood that
the principal of, or interest on, any Certificates of such Class or Series
will be paid on a scheduled date. In addition, any such rating will not
address the possibility of the occurrence of a Pay Out Event with respect
to such Class or Series or the possibility of the imposition of United
States withholding tax with respect to non-U.S. Certificateholders.
Further, the available amount of any Credit Enhancement or other Series
Enhancement with respect to any such Series or Class will be limited and
will be subject to reduction from time to time as described in the related
Prospectus Supplement. The rating of the Certificates of a Class or Series
will not be a recommendation to purchase, hold or sell such Certificates,
and such rating will not comment as to the marketability of such
Certificates, any market price or suitability for a particular investor.
There is no assurance that any rating will remain for any given period of
time or that any rating will not be lowered or withdrawn entirely by a
Rating Agency if in such Rating Agency's judgment circumstances so warrant.
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. Unless otherwise stated in the related
Prospectus Supplement, the Certificates of each Series offered hereby
initially will be represented by one or more certificates registered in the
name of Cede, the nominee for DTC, and will not be registered in the names
of the Certificateholders or their nominees. Consequently, unless and until
Definitive Certificates are issued, Certificateholders will not be
recognized by the Trustee as "Certificateholders" (as such term is used in
the Pooling Agreement and any Supplement). Hence, until such time,
Certificateholders will only be able to exercise the rights of
Certificateholders indirectly through DTC, CEDEL or Euroclear and their
respective participating organizations. See "The Pooling Agreement
Generally--Book Entry Registration" and "--Definitive Certificates".
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
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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 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 Generally--Amendments"), when
determining whether the required percentage of Certificateholders of a
Series have given their approval or consent, all the Certificateholders of
such Series will be treated as a single class (whether or not such Series
includes more than one Class). Accordingly, one or more Classes of
Certificateholders may have the power to determine whether any such action
is taken without regard to the position or interests of other Classes of
Certificateholders relating to such action.
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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 credit card accounts and revolving line of credit
accounts (which are accessed by checks rather than credit cards) under
management by the Bank or its affiliates but does not include secured and
partially secured credit card accounts, "unbanked" product accounts
(designed to serve a population that the Bank believes has been largely
underserved by traditional financial institutions) and home loans. The
Providian Portfolio consists primarily of unsecured credit card receivables
generated through the Visa and MasterCard credit cards.1
Receivables transferred and to be transferred by the Bank to the Trust
pursuant to the Pooling Agreement are generated from transactions made and
cash advances obtained by accountholders under accounts in the Providian
Portfolio. All accounts in the Providian Portfolio (other than certain
accounts purchased from third parties) were originated using the Bank's
account opening procedures. Certain of the accounts were originated by
former affiliates of the Bank or were acquired by the Bank in portfolio
acquisitions.
The Bank uses its affiliate, Providian Bancorp Services, and third
party vendors in the process of originating and servicing accounts in the
Providian Portfolio. Account set-up, telemarketing, customer service,
collection activities and certain data processing services are performed by
Providian Bancorp Services primarily at operations centers located in
northern California. Other data processing functions are handled by Total
System Services, Inc. ("Total System"), a Columbus, Georgia-based company.
Total System is the nation's second largest credit card processing company.
Total System is responsible for issuing and encoding cards, authorizing
accountholder purchases and processing transactions for merchants. Total
System also sends monthly billing statements, stores customer data files,
updates master files daily and provides master file tapes each month. The
accounts in the Providian Portfolio were principally generated through
direct mail and telemarketing. These solicitations are made to a
pre-screened list of prospective accountholders, followed by credit
verification and telemarketing support. The Bank's underwriting,
telemarketing, customer service and collection procedures, described below,
are subject to change as the competitive environment, industry practice,
legal requirements or the Bank's business objectives may require. In
addition, the Bank has acquired and may acquire from time to time in the
future accounts originated by third parties.
Accounts acquired by the Bank from third parties, 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. It is expected that the portfolios of credit card accounts purchased
by the Bank from other credit card issuers will be added to the Trust from
time to time. There can be no assurance that the purchased accounts will
perform similarly to accounts originated by the Bank. See "Description of
the Certificates--Addition of Trust Assets".
Underwriting Procedures
The Bank's credit screening process begins with a "prescreening"
review which identifies creditworthy consumers who are likely to be
eligible for an account. These consumers generally receive direct mail
solicitations or solicitations by telephone. Applications from consumers
who respond to the solicitations are reviewed against criteria established
by the Bank's loan committee.
In the "prescreening" process, the Bank provides a set of credit
criteria directly, or indirectly through a third party, to credit reporting
agencies. The credit reporting agencies screen their databases and generate
a list of names with the desired attributes. The list is further refined by
applying an additional set of targeting criteria which have been derived 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. -------- 1 Visa and MasterCard are registered
trademarks of Visa U.S.A. Inc. and MasterCard International Incorporated,
respectively.
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Individuals who receive the solicitations must respond in writing or
by telephone. Once the response is received, the Bank reviews credit
reporting agency information and information provided by the applicant to
confirm that the applicant meets the Bank's credit criteria. Pricing and
credit limits are established on an individualized basis, based on the
customer's risk profile and the customer's loan feature preferences and
price sensitivity. In this manner, the Bank seeks to configure a set of
terms that meets the customer's needs as well as the Bank's risk/return
parameters.
Each accountholder is subject to an agreement governing the terms and
conditions of the account. Pursuant to such lending agreement, the Bank
reserves the right to change or terminate any terms, conditions, services
or features of the account (including increasing or decreasing periodic
finance charges, other charges or minimum payments). The Bank monitors the
payment performance and risk profiles of customers, and may adjust the
interest rate and other terms on a customer's account based on such
customer's credit behavior. By their terms, the Bank's lending agreements
are governed by New Hampshire law.
Telemarketing and Customer Service
The Bank believes that customer contact must be quickly established to
take advantage of additional marketing opportunities, verify application
information and assist in the collections process. Customers have access to
their account information 24 hours a day, seven days a week. Customer
service representatives have on-line access to the customer's account
history in order to immediately resolve most questions. When charges are in
dispute, the Bank's current policy is to note on the accountholder's
monthly billing statements that such portion of the balance is in dispute,
and such portion will not accrue finance charges pending resolution of the
dispute. Multiple tracking and reporting systems are employed to ensure
that service standards are achieved and maintained.
Collection Efforts 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.
Current collection policy consists primarily of the following: (i)
statements are sent monthly and accountholders have approximately 30 days
after the statement date to remit payments before an account is considered
past-due; (ii) risk assessment and segmentation models are used to
determine when to contact accountholders by telephone after an account
becomes past due, with an emphasis on early intervention for those accounts
with the highest risk; (iii) arrangements may be made with accountholders
to extend or change payment schedules; (iv) collection efforts are
event-driven and, thus, accounts are escalated to more experienced
collectors, suspended, closed and/or referred for legal collection based on
customer behavior rather than on the passage of time; and (v) legally
permissible collections activities continue after an account is charged
off.
The Bank's policy is to charge off the principal balance of delinquent
accounts no more than 180 days after the delinquency occurs unless 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. Related interest and fees are written
off as a reversal of current earnings. Account balances for deceased and
bankrupt accountholders are written off upon determination of
uncollectibility, but in no event more than 180 days after delinquency.
Because accountholders for whom the Bank receives notice of a bankruptcy
filing are sometimes current in their payment up to the time of
notification, these accounts may be charged off without having been
delinquent.
Information with respect to the delinquency and loss experience of the
Seller'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 of the Receivables outstanding.
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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. Unless otherwise specified in the related Supplement,
Interchange attributable to the Accounts as determined above will also be
included in Finance Charge Receivables for purposes of calculating the
Portfolio Yield.
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 no later than June 30, 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 Banks 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
Generally--Representations and Warranties". However, there can be no
assurance that all the Accounts will continue to meet the applicable
eligibility requirements throughout the life of the Trust.
Subject to certain limitations and restrictions, the Bank may also
designate certain Accounts owned by it the Receivables in which will be
removed from the Trust. In such case, the Receivables in the Removed
Accounts will be reassigned to the Bank. The Bank may from time to time
remove from the Trust certain charged-off Accounts and closed accounts
having a zero balance. See "Description of the Certificates--Removal of
Accounts". Throughout the term of the Trust, the Trust Portfolio will
consist of the Initial Accounts, plus any Additional Accounts, and minus
any Removed Accounts.
The Trust Portfolio currently does not include the receivables
arising in secured and partially secured accounts and accounts acquired by
the Bank from unaffiliated credit card issuers. However, such accounts may
in the future be selected by the Bank to be designated for inclusion in the
Trust Portfolio. 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.
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Billing and Payments
The following is information with respect to the billing and payment
characteristics generally applicable to the accounts in the Providian
Portfolio.
Monthly billing statements are sent by the Bank to active
accountholders. The accounts generally require a minimum monthly payment
equal to at least 2% of the new balance shown on the statement, plus any
amount that is past-due and any amount by which the new balance exceeds the
accountholder's credit limit. The payment due will not be less than $15.00
(unless the new balance is less than $15.00, in which case the payment due
will be the amount of the new balance).
Finance charges are posted to the accounts at the end of each monthly
billing cycle. A daily finance charge is calculated by multiplying the
daily balance on the account by the applicable daily periodic rate. For the
majority of accounts, there is no grace period during which accountholders
may avoid monthly periodic charges on cash advances. However, most accounts
do have a grace period for new purchases if the entire account balance is
paid in full by the due date shown on the monthly billing statement.
Accounts may have different annual percentage rates for cash advances,
purchases and balance transfers and the annual percentage rate may be fixed
or variable. New accountholders are offered a reduced annual percentage
rate (which in some cases may be as low as 0%) for an introductory period,
generally no more than three months, and the annual percentage rate on some
accounts may be lower or higher than those generally offered by the Bank.
For an additional fee, certain accountholders have subscribed to a credit
protection feature pursuant to which the accountholder's obligation to make
payments will be suspended upon the occurrence of certain conditions. Other
add-on fee products are also offered to accountholders.
The Bank typically charges accounts certain additional fees including:
(i) a late fee, if the Bank does not receive the required minimum monthly
payment by the due date shown on the monthly billing statement; (ii) a
returned payment check fee, for each accountholder check received by the
Bank that is not paid by the bank on which the check was drawn; (iii) an
over-limit fee, if the new balance of an account exceeds the
accountholder's stated credit limit before addition of new finance charges
or other fees on the billing date; and (iv) for most accounts, a returned
check fee for any check written on the account that the Bank returns
unpaid. The Bank also charges a cash advance fee on certain types of cash
advances. Any of these fees may be waived or modified by the Bank at any
time.
The Bank generally does not charge customers an annual fee for the
accounts in the Providian Portfolio. However, the Bank reserves the right
to modify the terms of any account to charge an annual fee or other types
of fees.
Payments to the Bank on the accounts are processed and applied first
to finance charges, then to any fees billed to the account and then to
unpaid principal. Any excess creates a credit balance. Finance charges are
posted as of the last day of an account's monthly billing cycle. Principal
receivables are posted daily.
Annual percentage rates, minimum monthly payment requirements, fees
and other charges may increase or decrease from current levels. The lending
agreements governing the accounts permit the Bank to change rates and other
terms at any time after an applicable notice period. There can be no
assurance that annual percentage rates, minimum monthly payment
requirements, fees and other charges will remain at current levels in the
future. See "Risk Factors--The Ability of the Bank to Change Terms of the
Accounts".
THE BANK
The Bank is a wholly-owned subsidiary of Providian Financial
Corporation, a publicly owned financial services company which provides
lending and deposit products to consumers nationwide. Providian Financial
Corporation and its subsidiaries offer a range of lending products,
including unsecured credit cards, revolving lines of credit, home loans,
secured and partially secured credit cards, and fee based products
nationwide, primarily through direct mail and telemarketing. Providian
Financial Corporation became an independent, publicly held company in a
spin-off transaction 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.
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The Bank is the surviving entity in the merger, completed on
January 1, 1998 of Providian National Bank, another subsidiary of Providian
Financial Corporation, into First Deposit National Bank. Immediately
following the merger, First Deposit National Bank changed its name to
Providian National Bank.
The Bank is a national bank regulated by the Office of the Comptroller
of the Currency. Under the grandfather provisions of the Competitive
Equality Banking Act of 1987. Providian Financial Corporation is not
required to register as a bank holding company so long as certain
restrictions are observed, including limitations on new activities by the
Bank and on affiliate overdrafts and limitations on the Bank's ability to
cross-market its products and services with products and services of its
affiliates. The principal executive offices of the Bank are located at 295
Main Street, Tilton, New Hampshire 03276, and the principal executive
offices of Providian Financial Corporation are located at 201 Mission
Street, San Francisco, California 94105.
USE OF PROCEEDS
Unless otherwise specified in the related Prospectus Supplement, the
net proceeds from the sale of the Certificates of any Series offered hereby
will be paid to the Bank and will be used for the Bank's general corporate
purposes.
THE TRUST
The Trust, as a master trust, previously has issued other Series and
is expected to issue additional Series from time to time. The Trust has not
engaged and will not engage in any business activity other than acquiring
and holding Trust Assets and proceeds therefrom, issuing Series of
Certificates and the Seller's Interest and making payments thereon and
related activities. As a consequence, the Trust does not and is not
expected to have any source of capital resources other than the Trust
Assets. The Trust is administered in accordance with the laws of the State
of New York.
The Bank has conveyed to the Trust, without recourse, its interest in
all Receivables arising under the Accounts. The Trust Assets consist of the
Receivables, all monies due or to become due thereunder, the proceeds of
the Receivables, and certain Interchange attributable to accountholder
charges for goods and services in certain of the Accounts, all monies on
deposit in the Collection Account and in certain accounts maintained for
the benefit of the Certificateholders, any Participations included in the
Trust, funds collected or to be collected with respect to such
Participations and any Series Enhancements. The Trust Assets are expected
to change over the life of the Trust as revolving credit card accounts,
other revolving credit accounts and related assets become subject to the
Trust and as Accounts are closed, charged off or removed and are no longer
subject to the Trust. Pursuant to the Pooling Agreement, the Bank will have
the right (subject to certain limitations and conditions), and in some
circumstances will be obligated, to designate as Trust Assets Receivables
arising in Additional Accounts or, in lieu thereof or in addition thereto,
Participations. See "Description of the Certificates--Addition of Trust
Assets". In addition, the Bank will have the right to remove from the Trust
Receivables arising in designated Accounts as described herein under
"Description of the Certificates--Removal of Accounts".
DESCRIPTION OF THE CERTIFICATES
General
The Certificates of a Series will be issued pursuant to the Pooling
Agreement, and a Supplement thereto relating to such Certificates, between
the Bank, as seller of its interest in the Receivables and as servicer of
the Accounts, and the Trustee; the Pooling Agreement and each Supplement
with respect to any Series offered hereby will be substantially in the form
filed as exhibits to the Registration Statement of which this Prospectus is
a part. See "Description of the Certificates--New Issuances". The Trustee
will provide a copy of the Pooling Agreement (without exhibits or
schedules), including any Supplements, to Certificateholders upon written
request. The following summary describes certain 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.
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The Certificates of each Series offered hereby will initially be
represented by one or more certificates registered in the name of the
nominee of DTC (together with any successor depository selected by the
Bank, the "Depository"), except as set forth below. Unless otherwise
specified in the related Prospectus Supplement, the Certificates of each
Series offered hereby will be available for purchase in minimum
denominations of $1,000 and in integral multiples thereof in book-entry
form. The Bank has been informed by DTC that DTC's nominee will be Cede.
See "The Pooling Agreement Generally-- Book-Entry Registration" and
"--Definitive Certificates".
The Certificates of each Series offered hereby will evidence undivided
interests in the Trust Assets allocated to the Certificateholders' Interest
of such Series, representing the right to receive from such Trust Assets
funds up to (but not in excess of) the amounts required to make payments of
interest and principal with respect thereto as described in the related
Prospectus Supplement.
Interest
Interest will accrue on the Invested Amount of the Certificates of a
Series or Class offered hereby at the per annum rate either specified in or
determined in the manner specified in the related Prospectus Supplement.
Except as otherwise provided herein or in the related Prospectus
Supplement, collections of Finance Charge Receivables and certain other
amounts allocable to the Certificateholders' Interest of a Series offered
hereby will be used to make interest payments to Certificateholders of such
Series on each Interest Payment Date specified with respect thereto in the
related Prospectus Supplement, provided that if an Early Amortization
Period commences with respect to such Series, thereafter interest will be
distributed to such Certificateholders monthly on each Special Payment
Date. If the Interest Payment Dates for a Series or Class occur less
frequently than monthly, such collections or other amounts (or the portion
thereof allocable to such Class) will be deposited in one or more 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 except as otherwise specified in any Supplement. Interest with respect
to the Certificates of each Series offered hereby will accrue and be
calculated on the basis described in the related Prospectus Supplement.
Principal
The Certificates of each Series will have a Revolving Period during
which collections of Principal Receivables and certain other amounts
otherwise allocable to the Certificateholders' Interest of such Series will
be treated as Shared Principal Collections and will be distributed to, or
for the benefit of, the Certificateholders of other Series or the Bank.
Unless an Early Amortization Period commences with respect to a Series,
following the Revolving Period with respect to such Series, such Series
will have either an Accumulation Period or a Scheduled Amortization Period.
During the Accumulation Period, if any, of a Series, collections of
Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series will be deposited on each
Distribution Date with respect to such Accumulation Period in a Principal
Funding Account and used to make principal distributions to the
Certificateholders of such Series when due. The amount to be deposited in a
Principal Funding Account for any Series offered hereby on any Distribution
Date may, but will not necessarily, be limited to a Controlled Deposit
Amount equal to a Controlled Accumulation Amount specified in the related
Prospectus Settlement plus any existing deficit controlled accumulation
amount arising from prior Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a separate Principal Funding
Account and Controlled Accumulation Amount. In addition, the related
Prospectus Supplement may describe certain priorities among such Classes
with respect to deposits of principal into such Principal Funding Accounts.
During the Scheduled Amortization Period, if any, of a Series,
collections of Principal Receivables and certain other amounts allocable to
the Certificateholders' Interest of such Series will be used on each
Distribution Date with respect to such Scheduled Amortization Period to
make principal distributions to any Class of Certificateholders then
scheduled to receive such distributions. The amount to be distributed to
Certificateholders of any Series offered hereby on any Distribution Date
may, but will not necessarily, be limited to a Controlled Distribution
Amount equal to a Controlled Amortization Amount specified in the related
Prospectus Supplement plus any existing deficit controlled amortization
amount arising from prior Distribution Dates. If a Series has more than one
Class of Certificates, each Class may have a
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<PAGE>
separate Controlled Amortization Amount. In addition, the related
Prospectus Supplement may describe certain priorities among such Classes
with respect to such distributions.
During the Early Amortization Period of a Series, collections of
Principal Receivables and certain other amounts allocable to the
Certificateholders' Interest of such Series (including Shared Principal
Collections, if any, allocable to such Series) will be distributed as
principal payments to the applicable Certificateholders monthly on each
Distribution Date beginning with the first Special Payment Date. During the
Early Amortization Period of a Series, distributions of principal to
Certificateholders of such Series will not be subject to any Controlled
Deposit Amount or Controlled Distribution Amount. In addition, upon the
commencement of the Early Amortization Period, any funds on deposit in a
Principal Funding Account with respect to such Series will be paid to the
Certificateholders of the relevant Class or Series on the first Special
Payment Date. See "Series Provisions--Pay Out Events" for a discussion of
the events which might lead to the commencement of the Early Amortization
Period with respect to a Series.
Funds on deposit in any Principal Funding Account established with
respect to a Class or Series offered hereby will be invested in Eligible
Investments and may be subject to a guarantee or guaranteed investment
contract or other mechanism specified in the related Prospectus Supplement
intended to assure a minimum rate of return on the investment of such
funds. In order to enhance the likelihood of the payment in full of the
principal amount of a Class of Certificates offered hereby at the end of an
Accumulation Period with respect thereto, such Class may be subject to a
maturity liquidity facility or other similar mechanism specified in the
relevant Prospectus Supplement.
Addition of Trust Assets
If, as of the close of business on the last business day of any
Monthly Period, either (a) the Seller's Interest is less than the Required
Seller's Participation Amount or (b) the amount of Principal Receivables in
the Trust is less than the Required Principal Balance, the Bank shall, on
or prior to the close of business on the tenth business day following such
day, unless the Seller's Interest equals or exceeds the Required Seller's
Participation Amount or the amount of Principal Receivables in the Trust
equals or exceeds the Required Principal Balance, as the case may be, as of
the close of business on any day after the last business day of such
Monthly Period and prior to such tenth business day, make an Addition to
the Trust such that, after giving effect to such Addition, the Seller's
Interest is at least equal to the Required Seller's Participation Amount
and the amount of Principal Receivables in the Trust is at least equal to
the Required Principal Balance. An "Addition" will consist of (i)
receivables arising in Eligible Accounts owned by the Bank or (ii)
participations representing undivided interests in a pool of assets
primarily consisting of revolving credit card accounts or other revolving
credit accounts owned by the Bank or any affiliate thereof and collections
thereon ("Participations"). The addition of Participations to the Trust
pursuant to this paragraph will be effected by an amendment to the Pooling
Agreement which will not require the consent of Certificateholders. The
Bank may, upon 30 days' prior notice to the Trustee, the Rating Agency and
certain providers of Series Enhancement, reduce the Required Seller's
Percentage, provided that (a) such reduction will not result in a Ratings
Effect and (b) the Bank shall have delivered to the Trustee and certain
providers of Series Enhancement a certificate of an authorized officer to
the effect that, in the reasonable belief of the Bank, such reduction will
not, based on the facts known to such officer at the time of such
certification, cause a Pay Out Event to occur with respect to any Series;
and provided further that the Required Seller's Percentage shall never be
less than 2%. In addition, the Bank may from time to time, at its sole
discretion, subject to the conditions described below, voluntarily make an
Addition to the Trust.
The Bank may designate, from time to time, at its sole discretion,
Eligible Accounts to be included as Accounts ("Automatic Additional
Accounts"), subject to the limitations specified in this paragraph. If the
aggregate number of Automatic Additional Accounts designated to be included
as Accounts plus the number of Accounts added pursuant to the preceding
paragraph without prior review by the Rating Agency with respect to any of
the three consecutive Monthly Periods beginning in January, April, July and
October of each calendar year would exceed 15% of the number of Accounts as
of the first day of the calendar year during which such Monthly Periods
commence or the number of such Accounts designated during any twelve-month
period would exceed 20% of the number of Accounts as of the first day of
such twelve-month period (the "Aggregate Additional Limit"), then no
Automatic Additional Accounts may be added during such periods without the
consent of the Rating Agency. On or before each Distribution Date, the Bank
shall have delivered to the Trustee, the Rating Agency and certain
providers of Series Enhancement an opinion of counsel with respect to the
Automatic Additional Accounts included as Accounts during the preceding
Monthly Period confirming the validity and perfection of each transfer of
such Automatic Additional Accounts. If such opinion of counsel with respect
to any Automatic Additional Accounts is not so received, the ability of the
Bank to designate Automatic Additional
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Accounts will be suspended until such time as the Rating Agency otherwise
consents in writing. The addition to the Trust of Receivables in Automatic
Additional Accounts will be subject to the further condition that revolving
credit card accounts or other revolving credit accounts either (i) not
originated by the Bank or any affiliate of the Bank or (ii) of a type not
included in the Accounts at the time of their addition may only be
designated as Automatic Additional Accounts upon compliance with the
conditions described below with respect to Additions. Automatic Additional
Accounts and Accounts relating to any Addition are collectively referred to
herein as "Additional Accounts".
In connection with an Addition, the Bank will convey to the Trust the
Receivables arising in Additional Accounts and Participations subject to
the following conditions, among others (provided that the following
conditions (other than the delivery of a written assignment and a computer
file or microfiche list as described in clause (b)) shall not apply to the
transfer to the Trust of Receivables in Automatic Additional Accounts): (a)
on or before the tenth business day immediately preceding such Addition,
the Bank shall have given the Trustee, the Servicer, the Rating Agency and
certain providers of Series Enhancement written notice that the Receivables
arising in the Additional Accounts or Participations will be included as
Trust Assets; (b) on or before the date on which any such Receivables are
added to the Trust, the Bank shall have delivered to the Trustee a written
assignment and a computer file or microfiche list containing a true and
complete list of the Additional Accounts specifying for each such Account
its account number, the aggregate amount outstanding in such Account and
the aggregate amount of Principal Receivables outstanding in such Account;
(c) in the case of an Addition other than a required Addition, the Trustee
shall have received confirmation from the Rating Agency that such Addition
will not result in a Ratings Effect; (d) in the case of a required Addition
which exceeds the Aggregate Additional Limit, the Bank shall have provided
the Rating Agency with 15 days' prior written notice and the Rating Agency
shall not have notified the Bank that such addition would result in a
Ratings Effect; and (e) prior to or on the date any such Receivables or
Participations are added to the Trust, the Bank shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer stating that any related Additional Accounts are
Eligible Accounts and that the Bank reasonably believes that (i) such
Addition will not, based on the facts known to such officer at the time of
such certification, cause a Pay Out Event to occur with respect to any
Series and (ii) in the case of Additional Accounts, no selection procedure
was utilized by the Bank which would result in a selection of Additional
Accounts (from the available Eligible Accounts owned by the Bank) that
would be materially adverse to the interests of the Certificateholders of
any Series as of the date of addition.
The Bank may direct that the Principal Receivables in the Additional
Accounts be treated as Principal Receivables outstanding on the last day of
the Monthly Period preceding the Monthly Period in which the Addition is
made for purposes of calculating Floating Allocation Percentages and
Principal Allocation Percentages for the Monthly Period of such Addition.
Such direction may be made on the date of addition subject to the condition
that all collections with respect to the Additional Accounts for the period
from the last day of the preceding Monthly Period through the date of
addition must be deposited in the collection Account on the date of
addition. Following any such Addition, the Servicer will allocate
collections for the balance of such Monthly Period, including the
collections deposited on the date of addition, to the Certificateholders'
Interest of each Series and the Seller's Interest so that each interest
receives the same allocations of Finance Charge Receivables, Principal
Receivables and Defaulted Amounts that it would have received if such
Additional Accounts had been included in the Trust for the entire Monthly
Period in which the Addition occurred.
Affiliates of the Bank may originate or acquire portfolios of
revolving credit card accounts or other revolving credit accounts the
receivables in which may be participated to the Bank and sold to the Trust.
Such a sale of receivables to the Trust will be subject to the conditions
described above relating to Additions.
Additional Accounts or Participations may include accounts originated
using criteria different from those which were applied to the Initial
Accounts because such accounts were originated at a later date or were part
of a portfolio of revolving credit card accounts or other revolving credit
accounts which were not part of the Providian Portfolio as of the Trust
CutOff Date or which were acquired from another institution. Moreover,
Additional Accounts and accounts included in Participations may not be
accounts of the same type previously included in the Trust. See "The
Pooling Agreement Generally--Representations and Warranties". Consequently,
there can be no assurance that such Additional Accounts or Participations
will be of the same credit quality or have the same payment characteristics
as the Initial Accounts or the Additional Accounts previously included in
the Trust.
Additional Accounts of a type different than the Initial Accounts may
contain Receivables which consist of fees, charges and amounts which are
different from the fees, charges and amounts which have been designated as
Finance Charge Receivables and Principal Receivables herein and
Participations may be added to the Trust as Additions. In either
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case, the Servicer will designate the portions of funds collected or to be
collected in respect of such Receivables or Participations to be treated
for purposes of the Pooling Agreement as Principal Receivables and Finance
Charge Receivables.
Removal of Accounts
On any day of any Monthly Period the Bank shall have the right to
require the reassignment to it or its designee of all the Trust's right,
title and interest in, to and under the Receivables then existing and
thereafter created, all monies due or to become due and all amounts
received with respect thereto and all proceeds thereof in or with respect
to the Removed Accounts owned and designated by the Bank, upon satisfaction
of the following conditions: (a) on or before the tenth business day (the
"Removal Notice Date") immediately preceding the date upon which the
Receivables in such Accounts are to be removed from the Trust, the Bank
shall have given the Trustee, the Servicer, the Rating Agency and certain
providers of Series Enhancement written notice of such removal specifying
the date for removal of the Removed Accounts (the "Removal Date"); (b) on
or prior to the date that is ten business days after the Removal Date, the
Bank shall have delivered to the Trustee a computer file or microfiche list
containing a true and complete list of the Removed Accounts specifying for
each such Account, as of the Removal Notice Date, its account number, the
aggregate amount outstanding in such Account and the aggregate amount of
Principal Receivables outstanding in such Account; (c) the Bank shall have
represented and warranted as of each Removal Date that the list of Removed
Accounts delivered pursuant to clause (b) above, as of the Removal Date, is
true and complete in all material respects; (d) the Trustee shall have
received confirmation from the Rating Agency that such removal will not
result in a Ratings Effect; (e) the Bank shall have delivered to the
Trustee and certain providers of Series Enhancement a certificate of an
authorized officer, dated the Removal Date, to the effect that the Bank
reasonably believes that (i) such removal will not, based on the facts
known to such officer at the time of such certification, cause a Pay Out
Event to occur with respect to any Series and (ii) no selection procedure
was utilized by the Bank which would result in a selection of Removed
Accounts that would be materially adverse to the interests of the
Certificateholders of any Series as of the Removal Date; and (f) as of the
Removal Notice Date, either (i) the Receivables in the Accounts owned by
the Bank are not more than 15% delinquent by estimated principal amount and
the weighted average delinquency of such Receivables is not more than 60
days or (ii) the Receivables in the Accounts owned by the Bank are not more
than 7% delinquent by estimated principal amount and the weighted average
delinquency of such Receivables does not exceed 90 days.
Upon satisfaction of the above conditions, the Trustee shall execute
and deliver to the Bank a written reassignment and shall be deemed to sell,
transfer, assign, set over and otherwise convey to the Bank or its
designee, without recourse, representation or warranty, all the right,
title and interest of the Trust in and to the Receivables arising in the
Removed Accounts, all monies due and to become due and all amounts received
with respect thereto and all proceeds thereof.
New Issuances
The Pooling Agreement provides that, pursuant to any one or more
Supplements, the Bank may direct the Trustee to issue from time to time new
Series subject to the conditions described below (each such issuance a "New
Issuance"). Each New Issuance will have the effect of decreasing the
Seller's Interest to the extent of the Invested Amount of such new Series.
Under the Pooling Agreement, the Bank may designate, with respect to any
newly issued Series: (i) its name or designation; (ii) its initial
principal amount (or method for calculating such amount) and its invested
amount in the Trust (the "Invested Amount"); (iii) its certificate rate (or
formula for the determination thereof); (iv) the interest payment date or
dates (the "Interest Payment Dates") and the date or dates from which
interest shall accrue; (v) the method for allocating collections to
Certificateholders of such Series; (vi) any bank accounts to be used by
such Series and the terms governing the operation of any such bank
accounts; (vii) the percentage used to calculate monthly servicing fees;
(viii) the provider and terms of any form of Series Enhancement with
respect thereto; (ix) the terms on which the Certificates of such Series
may be repurchased or remarketed to other investors; (x) the Series
Termination Date; (xi) the number of Classes of Certificates of such
Series, and if such Series consists of more than one Class, the rights and
priorities of each such Class; (xii) the extent to which the Certificates
of such Series will be issuable in temporary or permanent global form (and,
in such case, the depositary for such global certificate or certificates,
the terms and conditions, if any, upon which such global certificate may be
exchanged, in whole or in part, for definitive certificates, and the manner
in which any interest payable on a global certificate will be paid); (xiii)
whether the Certificates of such Series may be issued in bearer form and
any limitations imposed thereon; (xiv) the priority of such Series with
respect to any other Series; (xv) the Group, if any, in which such Series
will be included; and (xvi) any other relevant terms (all such terms, the
"Principal Terms" of such Series). None of the Bank, the Servicer, the
Trustee or the Trust is required or intends to obtain the consent of any
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Certificateholder of any outstanding Series to issue any additional Series.
The Bank may offer any Series to the public under a Prospectus Supplement
or other Disclosure Document in transactions either registered under the
Act or exempt from registration thereunder directly, through one or more
underwriters or placement agents, in fixed-price offerings or in negotiated
transactions or otherwise. See "Plan of Distribution". Any such Series may
be issued in fully registered or book-entry form in minimum denominations
determined by the Bank. The Bank intends to offer, from time to time,
additional Series.
The Pooling Agreement provides that the Bank may designate Principal
Terms such that each Series has an Accumulation Period or a Scheduled
Amortization Period which may have a different length and begin on a
different date than such periods for any other Series. Further, one or more
Series may be in their Accumulation Period or Scheduled Amortization Period
while other Series are not. Collections of Principal Receivables otherwise
allocable to a Series which is not amortizing or accumulating principal
will be treated as Shared Principal Collections and reallocated to a Series
which is amortizing or accumulating principal. Moreover, each Series may
have the benefits of Series Enhancements issued by enhancement providers
different from the providers of Series Enhancement with respect to any
other Series. Under the Pooling Agreement, the Trustee shall hold any such
Series Enhancement only on behalf of the Series to which such Series
Enhancement relates. With respect to each such Series Enhancement, the Bank
may deliver a different form of Series Enhancement agreement. The Bank also
has the option under the Pooling Agreement to vary among Series the terms
upon which a Series may be repurchased by the Bank or remarketed to other
investors. There is no limit to the number of New Issuances that the Bank
may cause under the Pooling Agreement. The Trust will terminate only as
provided in the Pooling Agreement. There can be no assurance that the terms
of any Series might not have an impact on the timing and amount of payments
received by a Certificateholder of another Series.
Under the Pooling Agreement and pursuant to a Supplement, a New
Issuance may only occur upon the satisfaction of certain conditions
provided in the Pooling Agreement. The obligation of the Trustee to
authenticate the Certificates of such new Series and to execute and deliver
the related Supplement is subject to the satisfaction of the following
conditions: (a) on or before the fifth business day immediately preceding
the date upon which the New Issuance is to occur, the Bank shall have given
the Trustee, the Servicer, the Rating Agency and certain providers of
Series Enhancement written notice of such New Issuance and the date upon
which the New Issuance is to occur; (b) the Bank shall have delivered to
the Trustee the related Supplement, in form satisfactory to the Trustee,
executed by each party to the Pooling Agreement other than the Trustee; (c)
the Bank shall have delivered to the Trustee any related Series Enhancement
agreement executed by each of the parties to such agreement; (d) the
Trustee shall have received confirmation from the Rating Agency that such
New Issuance will not result in a Ratings Effect; (e) the Bank shall have
delivered to the Trustee and certain providers of Series Enhancement a
certificate of an authorized officer, dated the date upon which the New
Issuance is to occur, to the effect that the Bank reasonably believe that
such issuance will not, based on the facts known to such officer at the
time of such certification, cause a Pay Out Event to occur with respect to
any Series; (f) the Bank shall have delivered to the Trustee, the Rating
Agency and certain providers of Series Enhancement an opinion of counsel
acceptable to the Trustee that for federal income tax purposes (x)
following such New Issuance the Trust will not be deemed to be an
association (or publicly traded partnership) taxable as a corporation, (y)
such New Issuance will not affect the tax characterization as debt of
Certificates of any outstanding Series or Class that were characterized as
debt at the time of their issuance and (z) such New Issuance will not cause
or constitute an event in which gain or loss would be recognized by any
Certificateholders or the Trust (an opinion of counsel to the effect
referred to in clauses (x), (y) and (z) with respect to any action is
referred to herein as a "Tax Opinion"); (g) the Bank's remaining interest
in Principal Receivables shall not be less than 2% of the total amount of
Principal Receivables, in each case as of the date upon which the New
Issuance is to occur after giving effect to such issuance; (h) the sum of
the Invested Amounts to be used in calculating the Floating Allocation
Percentages of all outstanding Series shall not exceed the amount of
Principal Receivables to be used in calculating such Floating Allocation
Percentages, in each case as of the date of the New Issuance and after
giving effect to such New Issuance; and (i) any other conditions specified
in any Supplement. Upon satisfaction of the above conditions, the Trustee
shall execute the Supplement and issue to the Bank the Certificates of such
new Series for execution and redelivery to the Trustee for authentication.
Collection Account
The Servicer maintains for the benefit of the Certificateholders of
each Series, in the name of the Trustee, on behalf of the Trust, an
Eligible Deposit Account bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Certificateholders
of each Series (the "Collection Account"). "Eligible Deposit Account" means
either
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(a) a segregated account with an Eligible Institution or (b) a segregated
trust account with the corporate trust department of a depository
institution organized under the laws of the United States or any one of the
states thereof, including the District of Columbia (or any domestic branch
of a foreign bank), and acting as a trustee for funds deposited in such
account, so long as any of the securities of such depository institution
shall have a credit rating from the Rating Agency in one of its generic
credit rating categories which signifies investment grade. "Eligible
Institution" means a depository institution (which may be the Trustee)
organized under the laws of the United States or any one of the states
thereof which at all times (a) has either (i) a long-term unsecured debt
rating of A2 or better by Moody's Investors Service, Inc. ("Moody's") or
(ii) a certificate of deposit rating of P-1 by Moody's, (b) has either (i)
a long-term unsecured debt rating of AAA by Standard & Poor's Ratings Group
("Standard & Poor's") or (ii) a certificate of deposit rating of A-1+ by
Standard & Poor's and (c) is a member of the FDIC. The Collection Account
is currently maintained with Bankers Trust Company. If at any time the
Collection Account ceases to be an Eligible Deposit Account, the Collection
Account shall be moved so that it will again be qualified as an Eligible
Deposit Account. Funds in the Collection Account generally will be invested
in (i) obligations fully guaranteed by the United States of America, (ii)
demand deposits, time deposits or certificates of deposit of depository
institutions or trust companies, the commercial paper, if any, of which has
the highest rating from the Rating Agency, (iii) commercial paper (or other
short-term obligations) having, at the time of the Trust's investment
therein, a rating in the highest rating category from the Rating Agency,
(iv) demand deposits, time deposits and certificates of deposit which are
fully insured by the FDIC, (v) notes or bankers' acceptances issued by any
depository institution or trust company described in (ii) above, (vi) money
market funds which have the highest rating from, or have otherwise been
approved in writing by, the Rating Agency, (vii) time deposits with an
entity, the commercial paper of which has the highest rating from the
Rating Agency and (viii) any other investments approved in writing by the
Rating Agency (collectively, "Eligible Investments"). Such funds may be
invested in debt obligations of Providian Financial Corporation or its
affiliates so long as such obligations qualify as Eligible Investments. Any
earnings (net of losses and investment expenses) on funds in the Collection
Account will be treated as collections of Finance Charge Receivables with
respect to the last day of the related Monthly Period except as otherwise
specified in any Supplement. The Servicer will have the revocable power to
withdraw funds from the Collection Account and to instruct the Trustee to
make withdrawals and payments from the Collection Account for the purpose
of carrying out its duties under the Pooling Agreement and any Supplement.
The Paying Agent shall have the revocable power to withdraw funds from the
Collection Account for the purpose of making distributions to the
Certificateholders. The Paying Agent shall initially be the Trustee.
Allocation Percentages
Pursuant to the Pooling Agreement, the Servicer will allocate among
the Certificateholders' Interest of each Series and the Seller's Interest
all amounts collected with respect to Finance Charge Receivables and
Principal Receivables and the Defaulted Amount with respect to each day
during any Monthly Period as follows: (a) collections of Finance Charge
Receivables and the Defaulted Amount will at all times be allocated to the
Certificateholders' Interest of a Series based on the Floating Allocation
Percentage of such Series; and (b) collections of Principal Receivables
will at all times be allocated to the Certificateholders' Interest of such
Series based on the Principal Allocation Percentage of such Series.
The "Floating Allocation Percentage" and the "Principal Allocation
Percentage" with respect to any Series will be determined as set forth in
the related Supplement and, with respect to each Series offered hereby, in
the related Prospectus Supplement. Amounts not allocated to the
Certificateholders' Interest of any Series as described above will be
allocated to the Seller's Interest.
Deposits in Collection Account
For as long as (i) the Bank remains the Servicer under the Pooling
Agreement and (ii) either (x) the Bank, as the Servicer, provides to the
Trustee a letter of credit covering collection risk of the Servicer
acceptable to the Rating Agency (as evidenced by a letter from the Rating
Agency to the effect that no Ratings Effect would occur) or (y) the Bank
has and maintains a certificate of deposit rating of at least A-1 and P-1
(or their equivalent) by the Rating Agency, the Bank may use for its own
benefit all collections received with respect to the Receivables in each
Monthly Period until the business day preceding the related Distribution
Date, at which time the Bank will deposit all such collections, to the
extent described below, into the Collection Account, and the Servicer will
make the deposits and payments to the accounts and parties described herein
and in the related Prospectus Supplement on the date of such deposit.
However, if the Bank is no longer the Servicer or fails to maintain the
required letter of credit covering collection risk or the required
certificate of deposit rating, the Servicer will make such deposits, as
described below, not later than two business days after the Date of
Processing, except in the case of collections consisting of Interchange,
which will be deposited not later than each
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Distribution Date. Whether the Servicer is required to make deposits of
collections pursuant to the first or the second preceding sentence, (i) the
Servicer will only be required to deposit collections into the Collection
Account up to the aggregate amount of collections required to be deposited
into an account established for any Series or, without duplication,
distributed on the related Distribution Date or Payment Date to
Certificateholders of any Series or to the issuer of any Series Enhancement
pursuant to the terms of any Supplement or Series Enhancement agreement and
(ii) if at any time prior to such Distribution Date or Payment Date the
amount of collections deposited in the Collection Account exceeds the
amount required to be deposited pursuant to clause (i) above, the Servicer
will be permitted to withdraw such excess from the Collection Account.
Unless otherwise agreed by the Rating Agency, if at any time the Bank or
another eligible affiliate of Providian Financial Corporation is not the
Servicer, the Collection Account will be moved from the Bank, if then
maintained there.
On the earlier of (i) the second business day after the Date of
Processing and (ii) the day on which the Servicer deposits any collections
into the Collection Account, the Servicer will pay to the Bank (a) the
Bank's allocable portion of collections on Principal Receivables, provided
that the Seller's Interest in Principal Receivables on such day (after
giving effect to any new Receivables transferred to the Trust on such day)
is greater than zero; and (b) the Bank's allocable portion of collections
on Finance Charge Receivables, except in the case of collections consisting
of Interchange, the Bank's allocable portion of which will be retained by
the Bank. Any amount not allocated to the Bank because the Seller's
Interest in Principal Receivables is zero will be held in the Collection
Account unallocated ("Unallocated Principal Collections") until the
Seller's Interest in Principal Receivables is greater than zero (at which
time such amount will be allocated to the Bank) or until an Accumulation
Period, Scheduled Amortization Period or Early Amortization Period
commences for any Series (after which such amount will be treated as Shared
Principal Collections to the extent needed to cover principal payments due
to or for the benefit of such Series).
Shared Principal Collections
Collections on Principal Receivables for any Monthly Period allocated
to the Certificateholders' Interest of any Series offered hereby will first
be used to cover certain amounts described in the related Prospectus
Supplement (including any required deposits into a Principal Funding
Account or required distributions to Certificateholders of such Series).
The Servicer will determine the amount of collections of Principal
Receivables for any Monthly Period (plus certain other amounts described in
the related Prospectus Supplement) allocated to such Series remaining after
covering such required deposits and distributions and any similar amount
remaining for any other Series (collectively, "Shared Principal
Collections"). The Servicer will allocate the Shared Principal Collections
to cover any principal distributions to Certificateholders and deposits to
Principal Funding Accounts for any Series which are either scheduled or
permitted and which have not been covered out of the investor principal
collections and certain other amounts for such Series ("Principal
Shortfalls"). If Principal Shortfalls exceed Shared Principal Collections
for any Monthly Period, Shared Principal Collections will be allocated pro
rata among the applicable Series based on the respective Principal
Shortfalls of such Series. To the extent that Shared Principal Collections
exceed Principal Shortfalls, the balance will be allocated to the Bank,
provided that (a) such Shared Principal Collections will be distributed to
the Bank only to the extent that the Seller's Interest in Principal
Receivables is greater than zero (see "--Deposits in Collection Account")
and (b) in certain circumstances described below under "--Special Funding
Account", such Shared Principal Collections will be deposited in the
Special Funding Account. Any such reallocation of collections on Principal
Receivables will not result in a reduction in the Invested Amount of the
Series to which such collections were initially allocated. There can be no
assurance that there will be any Shared Principal Collections with respect
to any Monthly Period.
Special Funding Account
If, on any date, the Seller's Interest is less than or equal to the
Required Seller's Participation Amount or the amount of Principal
Receivables in the Trust is less than or equal to the Required Principal
Balance, the Servicer shall not distribute to the Bank any Shared Principal
Collections that otherwise would be distributed to the Bank, but shall
deposit such funds in an Eligible Deposit Account established and
maintained by the Servicer for the benefit of the Certificateholders of
each Series, in the name of the Trustee, on behalf of the Trust, and
bearing a designation clearly indicating that the funds deposited therein
are held for the benefit of the Certificateholders of each Series (the
"Special Funding Account"). Funds on deposit in the Special Funding Account
will be withdrawn and paid to the Bank on any Distribution Date to the
extent that, after giving effect to such payment, the Seller's Interest
exceeds the Required Seller's Participation Amount and the amount of
Principal Receivables in the Trust exceeds the Required Principal Balance
on such date; provided, however, that if an Accumulation Period, Scheduled
Amortization Period or Early Amortization Period commences with respect
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to any Series, any funds on deposit in the Special Funding Account will be
released from the Special Funding Account, deposited in the Collection
Account and treated as Shared Principal Collections to the extent needed to
cover principal payments due to or for the benefit of such Series.
Funds on deposit in the Special Funding Account will be invested by
the Trustee, at the direction of the Servicer, in Eligible Investments. Any
earnings (net of losses and investment expenses) earned on amounts on
deposit in the Special Funding Account during any Monthly Period will be
withdrawn from the Special Funding Account and treated as collections of
Finance Charge Receivables with respect to such Monthly Period.
Sharing of Additional Finance Charges
Any Series offered hereby may be included in a group of Series (a
"Group"). Each Series in a specific Group will be entitled to share
Additional Finance Charges in the manner, and to the extent, described
below with each other Series, if any, in such Group. The Prospectus
Supplement with respect to a Series offered hereby will specify whether
such Series will be included in a Group and whether any previously issued
Series have been included in such Group. Subsequently issued Series may
also be included in such Group. Collections of Finance Charge Receivables
and certain other amounts allocable to the Certificateholders' Interest of
any Series which is included in a Group in excess of the amounts necessary
to make required payments with respect to such Series (including payments
to the provider of any related Series Enhancement) that are payable out of
collections of Finance Charge Receivables ("Additional Finance Charges")
will be applied to cover any shortfalls with respect to amounts payable
from collections of Finance Charge Receivables allocable to any other
Series included in such Group, pro rata based upon the amount of the
shortfall, if any, with respect to each other Series in such Group;
provided, however, that the sharing of Additional Finance Charges among
Series in any Group will continue only until such time, if any, at which
the Bank shall deliver to the Trustee a certificate of an authorized
officer to the effect that, in the reasonable belief of the Bank, the
continued sharing of Additional Finance Charges among Series in any Group
would have adverse regulatory implications with respect to the Bank.
Following the delivery by the Bank of any such certificate to the Trustee
there will not be any further sharing of Additional Finance Charges among
the Series in any Group. In all cases, any Additional Finance Charges
remaining after covering shortfalls with respect to all outstanding Series
in a Group will be paid to the Bank. While any Series offered hereby may be
included in a Group, there can be no assurance that (i) any other Series
will be included in such Group, (ii) there will be any Additional Finance
Charges with respect to such Group for any Monthly Period or (iii) the Bank
will not at any time deliver a certificate as described above. While the
Bank believes that, based upon applicable rules and regulations as
currently in effect, the sharing of Additional Finance Charges among Series
in a Group will not have adverse regulatory implications for it, there can
be no assurance that this will continue to be true in the future.
Funding Period
For any Series, the related Prospectus Supplement may specify that
during a Funding Period, an amount (the "Prefunding Account Balance") will
be held in a Prefunding Account pending the transfer of additional
Receivables to the Trust or pending the reduction of the
Certificateholders' Interest of other Series issued by the Trust. The
related Prospectus Supplement will specify the initial Certificateholders'
Interest with respect to such Series, the Initial Amount and the date by
which the Certificateholders' Interest is expected to equal the Initial
Amount.
If so specified in the related Prospectus Supplement, during the
Funding Period, funds on deposit in the Prefunding Account for a Series may
or, under certain circumstances, must be withdrawn and paid to the Bank to
effect increases in the Certificateholders' Interest. In the event that the
Certificateholders' Interest does not for any reason equal the Initial
Amount by the end of the Funding Period, any amount remaining in the
Prefunding Account and any additional amounts, if any, specified in the
related Prospectus Supplement will be payable to the Certificateholders of
such Series in the manner and at such time as set forth in the related
Prospectus Supplement.
If so specified in the related Prospectus Supplement, monies in the
Prefunding Account will be invested by the Trustee in Eligible Investments
or will be subject to a guaranteed rate or investment agreement or other
similar arrangement, and, in connection with each Distribution Date during
the Funding Period, investment earnings on funds in the Prefunding Account
during the related Monthly Period will be withdrawn from the Prefunding
Account and deposited, together with any applicable payment under a
guaranteed rate or investment agreement or other similar arrangement, into
the Collection Account for distribution in respect of interest on the
Certificates of the related Series in the manner specified in the related
Prospectus Supplement.
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Defaulted Receivables; Rebates and Fraudulent Charges
"Defaulted Receivables" for any Monthly Period are Principal
Receivables that were charged-off as uncollectible in such Monthly Period.
The "Defaulted Amount" for any Monthly Period will be an amount (not less
than zero) equal to (a) the amount of Defaulted Receivables for such
Monthly Period minus (b) the sum of (i) the amount of any Defaulted
Receivables included in any Account the Receivables in which the Bank or
the Servicer becomes obligated to accept reassignment or assignment during
such Monthly Period (unless an Insolvency Event has occurred with respect
to the Bank or the Servicer, in which event the amount of such Defaulted
Receivables will not be added to the sum so subtracted), (ii) the aggregate
amount of recoveries received in such Monthly Period with respect to both
Finance Charge Receivables and Principal Receivables previously charged-off
as uncollectible and (iii) the excess, if any, for the immediately
preceding Monthly Period of the sum computed pursuant to this clause (b)
over the amount of Principal Receivables which became Defaulted Receivables
in such Monthly Period. Receivables in any Account will be charged-off as
uncollectible in accordance with the Lending Guidelines and the Servicer's
customary and usual policies and procedures for servicing revolving credit
card and other revolving credit account receivables comparable to the
Receivables. The current policy of the Bank is to charge off the
receivables in an account when that account becomes 180 days delinquent,
unless the accountholder cures such default by making a partial payment
which satisfies the criteria for curing delinquencies set forth in the
Lending Guidelines of the Bank. If the Bank receives notice that an
accountholder is deceased or in bankruptcy proceedings, the Bank will
generally charge off the receivables in such account when a determination
is made as to collectibility, but in no event more than 180 days after
delinquency.
If the Servicer adjusts downward the amount of any Principal
Receivable (other than Ineligible Receivables which have been, or are to
be, reassigned to the Bank) because of a rebate, refund, counterclaim,
defense, error, fraudulent charge or counterfeit charge to a cardholder or
such Principal Receivable was created in respect of merchandise which was
refused or returned by a cardholder, or if the Servicer otherwise adjusts
downward the amount of any Principal Receivable without receiving
collections therefor or charging off such amount as uncollectible, the
amount of the Principal Receivables in the Trust with respect to the
Monthly Period in which such adjustment takes place will be reduced by the
amount of the adjustment. Furthermore, in the event that the exclusion of
any such Receivables would cause the Seller's Interest in Principal
Receivables at such time to be a negative number, the Bank shall be
required to pay an amount equal to such deficiency into the Collection
Account (each such payment an "Adjustment Payment" with respect to such
Distribution Date). Any such Adjustment Payment will be treated as a
portion of Shared Principal Collections as described under "--Shared
Principal Collections".
Credit Enhancement
General. For any Series, Credit Enhancement may be provided with
respect to one or more Classes thereof. Credit Enhancement with respect to
one or more Classes of a Series offered hereby may include a letter of
credit, the establishment of a cash collateral account, a surety bond, an
insurance policy or another form of credit enhancement described in the
related Prospectus Supplement, or any combination of the foregoing. Credit
Enhancement may also be provided to a Class or Classes of a Series by
subordination provisions which require that distributions of principal
and/or interest be made with respect to the Certificates of such Class or
Classes before distributions are made to one or more Classes of such
Series. If so specified in the related Prospectus Supplement, any form of
Credit Enhancement may be structured so as to be available to more than one
Class or Series to the extent described therein.
The presence of Credit Enhancement with respect to a Class is intended
to enhance the likelihood of receipt by Certificateholders of such Class of
the full amount of principal and interest with respect thereto and to
decrease the likelihood that such Certificateholders will experience
losses. However, unless otherwise specified in the Prospectus Supplement
for a Series offered hereby, the Credit Enhancement, if any, with respect
thereto will not provide protection against all risks of loss and will not
guarantee repayment of the entire principal balance of the Certificates and
interest thereon. If losses occur which exceed the amount covered by the
Credit Enhancement or which are not covered by the Credit Enhancement,
Certificateholders will bear their allocable share of deficiencies. In
addition, if specific Credit Enhancement is provided for the benefit of
more than one Class or Series, Certificateholders of any such Class or
Series will be subject to the risk that such Credit Enhancement will be
exhausted by the claims of Certificateholders of other Classes or Series.
If Credit Enhancement is provided with respect to a Series offered
hereby, the related Prospectus Supplement will include a description of (a)
the amount payable under such Credit Enhancement, (b) any conditions to
payment thereunder
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not otherwise described herein, (c) the conditions (if any) under which the
amount payable under such Credit Enhancement may be reduced and under which
such Credit Enhancement may be terminated or replaced and (d) any material
provisions of any agreement relating to such Credit Enhancement.
Additionally, in certain cases, the related Prospectus Supplement may set
forth certain information with respect to the provider of any third-party
Credit Enhancement (the "Credit Enhancer"), including (i) a brief
description of its principal business activities, (ii) its principal place
of business, place of incorporation and/or the jurisdiction under which it
is chartered or licensed to do business, (iii) if applicable, the identity
of regulatory agencies which exercise primary jurisdiction over the conduct
of its business and (iv) its total assets, and its stockholders' or
policyholders' surplus, if applicable, as of a date specified in the
Prospectus Supplement. If so described in the related Prospectus
Supplement, Credit Enhancement with respect to a Series offered hereby may
be available to pay principal of the Certificates of such Series following
the occurrence of certain Pay Out Events with respect to such Series. In
such event, the Credit Enhancer will have an interest in certain cash flows
in respect of the Receivables to the extent described in such Prospectus
Supplement (the "Enhancement Invested Amount") and may be entitled to the
benefit of the Trustee's security interest in the Receivables, in each case
subordinated to the interest of the Certificateholders of such Series.
Subordination. If so specified in the related Prospectus Supplement,
one or more Classes of a Series (in which the Bank may have an interest)
may be subordinated to one or more other Classes of such Series. If so
specified in the related Prospectus Supplement, the rights of the holders
of the subordinated Classes to receive distributions of principal and/or
interest on any Payment Date will be subordinated to such rights of the
holders of the Classes which are senior to such subordinated Classes to the
extent set forth in the related Prospectus Supplement. The related
Prospectus Supplement will also set forth information concerning the amount
of subordination of a Class or Classes in a Series, the circumstances in
which such subordination will be applicable, the manner, if any, in which
the amount of subordination will decrease over time, and the conditions
under which amounts available from payments that would otherwise be made to
holders of such subordinated Classes will be distributed to holders of
Classes which are senior to such subordinated Classes. The amount of
subordination will decrease whenever amounts otherwise payable to the
holders of subordinated Classes are paid to the holders of the Classes
which are senior to such subordinated Classes.
Letter of Credit. If so specified in the related Prospectus
Supplement, a letter of credit with respect to a Series or Class of
Certificates offered hereby may be issued by a bank or financial
institution specified in the related Prospectus Supplement (the "L/C
Issuer"). Subject to the terms and conditions specified in the related
Prospectus Supplement, an L/C Issuer will be obligated to honor drawings
under a letter of credit in an aggregate dollar amount (which may be fixed
or may be reduced as described in the related Prospectus Supplement), net
of unreimbursed payments thereunder, equal to the amount described in the
related Prospectus Supplement. The amount available under a letter of
credit will be reduced to the extent of the unreimbursed payments
thereunder.
Cash Collateral Account. If specified in the related Prospectus
Supplement, the Certificates of any Class or Series offered hereby may have
the benefit of a cash collateral account. A cash collateral account with
respect to a Class or Series will be funded on the Series Issuance Date
with respect thereto and the funds on deposit therein will be invested in
Eligible Investments. The amount available to be withdrawn from a cash
collateral account will be the lesser of the amount on deposit in the cash
collateral account and an amount specified in the related Prospectus
Supplement. The related Prospectus Supplement will set forth the
circumstances under which such withdrawals will be made from the Cash
Collateral Account.
Surety Bond or Insurance Policy. If so specified in the related
Prospectus Supplement, insurance with respect to a Series or Class of
Certificates offered hereby may be provided by one or more insurance
companies. Such insurance will guarantee, with respect to one or more
Classes of the related Series, distributions of interest or principal in
the manner and amount specified in the related Prospectus Supplement.
If so specified in the related Prospectus Supplement, a surety bond
may be purchased for the benefit of the holders of any Series or Class of
Certificates offered hereby to assure distributions of interest or
principal with respect to such Series or Class of Certificates in the
manner and amount specified in the related Prospectus Supplement.
Spread Account. If so specified in the related Prospectus Supplement,
support for a Series or one or more Classes of a Series offered hereby may
be provided by the periodic deposit of certain available excess cash flow
from the Trust Assets into an account (the "Spread Account") intended to
assure the subsequent distributions of interest and principal on the
Certificates of such Class or Series in the manner specified in the related
Prospectus Supplement.
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Other Series Enhancement
For any Series or for any Class of any Series, there may be, in
addition to Credit Enhancement, other Series Enhancement in the form of a
guaranteed rate agreement, maturity liquidity facility, tax protection
agreement, interest rate cap agreement, interest rate swap agreement or
other similar arrangement for the benefit of Certificateholders of such
Series or Class.
Pay Out Events
As described above, the Revolving Period with respect to a Series will
continue until the commencement of the Accumulation Period or the Scheduled
Amortization Period with respect thereto, which will continue until the
Invested Amount of such Series shall have been paid in full or the Series
Termination Date with respect to such Series occurs, unless a Pay Out Event
occurs with respect to such Series prior to any of such dates. Except as
otherwise provided in the related Prospectus Supplement with respect to any
Series offered hereby, a "Pay Out Event" with respect to a Series refers to
any of the following events and any other events specified as such in the
related Prospectus Supplement: (a) failure on the part of the Bank (i) to
make any payment or deposit required under the Pooling Agreement or the
Supplement relating to such Series within five business days after the date
such payment or deposit is required to be made or (ii) to observe or
perform any other covenants or agreements of the Bank set forth in the
Pooling Agreement or such Supplement, which failure has a material adverse
effect on the Certificateholders of such Series and which continues
unremedied for a period of 60 days after written notice; provided that no
such 60-day cure period shall apply in the case of a failure by the Bank to
perform its agreement to accept reassignment of Receivables which were the
subject of a breached representation or warranty as described in the first
paragraph under the heading "The Pooling Agreement Generally--
Representations and Warranties" and that only a five day cure period shall
apply in the case of a failure by the Bank to observe its covenant not to
grant a security interest or otherwise intentionally create a lien on the
Receivables; (b) any representation or warranty made by the Bank in the
Pooling Agreement or the Supplement with respect to such Series or any
information required to be given by the Bank to the Trustee to identify the
Accounts proves to have been incorrect in any material respect when made
and continues to be incorrect in any material respect for a period of 60
days after written notice and as a result of which the interests of the
Certificateholders of such Series are materially and adversely affected;
provided, however, that a Pay Out Event shall not be deemed to occur
thereunder if the Bank has repurchased the related Receivables or all such
Receivables, if applicable, during such period in accordance with the
provisions of the Pooling Agreement; (c) the occurrence of an Insolvency
Event relating to the Bank; (d) a failure by the Bank to make an Addition
to the Trust by the day on which it is required to make such Addition
pursuant to the Pooling Agreement; (e) the Trust becomes an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended; (f) the average of the Portfolio Yields for any three consecutive
Monthly Periods is less than the average of the Base Rates with respect to
such Series for such Monthly Periods; the terms "Base Rate" and "Portfolio
Yield" with respect to a Series offered hereby will have the meanings set
forth in the related Prospectus Supplement; (g) the occurrence of any
Servicer Default; or (h) the Bank becomes unable for any reason to transfer
Receivables to the Trust in accordance with the Pooling Agreement.
In the case of any event described in (a), (b) or (g), a Pay Out Event
with respect to any Series will be deemed to have occurred only if, after
the applicable grace period described in such clauses, if any, either the
Trustee or Certificateholders holding Certificates evidencing more than 50%
of the aggregate unpaid principal amount of the Certificates of any Series
to which such event relates by written notice to the Bank and the Servicer
(and the Trustee, if given by the Certificateholders) declare that a Pay
Out Event has occurred as of the date of such notice. See "Risk
Factors--Control". In the case of any event described in clause (c), (d),
(e) or (h), a Pay Out Event with respect to all Series will be deemed to
have occurred without any notice or other action on the part of the Trustee
or the Certificateholders of any Series immediately upon the occurrence of
such event. In the case of the event described in clause (f), a Pay Out
Event with respect to the related Series will be deemed to have occurred
without any notice or other action on the part of the Trustee or the
Certificateholders immediately upon the Determination Date following the
occurrence of such event. The Early Amortization Period with respect to a
Series will commence on the day on which a Pay Out Event occurs with
respect thereto. Monthly distributions of principal to the
Certificateholders of such Series will begin on the Distribution Date in
the Monthly Period following the Monthly Period in which such Pay Out Event
occurs (such Distribution Date and each following Distribution Date with
respect to such Series, a "Special Payment Date"). Any amounts on deposit
in a Principal Funding Account or an Interest Funding Account with respect
to such Series at such time will be distributed on such first Special
Payment Date to the Certificateholders of such Series. If a Series has more
than one Class of Certificates, each Class may have different Pay Out
Events which, in the case of any Series of Certificates offered hereby,
will be described in the related Prospectus Supplement.
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In addition to the consequences of a Pay Out Event discussed above, if
an Insolvency Event occurs, pursuant to the Pooling Agreement, on the day
of such Insolvency Event, the Bank will immediately cease to transfer
Principal Receivables to the Trust and promptly give notice to the Trustee
of such Insolvency Event. Under the terms of the Pooling Agreement, within
15 days the Trustee will publish a notice of the occurrence of the
Insolvency Event stating that the Trustee intends to sell, dispose of or
otherwise liquidate the Receivables in a commercially reasonable manner and
on commercially reasonable terms unless within 90 days from the date such
notice is published each other holder of the Seller's Interest and the
holders of Certificates of each Series or, if a Series includes more than
one Class, each Class of such Series evidencing more than 50% of the
aggregate unpaid principal amount of each such Series or Class (and, in the
case of any Series with respect to which there is an Enhancement Invested
Amount, any Credit Enhancer with respect thereto) instruct the Trustee not
to dispose of or liquidate the Receivables and to continue transferring
Principal Receivables as before such Insolvency Event. The proceeds from
any such sale, disposition or liquidation of the Receivables will be
deposited in the Collection Account and allocated as described in the
Pooling Agreement and each Series Supplement. If the sum of (a) the portion
of such proceeds allocated to the Certificateholders' Interest of any
Series and (b) the proceeds of any collections on the Receivables in the
Collection Account allocated to the Certificateholders' Interest of such
Series is not sufficient to pay the Invested Amount of the Certificates of
such Series in full, such Certificateholders will incur a loss.
Servicing Compensation and Payment of Expenses
The Servicer's compensation for its servicing activities and
reimbursement for its expenses for any Monthly Period will be a servicing
fee (the "Servicing Fee") payable monthly on each Distribution Date in an
amount equal to one-twelfth of the product of (a) the weighted average of
the applicable servicing fee percentages with respect to each Series
outstanding (based upon the applicable servicing fee percentage for each
Series and the amount of Receivables serviced on behalf of each Series) and
(b) the amount of Principal Receivables in the Trust on the last day of the
prior Monthly Period. The Servicing Fee will be allocated among the
Seller's Interest, the Certificateholders' Interests of each Series and,
after the Certificates of a Series have been paid in full, the interest
represented by the Enhancement Investment Amount, if any, with respect to
such Series. The share of the Servicing Fee allocable to the
Certificateholders' Interest, which includes the Enhancement Invested
Amount, if any, of a Series offered hereby with respect to any Distribution
Date shall be equal to one-twelfth of the product of (A) the servicing fee
percentage specified in the related Prospectus Supplement with respect to
such Series (the "Series Servicing Fee Percentage') and (B) the sum of the
Invested Amount with respect to such Series (less the amount, if any, on
deposit in any Principal Funding Account with respect to such Series and
the amount, if any, on deposit in the Special Funding Account allocable to
such Series) and the Enhancement Invested Amount, if any, with respect to
such Series as of the last day of the prior Monthly Period (the "Monthly
Investor Servicing Fee"). The portion of the Servicing Fee not so allocated
to the Certificateholders' Interest of a Series shall be paid by the Bank
and in no event shall the Trust, the Trustee or the Certificateholders of
any Series be liable for the share of the Servicing Fee to be paid by the
Bank. Unless otherwise provided in any Supplement, in the case of the first
Distribution Date with respect to any Series, the Monthly Investor
Servicing Fee shall accrue from the Series Issuance Date with respect to
such Series. The Monthly Investor Servicing Fee with respect to a Series
will be funded from collections of Finance Charge Receivables allocable to
such Series, and will be paid on the Distribution Date with respect to each
Monthly Period from the Collection Account (unless such amount has been
netted against deposits by the Servicer to the Collection Account).
The Servicer will pay from its servicing compensation certain expenses
incurred in connection with servicing the Receivables including, without
limitation, expenses related to the enforcement of the Receivables, payment
of the fees and disbursements of the Trustee and independent accountants
and other fees which are not expressly stated in the Pooling Agreement to
be payable by the Trust, the Certificateholders of a Series or the Bank
(other than Federal, state, local and foreign income, franchise or other
taxes based on income, if any, or any interest or penalties with respect
thereto, imposed upon the Trust). In the event that the Bank is acting as
Servicer and fails to pay the fees and disbursements of the Trustee, the
Trustee will be entitled to receive the portion of the Servicing Fee that
is equal to such unpaid amounts. In no event will the Certificateholders of
a Series be liable to the Trustee for the Servicer's failure to pay such
amounts, and any such amounts so paid to the Trustee will be treated as
paid to the Servicer for all other purposes of the Pooling Agreement.
Record Date
Payments on the Certificates of a Series offered hereby will be made
as described herein and in the relevant Prospectus Supplement to the
Certificateholders in whose names the Certificates were registered
(expected to be Cede, as nominee of DTC) at the close of business on the
last business day of the calendar month preceding the date of such
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payment (each a "Record Date"). However, the final payment on the
Certificates of a Series offered hereby will be made only upon presentation
and surrender of such Certificates. Distributions will be made to DTC in
immediately available funds. See "The Pooling Agreement Generally--
Book-Entry Registration".
Optional Termination; Final Payment of Principal
Unless otherwise specified in the Prospectus Supplement with respect
to any Series offered hereby, on any day occurring on or after the day that
the sum of the Invested Amount of the Certificates of a Series and the
Enhancement Invested Amount, if any, with respect to such Series is reduced
to 5% or less of the initial Invested Amount of the Certificates of such
Series, the Bank will have the option to repurchase the Certificateholders'
Interest of such Series. The purchase price will be equal to the sum of the
Invested Amount of such Series (less the amount, if any, on deposit in any
Principal Funding Account with respect to such Series), plus the
Enhancement Invested Amount, if any, with respect to such Series, plus
accrued and unpaid interest on the unpaid principal amount of the
Certificates (and accrued and unpaid interest with respect to interest
amounts that were due but not paid on a prior Payment Date) through (a) if
the day on which such repurchase occurs is a Distribution Date, the day
preceding such Distribution Date or (b) if the day on which such repurchase
occurs is not a Distribution Date, the day preceding the Distribution Date
following such day, at the applicable certificate rate. Following any such
repurchase, the Certificateholders of such Series will have no further
rights with respect to the Receivables. In the event that the Bank fails
for any reason to deposit the aggregate purchase price for the
Certificateholders' Interest of a Series offered hereby, payments would
continue to be made to the Certificateholders of such Series as described
herein and in the related Prospectus Supplement.
In any event, the last payment of principal and interest on the
Certificates of a Series offered hereby will be due and payable not later
than the date (the "Series Termination Date") specified in the related
Prospectus Supplement. In the event that the Invested Amount of the
Certificates of such Series is greater than zero on the Series Termination
Date (or a Distribution Date prior thereto specified in the related
Prospectus Supplement), the Trustee may, subject to any conditions
specified in such Prospectus Supplement, sell or cause to be sold interests
in the Principal Receivables or certain Principal Receivables, together in
each case with related Finance Charge Receivables, as specified in such
Prospectus Supplement, in an amount equal to the sum of the Invested Amount
and the Enhancement Invested Amount, if any, with respect to such Series.
The net proceeds of any such sale will be deposited in the Collection
Account and allocated to the Certificateholders of such Series, as provided
in such Prospectus Supplement.
Reports
No later than the third business day prior to each Distribution Date,
the Servicer will forward to the Trustee and the Paying Agent, and no later
than each Distribution Date, the Paying Agent will provide to each Rating
Agency, a statement (the "Monthly Report") prepared by the Servicer setting
forth certain information with respect to the Trust and the Certificates of
such Series (unless otherwise indicated), including: (a) the aggregate
amount of Principal Receivables and Finance Charge Receivables in the Trust
as of the end of such Monthly Period; (b) the Invested Amount with respect
to such Series (and, if such Series includes more than one Class, each such
Class); (c) the Floating Allocation Percentage and, during any Accumulation
Period, Scheduled Amortization Period or Early Amortization Period with
respect to such Series, the Principal Allocation Percentage with respect to
such Series; (d) the amount of collections of Principal Receivables and
Finance Charge Receivables processed during the related Monthly Period and
the portion thereof allocated to the Certificateholders' Interest of such
Series; (e) the aggregate outstanding balance of Accounts which were 31, 61
and 91 days or more delinquent as of the end of such Monthly Period; (f)
the Defaulted Amount with respect to such Monthly Period and the portion
thereof allocated to the Certificateholders' Interest of such Series; (g)
the amount, if any, of charge-offs with respect to the Certificateholders'
Interest of such Series for such Monthly Period; (h) the Monthly Investor
Servicing Fee with respect to such Series for such Monthly Period; and (i)
the available amount of Credit Enhancement with respect to such Series for
such Distribution Date.
With respect to each Interest Payment Date or Special Payment Date
(each, a "Payment Date"), as the case may be, the Monthly Report with
respect to any Series will include the following additional information
with respect to the Certificates of such Series: (a) the total amount
distributed; (b) the amount of such distribution allocable to principal on
the Certificates; (c) the amount of such distribution allocable to interest
on the Certificates; and (d) the amount, if any, by which the unpaid
principal balance of the Certificates exceeds the Invested Amount of such
Series as of the Record Date with respect to such Payment Date. On each
Distribution Date, the Paying Agent, on behalf of the Trustee, will forward
to each Certificateholder of record a copy of the Monthly Report.
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On or before January 31 of each calendar year, the Paying Agent, on
behalf of the Trustee, will furnish (or cause to be furnished) to each
person who at any time during the preceding calendar year was a
Certificateholder of record a statement containing the information required
to be provided by an issuer of indebtedness under the Code for such
preceding calendar year or the applicable portion thereof during which such
person was a Certificateholder, together with such other customary
information as is necessary to enable the Certificateholders to prepare
their tax returns. See "Tax Matters".
List of Investor Certificateholders
At such time, if any, as Definitive Certificates have been issued,
upon written request of any Certificateholder or group of
Certificateholders of record holding Certificates evidencing not less than
10% of the aggregate unpaid principal amount of the Certificates of a
Series or all outstanding Series, as the case may be, the Trustee will
afford such Certificateholders access during normal business hours to the
current list of Certificateholders of such Series or all outstanding
Series, as the case may be, for purposes of communicating with other
Certificateholders with respect to their rights under the Pooling Agreement
or any Supplement or Certificates. See "The Pooling Agreement
Generally--Book- Entry Registration" and "--Definitive Certificates".
The Pooling Agreement does not provide for any annual or other
meetings of Certificateholders.
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THE POOLING AGREEMENT
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
Unless otherwise specified in the related Prospectus Supplement,
Certificateholders may hold Certificates of a Series offered hereby through
DTC (in the United States) or CEDEL or Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems.
Cede, as nominee for DTC, will be the registered holder of the global
Certificates. No Certificateholder will be entitled to receive a
certificate representing such person's interest in the Certificates. Unless
and until Definitive Certificates are issued under the limited
circumstances described below, all references herein to actions by
Certificateholders shall refer to actions taken by DTC upon instructions
from its Participants, and all references herein to distributions, notices,
reports and statements to Certificateholders shall refer to distributions,
notices, reports and statements to Cede, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC
procedures.
CEDEL and Euroclear will hold omnibus positions on behalf of their
participants through customers' securities accounts in CEDEL's and
Euroclear's names on the books of their respective Depositaries which in
turn will hold such positions in customers' securities accounts in the
Depositaries' names on the books of DTC. Citibank, N.A. ("Citibank"), will
act as depositary for CEDEL and Morgan Guaranty Trust Company of New York
("Morgan") will act as depositary for Euroclear (in such capacities, the
"Depositaries").
Transfers between DTC participants will occur in the ordinary way in
accordance with DTC rules. Transfers between CEDEL Participants and
Euroclear Participants will occur in the ordinary way in accordance with
their applicable rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL or
Euroclear participants, on the other, will be effected in DTC in accordance
with DTC rules on behalf of the relevant European international clearing
system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international
clearing system by the counterparty in such system in accordance with its
rules and procedures and within its established deadlines (European time).
The relevant European international clearing system will, if the
transaction meets its settlement requirements, deliver instructions to its
Depositary to take action to effect final settlement on its behalf by
delivering or receiving securities in DTC, and making or receiving payment
in accordance with normal procedures for same-day funds settlement
applicable to DTC. CEDEL Participants and Euroclear Participants may not
deliver instructions directly to the Depositaries.
Because of time zone differences, credits of securities received in
CEDEL or Euroclear as a result of a transaction with a DTC participant will
be made during subsequent securities settlement processing and dated the
business day following the DTC settlement date. Such credits or any
transactions in such securities settled during such processing will be
reported to the relevant Euroclear or CEDEL participant on such business
day. Cash received in CEDEL or Euroclear as a result of sales of securities
by or through a CEDEL Participant or a Euroclear Participant to a DTC
participant will be received with value on the DTC settlement date but will
be available in the relevant CEDEL or Euroclear cash account only as of the
business day following settlement in DTC. For information with respect to
tax documentation procedures relating to the Certificates, see "Tax
Matters--Federal Income Tax Consequences--Non-United States Investors".
DTC is a limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the UCC and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act.
DTC was created to hold securities for its participating organizations
("Participants") and facilitate the clearance and settlement of securities
transactions between Participants through electronic book-entry changes in
accounts of its Participants, thereby eliminating the need for physical
movement of certificates. Participants include securities brokers and
dealers, banks, trust companies and clearing corporations and may include
certain other organizations. Indirect access to the DTC system also is
available to others such as banks, brokers, dealers
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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 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
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cooperative corporation (the "Cooperative"). All operations are conducted
by the Euroclear Operator, and all Euroclear securities clearance accounts
and Euroclear cash accounts are accounts with the Euroclear Operator, not
the Cooperative. The Cooperative establishes policy for the Euroclear
System on behalf of Euroclear Participants. Euroclear Participants include
banks (including central banks), securities brokers and dealers and other
professional financial intermediaries and may include any underwriters,
agents or dealers with respect to a Series of Certificates offered hereby.
Indirect access to the Euroclear System is also available to other firms
that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such,
it is regulated and examined by the Board of Governors of the Federal
Reserve System and the New York State Banking Department, as well as the
Belgian Banking Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of
Euroclear and the related Operating Procedures of the Euroclear System and
applicable Belgian law (collectively, the "Terms and Conditions"). The
Terms and Conditions govern transfers of securities and cash within the
Euroclear System, withdrawals of securities and cash from the Euroclear
System and receipts of payments with respect to securities in the Euroclear
System. All securities in the Euroclear System are held on a fungible basis
without attribution of specific certificates to specific securities
clearance accounts. The Euroclear Operator acts under the Terms and
Conditions only on behalf of Euroclear Participants, and has no record of
or relationship with persons holding through Euroclear Participants.
Distributions with respect to Certificates held through CEDEL or
Euroclear will be credited to the cash accounts of CEDEL Participants or
Euroclear Participants in accordance with the relevant system's rules and
procedures, to the extent received by its Depositary. Such distributions
will be subject to tax reporting in accordance with relevant United States
tax laws and regulations. See "Tax Matters". CEDEL or the Euroclear
Operator, as the case may be, will take any other action permitted to be
taken by a Certificateholder under the Pooling Agreement or the relevant
Supplement on behalf of a CEDEL Participant or Euroclear Participant only
in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect such actions on its behalf through DTC.
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Certificates among
participants of DTC, CEDEL and Euroclear, they are under no obligation to
perform or continue to perform such procedures and such procedures may be
discontinued at any time.
Definitive Certificates
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series offered hereby will be issued in fully registered,
certificated form to Certificateholders or their respective nominees
("Definitive Certificates"), rather than to DTC or its nominee only if (i)
the 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
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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 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
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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, 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
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transferred to the Trust by the Bank, either the Trustee or the holders of
Certificates evidencing not less than 50% of the aggregate unpaid principal
amount of the Certificates of all Series, by written notice to the Bank and
the Servicer (and to the Trustee if given by the holders of the requisite
percentage of Certificates of all Series), may direct the Bank to accept
the reassignment of the Receivables transferred by it to the Trust within
60 days of such notice, or within such longer period specified in such
notice; provided, however, that such Receivables will not be reassigned to
the Bank if, on any day prior to the end of such 60-day or longer period,
(i) the relevant representation and warranty shall be true and correct in
all material respects as if made on such day and (ii) the Bank shall have
delivered to the Trustee a certificate of an authorized officer describing
the nature of such breach and the manner in which the relevant
representation and warranty became true and correct. The Bank will be
obligated to accept the reassignment of such Receivables on the
Distribution Date following the Monthly Period in which such reassignment
obligation arises. The price for such reassignment will generally be equal
to the aggregate Invested Amounts and Enhancement Invested Amounts of all
Series on the Distribution Date on which the purchase is scheduled to be
made plus accrued and unpaid interest on the unpaid principal amount of all
Series and any interest amounts that were due but not paid on a prior date
and interest on such overdue interest amounts (if the applicable Supplement
so provides) at the applicable certificate rates through the day preceding
such Distribution Date. The payment of such reassignment price, in
immediately available funds, will be considered a payment in full of such
Receivables and the principal portion of such funds and the interest
portion of such funds will be deposited into the Special Funding Account
and the Collection Account, respectively. If the Trustee or the requisite
percentage of Certificateholders of all Series gives a notice as provided
above, the obligation of the Bank to make any such deposit will constitute
the sole remedy respecting a breach of the representations and warranties
available to Certificateholders of all Series (or the Trustee on behalf of
such Certificateholders) or any provider of Series Enhancement.
An "Eligible Account" is defined to mean a revolving credit card
account or other revolving credit account owned by the Bank which as of the
Trust Cut-Off Date with respect to an Initial Account or as of the addition
date with respect to an Additional Account (a) is payable in United States
dollars; (b) except as provided below, has not been identified as an
account the credit cards or checks, if any, with respect to which have been
reported to the Bank as having been lost or stolen; (c) has an
accountholder who has provided, as his or her billing address at the date
such account was opened, an address located in the United States or its
territories or possessions or a military address; (d) has an accountholder
who has not been identified by the Bank as an employee of the Bank or any
affiliate; (e) has not been, and does not have any receivables which have
been, sold, pledged, assigned or otherwise conveyed to any person (except
pursuant to the Pooling Agreement); (f) except as provided below, does not
have any receivables which are Defaulted Receivables; and (g) except as
provided below, does not have any receivables which have been identified as
having been incurred as a result of fraudulent use of any related credit
card or check. Eligible Accounts may include accounts, the receivables of
which have been written off, or with respect to which the Bank believes the
related accountholder is bankrupt, or as to which certain receivables have
been identified by the accountholder as having been incurred as a result of
fraudulent use of any credit cards or checks, or as to which any credit
cards or checks have been reported to the Bank as lost or stolen; provided,
that (a) the balance of all receivables in such accounts is reflected on
the books and records of the Bank (and is treated for purposes of the
Pooling Agreement) as "zero," and (b) charging or check writing privileges
with respect to all such accounts have been canceled in accordance with the
Lending Guidelines of the Bank and will not be reinstated by the Bank or
the Servicer.
An "Eligible Receivable" is defined to mean each Receivable (a) which
has arisen under an Eligible Account; (b) which was created in compliance
with the Lending Guidelines and all requirements of law applicable to the
Bank, the failure to comply with which would have a material adverse effect
on Certificateholders, and pursuant to a lending agreement which complies
with all requirements of law applicable to the Bank, the failure to comply
with which would have a material adverse effect on Certificateholders; (c)
with respect to which all consents, licenses, approvals or authorizations
of, or registrations with, any governmental authority required to be
obtained or given by the Bank in connection with the creation of such
Receivable or the execution, delivery and performance by the Bank of the
related lending agreement have been duly obtained or given and are in full
force and effect as of the date of the creation of such Receivable; (d) as
to which, at the time of its transfer to the Trust, the Bank or the Trust
will have good and marketable title free and clear of all liens and
security interests (other than any lien for municipal or other local taxes
if such taxes are not then due and payable or if the Bank is then
contesting the validity thereof in good faith by appropriate proceedings
and has set aside on its books adequate reserves with respect thereto); (e)
which has been the subject of either a valid transfer and assignment from
the Bank to the Trust of all the Bank's right, title and interest therein
or the grant of a first priority perfected security interest therein (and
in the proceeds thereof), effective until the termination of the Trust; (f)
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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 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.
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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.
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.
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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 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
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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 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
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(other than an amendment described in the preceding paragraph), the Trustee
will furnish written notice of the substance of such amendment to each
Certificateholder.
Trustee
Bankers Trust Company is the Trustee under the Pooling Agreement. The
Corporate Trust Department of Bankers Trust Company is located at Four
Albany Street, New York, New York 10006. The 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 Generally--Representations and Warranties".
Pursuant to the Pooling Agreement, the Bank represents that the
Receivables transferred by it to the Trust are "accounts" or "general
intangibles" for purpose of the UCC. Both the sale of accounts and the
transfer of accounts as security for an obligation are treated under the
UCC as creating a security interest therein and are subject to its
provisions, and the filing of an appropriate financing statement or
statements is required to perfect the interest of the Trust in the
Receivables. If a transfer of general intangibles is deemed to create a
security interest, the UCC applies and filing an appropriate financing
statement or statements is also required in order to perfect the Trust's
security interest. Financing statements covering the Receivables have been
and will be filed under the UCC to protect the Trust in the event the
transfer by the Bank is deemed to be subject to the UCC. If a transfer of
general intangibles is deemed to be a sale, then the UCC is not applicable
and no further action under the UCC is required to protect the Trust's
interest from third parties. Although the priority of a transfer of general
intangibles arising after the formation of the Trust or the date of
addition is not as clear under the laws of the States of California and New
Hampshire as the priority of interests governed by the UCC, counsel to the
Bank is of the opinion, in New Hampshire, that it would be inconsistent for
a court to afford the Trust less favorable treatment if the transfer of the
Receivables is deemed to be a sale than if it were deemed to be a security
interest, and, in California, that a court should conclude that a sale of
Receivables (including after-arising Receivables) consisting of general
intangibles would be deemed to have occurred as of the date of execution of
the related assignment under the Pooling Agreement.
There are certain limited circumstances under the UCC in which prior
or subsequent transferees of Receivables coming into existence after the
date of the Pooling Agreement could have an interest in such Receivables
with priority over the Trust's interest. A tax or other government lien on
property of the Bank arising prior to the time a Receivable comes into
existence may also have priority over the interest of the Trust in such
Receivables. Furthermore, if the FDIC were appointed as a receiver of
either of the Bank, the receiver's administrative expenses may also have
priority over the interest of the Trust in such Receivables. Under the
Pooling Agreement, however, the Bank warrants that it has transferred the
Receivables to the Trust free and clear of the lien of any third party
(subject to certain potential tax liens referred to under "The Pooling
Agreement Generally--Representations and Warranties"). In addition, the
Bank covenants that it will not sell, pledge, assign, transfer or grant any
lien on any Receivable (or any interest therein) other than to the Trust.
Certain Matters Relating to Receivership
The Federal Deposit Insurance Act ("FDIA"), as amended by the
Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA"), which became effective August 9, 1989, sets forth certain
powers that the FDIC could exercise if it were appointed as receiver or
conservator of the Bank.
Subject to clarification by FDIC regulations or interpretations, it
would appear from the positions taken by the FDIC that the FDIC, in its
capacity as receiver or conservator for the Bank, would not interfere with
the timely transfer to the Trust of payments collected on the Receivables
or interfere with the timely liquidation of Receivables as described below.
To the extent that the Bank has granted a security interest in the
Receivables to the Trust, and such security interest is validly perfected
before an Insolvency Event and is not taken in contemplation of insolvency
or with the intent to hinder, delay or defraud the Bank or its creditors,
based upon opinions issued by the general counsel of the FDIC and a related
policy statement issued by the FDIC addressing the enforceability against
the FDIC, as conservator or receiver for a
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depository institution, of a security interest in collateral granted by
such depository institution, such security interest should not be subject
to avoidance, and payments to the Trust with respect to the Receivables
should not be subject to recovery, by the FDIC. However, such opinions and
policy statement are not binding on the FDIC and, if the FDIC were to
assert a contrary position, certain provisions of the FDIA which, at the
request of the FDIC, have been applied in lawsuits to avoid security
interests in collateral granted by depository institutions, would permit
the FDIC to avoid such security interest, thereby resulting in possible
delays and reductions in payments to the Certificateholders of all
outstanding Series. In addition, if the FDIC were to require the Trustee to
establish its right to such payments by submitting to and completing the
administrative claims procedure under the FDIA, as amended by FIRREA,
delays in payments on the Certificates of all Series and possible
reductions in the amount of those payments could occur.
The Pooling Agreement provides that, upon the occurrence of an
Insolvency Event, the Bank will promptly give notice thereof to the Trustee
and a Pay Out Event will occur with respect to each outstanding Series.
Under the Pooling Agreement, no new Principal Receivables will be
transferred to the Trust and, unless otherwise instructed within a
specified period by each other holder of the Seller's Interest and the
Certificateholders holding Certificates of each Series or, if a Series
includes more than one Class, each Class of such Series, evidencing more
than 50% of the aggregate unpaid principal amount of each such Series or
Class (and, in the case of any Series with respect to which there is an
Enhancement Invested Amount, any Credit Enhancer with respect thereto), or
unless otherwise prohibited by law, the Trustee will proceed to sell,
dispose of or otherwise liquidate the Receivables in a commercially
reasonable manner and on commercially reasonable terms. The proceeds from
the sale of the Receivables would then be treated by the Trustee as
collections on the Receivables. This procedure, however, could be delayed
as described above. Upon the occurrence of an Insolvency Event, if no Pay
Out Event other than such Insolvency Event exists, the FDIC may have the
power to continue to require the Bank to transfer new Principal Receivables
to the Trust and to prevent the early sale, liquidation or disposition of
the Receivables and the commencement of the Early Amortization Period. See
"Description of the Certificates--Pay Out Events".
In the event of a Servicer Default, if a conservator, receiver or
liquidator is appointed for the Servicer, and no Servicer Default other
than such conservatorship, receivership, liquidation or insolvency of the
Servicer exists, the conservator, receiver or liquidator may have the power
to prevent either the Trustee or the requisite percentage of
Certificateholders of all Series from appointing a successor Servicer. See
"The Pooling Agreement Generally--Servicer Default".
Consumer Protection Laws
The relationship between an accountholder and consumer lender is
extensively regulated by federal, state and local consumer protection laws.
With respect to consumer revolving credit accounts owned by the Bank, the
most significant federal laws include the Federal Truth-in-Lending, Equal
Credit Opportunity, Fair Credit Reporting, Telemarketing and Consumer Fraud
and Abuse Prevention and Fair Debt Collection Practices Acts. These
statutes impose disclosure requirements before and when an Account is
opened and at the end of monthly billing cycles and, in addition, limit
accountholder liability for unauthorized use, prohibit certain
discriminatory practices in extending credit, impose certain limitations on
the type of account-related charges that may be issued and regulate
collection practices by third parties. In addition, accountholders are
entitled under these laws to have payments and credits applied to their
accounts promptly and to require billing errors to be resolved promptly.
The Trust may be liable for certain violations of consumer protection laws
that apply to the Receivables, either as assignee from the Bank with
respect to obligations arising before transfer of the Receivables to the
Trust or as the party directly responsible for obligations arising after
the transfer. In addition, an accountholder may be entitled to assert such
violations by way of setoff against the obligation to pay the amount of
Receivables owing. See "Risk Factors--Certain Legal Aspects" and "--The
Ability of the Bank to Change Terms of the Accounts". All Receivables that
were not created in compliance in all material respects with the
requirements of such laws, subject to certain conditions described under
"The Pooling Agreement Generally--Representations and Warranties", will be
reassigned to the Bank. The Servicer has also agreed in the Pooling
Agreement to indemnify the Trust, among other things, for any liability
arising from such violations. For a discussion of the Trust's rights if the
Receivables were not created in compliance in all material respects with
applicable laws, see "The Pooling Agreement Generally-- Representations and
Warranties".
The Soldiers' and Sailors' Civil Relief Act of 1940 allows individuals
on active duty in the military to cap the interest rate on debts incurred
before the call to active duty at 6%. In addition, subject to judicial
discretion, any action or court proceeding in which an individual in
military service is involved may be stayed if the individual's rights would
be prejudiced by denial of such a stay.
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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 general discussion of 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
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
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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.
Federal Income Tax Consequences--United States Investors
Interest Income to Certificateholders
Assuming the Certificates are debt obligations for federal income tax
purposes, based on the above assumptions they will not be considered issued
with OID (except as discussed below or in the applicable Prospectus
Supplement). Interest thereon will be taxable as ordinary interest income
when received or accrued by holders utilizing the cash or accrual methods
of accounting, respectively. Under the OID regulations, a holder of a
Certificate issued with a de minimis amount of OID must include such OID in
income, on a pro rata basis, as principal payments are made on the
Certificate. A purchaser who buys a Certificate for more or less than its
principal amount will generally be subject, respectively, to the premium
amortization or market discount rules of the Code.
If any interest due on a Series or Class of Certificates is not paid
in full on its scheduled payment date, Certificates of that Series or Class
will thereafter be considered to be issued with OID. The Bank intends to
take the position that OID does not arise on a Series or Class of
Certificates unless and until an event described in the preceding sentence
occurs. This position is based on the Bank's belief that the likelihood of
any such event is a "remote contingency" under applicable Treasury
regulations. However, if at the time of issuance of a Series or Class of
Certificates such an event was not considered to be a "remote contingency",
the Certificates of that Series or Class would be considered to have OID
from their date of issuance without regard to the occurrence of any such
event.
If the Certificates of a Series or Class were considered to have OID,
either initially or subsequently, all holders of Certificates of that
Series or Class would thereafter be required to accrue OID into income at a
rate equal to the full interest rate payable on the Certificates, whether
or not all or part of the interest on the Certificates was paid currently.
Moreover, the holders would be required to accrue any de minimis discount
into income over the life of the Certificates rather than when principal is
paid. As a result, holders might be required to report taxable income prior
to the receipt of cash attributable to such income.
The Paying Agent will be required to report annually to the IRS, and
to each Certificateholder of record, the amount of interest paid (or OID
accrued) on the Certificates (and the amount of interest withheld for
federal income taxes, if any) for each calendar year, except as to exempt
holders (generally, holders that are corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to
their status as nonresidents). As long as the only "Certificateholder" of
record is Cede, as nominee for DTC, Certificateholders and the IRS will
receive tax and other information only from Participants and Indirect
Participants rather than the Paying Agent. Accordingly, each nonexempt
Certificateholder will be required to provide, under penalties of perjury,
a certificate on IRS Form W-9 containing the holder's name, address,
correct federal taxpayer identification number and a statement that such
holder is not subject to backup withholding. If a nonexempt
Certificateholder fails to
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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 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
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the beneficial owner of the Certificates or such owner's agent claiming
exemption from withholding of tax on income connected with the conduct of a
trade or business in the United States; provided that in any such case (x)
the applicable form is delivered pursuant to applicable procedures and is
properly transmitted to the United States entity otherwise required to
withhold tax and (y) none of the entities receiving the form has actual
knowledge that the holder is a U.S. person or that any certification on the
form is false; (b) a holder of a Certificate who is a nonresident alien or
foreign corporation will not be subject to United States federal income tax
on gain realized on the sale, exchange or redemption of such Certificate,
provided that (i) such gain is not effectively connected to a trade or
business carried on by the holder in the United States, (ii) in the case of
a holder that is an individual, such holder is not present in the United
States for 183 days or more during the taxable year in which such sale,
exchange or redemption occurs, and (iii) in the case of gain representing
accrued interest, the conditions described in clause (a) are satisfied; and
(c) a Certificate held by an individual who at the time of death is a
nonresident alien will not be subject to United States federal estate tax
as a result of such individual's death if, immediately before his death,
(i) the individual did not actually or constructively own 10% or more of
the voting stock of Providian 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 general discussion of 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 each 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 state income 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 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
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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 which are subject to
change, which change may be retroactive. No ruling on any of the issues
discussed below will be sought from the New Hampshire Department of Revenue
Administration.
New Hampshire has a Business Profits Tax, an Interest and Dividends
Tax and a Business Enterprise Tax. New Hampshire taxing authorities would
follow federal income tax standards on characterization of the Certificates
as indebtedness. Accordingly, it is the opinion of Gallagher, Callahan &
Gartrell, P.A., New Hampshire tax counsel to the Bank ("New Hampshire Tax
Counsel") that if the Certificates were characterized as indebtedness for
federal income tax purposes, they would also be characterized as
indebtedness for New Hampshire tax purposes. Pursuant to this
characterization, the Trust would be treated as a mere security device.
The activities to be undertaken by the Bank in originating and
conveying Receivables to the Trust might be viewed as taking place in New
Hampshire; pursuant to the Pooling Agreement, the Bank, as Servicer, will
be responsible for the administration and the servicing of the Receivables.
All Trust operations, however, will take place outside of New Hampshire.
Because the situs of the Trust is outside the State of New Hampshire and
all duties and obligations of the trustee of the Trust are performed
outside of the State of New Hampshire (except in connection with the
enforcement of rights and remedies in the event of default), New Hampshire
Tax Counsel is of the opinion that the Trust will not be considered as
carrying on any business activity in the State of New Hampshire and will
not be subject to the Business Profits Tax or the Business Enterprise Tax.
There is insufficient nexus to justify New Hampshire taxation.
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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 could constitute a prohibited transaction.
Moreover, as discussed above, while Tax Counsel has given its opinion
that (unless otherwise provided in the related Prospectus Supplement) the
Certificates of a Series offered hereby will properly be treated as debt
for federal income tax purposes, if any Certificates were instead treated
as equity interests in a partnership not taxable as a corporation in which
any other Class or Series of Certificates are debt, all or part of a
tax-exempt investors share of income from the Certificates that are treated
as equity would be treated as unrelated debt-financed income under the Code
taxable to the investor.
In light of the foregoing, fiduciaries of Benefit Plans or other
investors of "plan assets" considering the purchase of Certificates should
consult their own counsel as to whether the acquisition of such
Certificates would be a prohibited
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transaction, whether Trust Assets which are represented by such
Certificates would be considered plan assets, the consequences that would
apply if the Trust Assets were considered plan assets, the applicability of
exemptive relief from the prohibited transaction rules, and the
applicability of the tax on unrelated business income and unrelated
debt-financed income. In addition, based on the reasoning of the United
States Supreme Courts decision in John Hancock Life Ins. Co. v. Harris
Trust and Sav. Bank, 510 U.S. 86 (1993), under certain circumstances assets
in the general account of an insurance company might be deemed to be plan
assets for certain purposes, and under such reasoning the purchase of
Certificates with assets of an insurance company's general account might be
subject to the prohibited transaction rules described above. Insurance
company general account investors should also consider the effect of the
recent enactment of Section 401(c) of ERISA.
Unless otherwise provided in the Prospectus Supplement, if the Bank
does not notify the Trustee, as described above, that the Certificates of
any particular Class or Series will be held by at least 100 separately
named persons, the Certificates of such Class or Series may not be acquired
by any Benefit Plan or by any entity investing with assets that are treated
as assets of a Benefit Plan. Furthermore, in that case, the Pooling
Agreement, the related Supplement and each Certificate of such Class or
Series will provide that each holder of such Certificate shall be deemed to
have represented and warranted that it is not a Benefit Plan, is not
purchasing such Certificate on behalf of a Benefit Plan, and is not using
assets treated as assets of any Benefit Plan to effect the purchase.
PLAN OF DISTRIBUTION
The Bank may sell Certificates in any of three ways: (i) through
underwriters or dealers; (ii) directly to one or more purchasers; or (iii)
through agents. The related Prospectus Supplement will set forth the terms
of the offering of any Certificates offered hereby, including, without
limitation, the names of any underwriters, the purchase price of such
Certificates and the proceeds to the Bank from such sale, any underwriting
discounts and other items constituting underwriters' compensation, any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers.
If underwriters are used in a sale of any Certificates of a Series
offered hereby, such Certificates will be acquired by the underwriters for
their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices to be determined at the time of sale or at the
time of commitment therefor. Such Certificates may be offered to the public
either through underwriting syndicates represented by managing underwriters
or by underwriters without a syndicate. Unless otherwise set forth in the
related Prospectus Supplement, the obligations of the underwriters to
purchase such Certificates will be subject to certain conditions precedent,
and the underwriters will be obligated to purchase all of such Certificates
if any of such Certificates are purchased. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to
dealers may be changed from time to time.
Certificates of a Series offered hereby may also be offered and sold,
if so indicated in the related Prospectus Supplement, in connection with a
remarketing upon their purchase, in accordance with a redemption or
repayment pursuant to their terms, by one or more firms ("remarketing
firms") acting as principals for their own accounts or as agents for the
Bank. Any remarketing firm will be identified and the terms of its
agreement, if any, with the Bank and its compensation will be described in
the related Prospectus Supplement. Remarketing firms may be deemed to be
underwriters in connection with the Certificates remarketed thereby.
Certificates may also be sold directly by the Bank or through agents
designated by the Bank from time to time. Any agent involved in the offer
or sale of Certificates will be named, and any commissions payable by the
Bank to such agent will be set forth, in the related Prospectus Supplement.
Unless otherwise indicated in the related Prospectus Supplement, any such
agent will act on a best efforts basis for the period of its appointment.
Any underwriters, agents or dealers participating in the distribution
of Certificates may be deemed to be underwriters, and any discounts or
commissions received by them on the sale or resale of Certificates may be
deemed to be underwriting discounts and commissions, under the Act. Agents
and underwriters may be entitled under agreements entered into with the
Bank to indemnification by the Bank against certain civil liabilities,
including liabilities under the Act, or to contribution with respect to
payments that the agents or underwriters may be required to make in respect
thereof. Agents
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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.................................................. 7
Act.................................................................. 2
Addition ............................................................ 25
Additional Accounts.................................................. 26
Additional Finance Charges........................................... 31
Additional Sellers .................................................. 41
Adjustment Payment .................................................. 32
Aggregate Additional Limit .......................................... 25
Automatic Additional Accounts........................................ 25
Bank................................................................. 1
Bank's Interest...................................................... 5
Base Rate............................................................ 34
Benefit Plans........................................................ 57
California Tax Counsel............................................... 54
Cede................................................................. 2
CEDEL................................................................ 39
CEDEL Participants .................................................. 39
Certificateholders .................................................. 2
Certificateholders' Interest ........................................ 4
Certificates ........................................................ 1
Citibank............................................................. 38
Class................................................................ 1
Code................................................................. 51
Collection Account................................................... 29
Commission........................................................... 2
Controlled Accumulation Amount....................................... 7
Controlled Amortization Amount....................................... 8
Controlled Deposit Amount............................................ 7
Controlled Distribution Amount....................................... 8
Cooperative.......................................................... 40
Credit Enhancement................................................... 10
Credit Enhancer...................................................... 33
Date of Processing................................................... 10
Defaulted Amount..................................................... 32
Defaulted Receivables................................................ 32
Definitive Certificates.............................................. 40
Depositaries......................................................... 38
Depository........................................................... 24
Determination Date................................................... 11
Disclosure Document.................................................. 6
Distribution Date.................................................... 7
DOL.................................................................. 57
DTC.................................................................. 2
Early Amortization Period............................................ 8
Eligible Account..................................................... 43
Eligible Deposit Account............................................. 29
Eligible Institution................................................. 29
Eligible Investments................................................. 29
Eligible Receivable.................................................. 43
Enhancement Invested Amount.......................................... 33
ERISA................................................................ 57
Euroclear............................................................ 39
Euroclear Operator................................................... 39
Euroclear Participants............................................... 39
Exchange Act......................................................... 2
Expected Final Payment Date.......................................... 6
FDIA................................................................. 49
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Term Page
FDIC................................................................. 5
Final Regulation..................................................... 57
Finance Charge Receivables........................................... 4
FIRREA............................................................... 49
Floating Allocation Percentage....................................... 29
Funding Period....................................................... 9
GAO.................................................................. 14
Group................................................................ 31
Holders.............................................................. 40
Indirect Participants................................................ 39
Ineligible Receivables............................................... 42
Initial Accounts..................................................... 3
Initial Amount....................................................... 9
Insolvency Event..................................................... 14
Interchange.......................................................... 20
Interest Funding Account............................................. 24
Interest Payment Dates............................................... 27
Invested Amount...................................................... 27
IRS.................................................................. 51
L/C Issuer........................................................... 33
Lending Guidelines................................................... 17
Monthly Investor Servicing Fee....................................... 35
Monthly Period....................................................... 21
Monthly Report....................................................... 36
Moody's.............................................................. 29
Morgan............................................................... 38
New Hampshire Tax Counsel............................................ 55
New Issuance......................................................... 3
OID.................................................................. 51
OID regulations...................................................... 51
Participants......................................................... 38
Participations....................................................... 25
Pay Out Event........................................................ 34
Payment Date......................................................... 37
Pooling Agreement.................................................... 1
Portfolio Yield...................................................... 34
Prefunding Account................................................... 9
Prefunding Account Balance........................................... 31
Principal Allocation Percentage...................................... 29
Principal Commencement Date.......................................... 7
Principal Funding Account............................................ 7
Principal Receivables................................................ 4
Principal Shortfalls................................................. 30
Principal Terms...................................................... 28
Prospectus Supplement................................................ 1
Providian Portfolio.................................................. 18
Publicly-offered security............................................ 57
Rating Agency........................................................ 12
Ratings Effect....................................................... 13
Receivables.......................................................... 1
Record Date.......................................................... 36
Remarketing Firms.................................................... 58
Removal Date......................................................... 27
Removal Notice Date.................................................. 27
Removed Accounts..................................................... 4
Required Principal Balance........................................... 16
Required Seller's Participation Amount............................... 16
Required Seller's Percentage......................................... 16
Revolving Period..................................................... 7
Rollouts............................................................. 21
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Term Page
Scheduled Amortization Period........................................ 8
Seller's Interest.................................................... 4
Series............................................................... 1
Series Cut-off Date.................................................. 7
Series Enhancement................................................... 3
Series Issuance Date................................................. 42
Series Servicing Fee Percentage...................................... 35
Series Termination Date.............................................. 36
Service Transfer..................................................... 46
Servicer............................................................. 11
Servicer Default..................................................... 46
Servicing Fee........................................................ 35
Shared Principal Collections......................................... 30
Special Funding Account.............................................. 31
Special Payment Date................................................. 35
Spread Account....................................................... 34
Standard & Poor's.................................................... 29
Supplement........................................................... 5
Supplemental Interest................................................ 41
Tax Counsel.......................................................... 11
Tax Opinion.......................................................... 28
Termination Notice................................................... 46
Terms and Conditions................................................. 40
Total System......................................................... 18
Transfer Deposit Amount.............................................. 42
Trust................................................................ 1
Trust Assets......................................................... 3
Trust Cut-off Date................................................... 3
Trustee.............................................................. 1
Trust Portfolio...................................................... 21
Trust Termination Date............................................... 41
UCC.................................................................. 14
Unallocated Principal Collections.................................... 30
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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)
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)
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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. Amendment No. 4 to the Pooling and Servicing Agreement, dated as
of June 1, 1998
4.7. Supplemental Agreement No. 1 to the Pooling and Servicing
Agreement, dated as of January 1, 1998 (incorporated by
reference to the issuer's report on Form 8-K filed on January 9,
1998)
5.1. Opinion of Cravath, Swaine & Moore with respect to legality
8.1. Opinion of Cravath, Swaine & Moore with respect to federal tax
matters**
8.2. Opinion of Farella Braun & Martel LLP with respect to California
tax matters**
8.3. Opinion of Gallagher, Callahan & Gartell, P.A., with respect to
New Hampshire tax matters**
24.1. Consent of Cravath, Swaine & Moore**
24.2. Consent of Farella Braun & Martel**
24.3. Consent of Gallagher, Callahan & Gartrell, P.A.**
25.1. Powers of Attorney**
- ----------------
** Previously filed as Part of Registration No. 333-55817 filed on
June 2, 1998.
Item 17. Undertakings
The undersigned registrant hereby agrees: (a)To file, during any
period in which offers or sales are being made, a post-effective amendment
to this registration statement; (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the registration statement; (iii) to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change in such information in the registration statement; provided,
however, that (a)(i) and (a)(ii) will not apply if the information required
to be included in a post-effective amendment thereby is contained in
periodic reports filed pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in this
registration statement. (b)That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering hereof. (c)To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering. (d)That, for purposes of determining any liability under the
Securities Act of 1933, each filing of that registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof. (e)To provide to the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required
by the underwriters to permit prompt delivery to each purchaser. (f)That
insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue. (g)That, for purposes of determining any
liability under the Securities Act of 1933, the information omitted from
the form of prospectus filed as part of this Registration Statement in
reliance upon Rule 430A
II-2
<PAGE>
and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be
deemed to be part of this Registration Statement as of the time it was
declared effective. (h)That, for the purpose of determining any liability
under the Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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. 1 to be signed
on its behalf by the undersigned, thereunto duly authorized, on July 17 ,
1998.
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. 1 has been signed by the following persons in the capacities
indicated on July 17, 1998.
Signature Title
*
- ------------------------------- Chairman of the Board and Chief Executive
Shailesh J. Mehta Officer and Director
*
- ------------------------------- Senior Vice President, Chief Financial
David J. Petrini Officer and Treasurer (Principal Financial
Officer)
/s/ Daniel Sanford
- ------------------------------- Vice President and Controller (Principal
Daniel Sanford Accounting Officer)
*
- ------------------------------- President and Director
Dianne Peterson
*
- ------------------------------- Executive Vice President and Director
Seth Barad
*
- ------------------------------- Director
Darrell Hotchkiss
*
- ------------------------------- Director
Janice Kitchen
* The undersigned, by signing his name hereto, does hereby sign this
Amendment No. 1 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/ Daniel Sanford
------------------------
Daniel Sanford
II-4
<PAGE>
AMENDMENT No. 4 dated as of June 1,
1998, to the Pooling and Servicing Agreement
dated as of June 1, 1993, between PROVIDIAN
NATIONAL BANK (formerly known as First
Deposit National Bank), a national banking
association, as Seller and Servicer, and
BANKERS TRUST COMPANY, a New York banking
corporation, as Trustee.
WHEREAS the Seller, the Servicer and the Trustee are parties to
the Pooling and Servicing Agreement dated as of June 1, 1993, as amended by
AMENDMENT No. 1 dated as of May 1, 1994, AMENDMENT No. 2 dated as of June
1, 1995 and AMENDMENT No. 3 dated as of March 1, 1997, and as supple mented
by SUPPLEMENTAL AGREEMENT No. 1 dated as of January 1, 1998 (as so amended
and supplemented, the "Agreement"); and
WHEREAS the Seller, the Servicer and the Trustee now wish to
amend the Agreement as set forth herein;
NOW, THEREFORE, the Seller, the Servicer and the Trustee hereby
agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms Not Defined Herein. All capitalized
terms used herein that are not defined here in shall have the meaning
ascribed to them in the Agreement.
SECTION 2.01. Amendments to Section 1.01 of the Agreement.
Section 1.01 of the Agreement is hereby amended as follows:
(a) The term "Bank Certificate" and the definition
thereof is deleted.
(b) The term "Bank's Interest" and the definition
thereof is added as follows:
"Bank's Interest" shall mean the interest of the Bank
and any Additional Sellers in the Trust.
<PAGE>
(c) The definition of the term "Certificate" is amended
and restated as follows:
"Certificate" shall mean any one of the Investor Certificates.
(d) The definition of the term "Certificate Register"
is amended and restated as follows:
"Certificate Register" shall mean the register maintained
pursuant to Section 6.04, providing for the registration of the Registered
Certificates and transfers and exchanges thereof.
(e) The definition of the term "Certificate holder" or
"Holder" is amended and restated as follows:
"Certificateholder" or "Holder" shall mean an
Investor Certificateholder or an owner of the
Sellers' Interest.
(f) The definition of the term "Investor Certificates" is
amended and restated as follows:
"Investor Certificates" shall mean any one of the
Certificates (including the Bearer Certificates, the Registered
Certificates or any Global Certificate) executed by the Banks and
authenticated by or on behalf of the Trustee, substantially in
the form attached to the related Supplement.
(g) The term "Sellers' Certificates" and the definition
thereof is deleted.
(h) The definition of the term "Sellers' Interest" is
amended and restated as follows:
"Sellers' Interest" shall mean, collectively,
the Bank's Interest and any outstanding Supplemental
Interest.
(i) The term "Supplemental Certificate" and the
definition thereof is deleted.
(j) The term "Supplemental Interest" and the definition
thereof is added as follows:
<PAGE>
"Supplemental Interest" shall have the
meaning specified in Section 6.03(c).
Section 2.02. Amendment to Section 2.07 of the Agreement. Section
2.07(c) of the Agreement is hereby amended and restated in its entirety as
follows:
(c) Sellers' Interest. Except for the conveyances
hereunder, in connection with any transaction permitted by
Section 7.02 and as provided in Sections 2.08(f) and 6.03, such
Seller agrees not to transfer, assign, exchange or otherwise
convey or pledge, hypothecate or otherwise grant a security
interest in the Sellers' Interest and any such attempted
transfer, assignment, exchange, conveyance, pledge, hypothecation
or grant shall be void.
Section 2.03. Amendment to Section 2.08 of the Agreement. Section
2.08(f) of the Agreement is hereby amended and restated in its entirety as
follows:
(f) Additional Sellers. The Bank may designate
Affiliates of the Bank to be included as Sellers and, as such,
Holders of an interest in the Sellers' Interest ("Additional
Sellers") under this Agreement by an amendment hereto pursuant to
Section 13.01(a); provided, however, that prior to any such
designation the conditions set forth in Section 6.03(c) or
6.03(d), as applicable, shall have been satisfied with respect
thereto.
Section 2.04. Amendment to Section 4.01 of the Agreement. The
second sentence of Section 4.01 of the Agreement is hereby amended and
restated in its entirety as follows:
The Sellers' Interest shall represent the owner ship
interest in the remainder of the Trust Assets not
allocated pursuant to this Agreement or any Supplement
to the Certificateholders' Interest, including the
right to receive Collections with respect to the
Receivables and other amounts at the times and in the
amounts specified in this Agreement or any Supplement
to be paid to the Sellers on behalf of all Holders of
the Sellers' Interest; provided, however, that the
Sellers'
<PAGE>
Interest shall not represent any interest in the
Collection Account, any Series Account or any Series
Enhancement, except as specifically provided in this
Agreement or any Supplement; provided further that the
foregoing shall not be construed to limit the Trustee's
obligations to make payments to the Sellers and the
Servicer as and when required under this Agreement and
any Supplement.
Section 2.05. Amendment to Section 6.01 of the Agreement. (a) The
second sentence of Section 6.01 is hereby amended and restated in its
entirety as follows:
The Bank's Interest, which initially represents the
entire Sellers' Interest, is in uncertificated form.
(b) The fifth sentences of Section 6.01 of the
Agreement is deleted.
(c) The final sentence of Section 6.01 is hereby
amended and restated in its entirety as follows:
All Registered Certificates shall be dated the date of
their authentication.
Section 2.06. Amendment to Section 6.02 of the Agreement. The
second sentence of Section 6.02 of the Agreement is deleted.
Section 2.07. Amendments to Section 6.03 of the Agreement. (a)
The parenthetical in Section 6.03(b)(vii) is hereby amended and restated in
its entirety as follows:
(excluding any Supplemental Interest)
(b) Section 6.03(c) of the Agreement is
hereby amended and restated in its entirety as follows:
(c) The Bank may assign all or a portion of
the Bank's Interest(such assigned interest, a
"Supplemental Interest"), the terms of which
Supplemental Interest shall be defined in a Supplement
(which Supplement shall be subject to Section 13.01(a)
to the extent that it amends any of the terms of this
Agreement), to a Person
<PAGE>
designated by the Bank (or by the holder of a
Supplemental Interest, in the case of an assignement
thereof, as provided below), upon satisfaction of the
following conditions:
(i) the Sellers' Participation
Amount (excluding any Supplemental Interest)
shall not be less than 2% of the total amount
of Principal Receivables, in each case as of
the date of, and after giving effect to, such
assignment;
(ii) the Rating Agency Condition
shall have been satisfied with respect to
such assignment; and
(iii) the Sellers shall have
delivered to the Trustee, each Rating Agency
and any Series Enhancer entitled thereto
pursuant to the relevant Supplement a Tax
Opinion, dated the date of such assignment,
with respect thereto.
Any Supplemental Interest may be assigned only upon
satisfaction of the conditions set forth in clauses
(ii) and (iii) above.
(c) Section 6.03(d) of the Agreement is
hereby amended and restated in its entirety as follows:
(d) The Bank's Interest (or any interest
therein) may be transferred to a Person which is a
member of the "affiliated group" of which Providian
Financial Corporation is the "common parent" (as such
terms are defined in Section 1504(a) of the Code);
provided that the Sellers shall have delivered to the
Trustee, each Rating Agency and any Series Enhancer
entitled thereto pursuant to the relevant Supplement a
Tax Opinion, dated the date of such transfer, with
respect thereto.
Section 2.08. Amendment to Section 6.06 of the Agreement. The
second and third sentences of Section 6.06 are hereby amended and restated
in their entirety as follows:
<PAGE>
Notwithstanding the foregoing, in determining whether the Holders of the
requisite Investor Certificates have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
owned by any of the Sellers, the Servicer, any other Holder of the Seller's
Interest, the Trustee or any Affiliate thereof, shall be disregarded and
deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Certificates
which the Trustee actually knows to be so owned shall be so disregarded.
Certificates so owned which have been pledged in good faith shall not be
disre garded and may be regarded as outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with
respect to such Certificates and that the pledgee is not any Seller, the
Servicer, any other Holder of the Sellers' Interest or any Affiliate
thereof.
Section 2.09. Amendment to Section 9.02 of the Agreement. The
fourth sentence of Section 9.02(a) is hereby amended and restated in its
entirety as follows:
Unless the Trustee shall have received instruc tions
within 90 days from the date notice pursuant to clause
(i) above is first published from (x) Holders of Investor
Certificates evidencing more than 50% of the aggregate
unpaid principal amount of each Series or, with respect
to any Series with two or more Classes, of each Class, to
the effect that such Investor Certificateholders
disapprove of the liquidation of the Receivables and wish
to continue having Principal Receivables transferred to
the Trust as before such Insolvency Event or violation,
(y) to the extent provided in the relevant Supplement,
any Series Enhancer with respect to such Series, and (z)
each of the Sellers (other than the Seller that is the
subject of such Insolvency Event or violation), including
any Additional Seller, any Holder of a Supplemental
Interest and any permitted assignee or successor under
Section 7.02, to such effect, the Trustee shall promptly
sell, dispose of or otherwise liquidate the Receivables
in a
<PAGE>
commercially reasonable manner and on commercially
reasonable terms, which shall include the solicitation of
competitive bids.
Section 2.10. Amendment to Section 10.02 of the Agreement. The
second sentence of Section 10.02(c) of the Agreement is hereby amended and
restated in its entirety as follows:
Each Holder of any interest in the Sellers' Interest
agrees that, if Providian National Bank (or any
Successor Servicer) is terminated as Servicer
hereunder, the portion of the Collections in respect of
Finance Charge Receivables that the Sellers are
entitled to receive pursuant to this Agreement or any
Supplement shall be reduced by an amount sufficient to
pay the Sellers' share (determined by reference to the
Supplements with respect to any outstanding Series) of
the compensation of the Successor Servicer.
Section 2.11. Amendment to Section 11.03 of the Agreement. The
third sentence of Section 11.03 of the Agreement is hereby amended and
restated in its entirety as follows:
The Trustee shall not be accountable for the use or
application by the Sellers of any of the Certificates
or of the proceeds of such Certif icates, or for the
use or application of any funds paid to the Sellers or
the Holders of the Sellers' Interest in respect of the
Receivables or deposited in or withdrawn from the
Collection Account, any Series Accounts or any other
accounts hereafter established to effectuate the trans
actions contemplated by this Agreement and in
accordance with the terms of this Agreement.
Section 2.12. Amendment to Section 12.03 of the Agreement. The
first sentence of Section 12.03 of the Agreement is hereby amended and
restated in its entirety as follows:
Upon the termination of the Trust pursuant to Section
12.01 and the assignment of any Supplemental Interest
to the Sellers, the Trustee shall sell, assign and
convey to the Sellers or
<PAGE>
their designee, without recourse, representation or
warranty, all right, title and interest of the Trust in
the Receivables, whether then existing or thereafter
created, all moneys due or to become due and all
amounts received with respect thereto and all proceeds
thereof, except for amounts held by the Trustee
pursuant to Section 12.02(b).
Section 2.13. Amendment to Section 13.01 of the Agreement. The
reference to "Supplemental Certificate" in Section 13.01(a) of the
Agreement is hereby replaced with the term "Supplemental Interest".
Section 2.14. Amendment to Section 13.05 of the Agreement. Clause
(i) of Section 13.05 of the Agreement is hereby amended and restated in its
entirety as follows:
(i) in the case of the Sellers or the Servicer, to
Providian National Bank c/o Providan Fianancial
Corporation, 201 Mission Street, San Francisco,
California 94105, Attention of Chief Financial Officer
(facsimile no. (415)278-6028).
Section 2.15. Amendment to Section 13.11 of the Agreement. The
reference to "Supplemental Certificate" in Section 13.11 of the Agreement
is hereby replaced with the term "Supplemental Interest".
Section 2.16. Exhibit A to the Agreement. Exhibit A to the
Agreement is deleted.
Section 2.17. Amendment to Supplements. The Supplement for each
outstanding Series, including each exhibit and schedule thereto, is hereby
amended by deleting the term "Sellers' Certificate" and replacing it with
the term "Sellers' Interest".
ARTICLE III
TENDER AND CANCELATION OF THE BANK CERTIFICATE
Section 3.01. Tender and Cancelation of the Bank Certificate.
Following the execution of this Amendment, the Seller agrees to promptly
tender the Bank Certificate to the Trustee for cancelation and the Trustee
agrees that upon receipt such Bank Certificate will be canceled.
<PAGE>
ARTICLE IV
MISCELLANEOUS
SECTION 4.01. Ratification of Agreement. As amended by this
Amendment, the Agreement is in all respects ratified and confirmed and the
Agreement as amended by this Amendment shall be read, taken and construed
as one and the same instrument.
SECTION 4.02. Amendment. The Agreement may be amended from time
to time only if the conditions set forth in Section 13.01 of the Agreement
are satisfied.
SECTION 4.03. Counterparts. This Amendment may be executed in two
or more counterparts, and by different parties on separate counterparts,
each of which shall be an original, but all of which shall constitute one
and the same instrument.
SECTION 4.04. GOVERNING LAW. THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW
<PAGE>
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, the Seller, the Servicer and the Trustee have
caused this Amendment to be duly executed by their respective officers as
of the day and year first above written.
PROVIDIAN NATIONAL BANK,
Seller and Servicer,
by
Name:
Title:
BANKERS TRUST COMPANY,
Trustee,
by
Name:
Title:
<PAGE>
[Letterhead of]
CRAVATH, SWAINE & MOORE
July 16, 1998
Providian Master Trust
Asset Backed Certificates
Dear Sirs:
We have acted as counsel for Providian National
Bank, a national banking association (the "Bank"), in
connection with the filing by the Bank, on behalf of the
Providian Master Trust (the "Trust"), with the Securities and
Exchange Commission of a Registration Statement on Form S-3
(the "Registration Statement") registering Asset Backed
Certificates representing undivided interests in certain
assets of the Trust (the "Certificates"). The Certificates of
a particular Series will be issued pursuant to the Pooling
and Servicing Agreement dated as of June 1, 1993 (as amended
by any amendments executed on or before the date hereof, the
"Pooling and Servicing Agreement"), between the Bank and
Bankers Trust Company, as trustee (the "Trustee"), and a
related Series Supplement to the Pooling and Servicing
Agreement (a "Series Supplement") between the Bank and the
Trustee, substantially in the forms filed as Exhibits 4.1 and
4.2, respectively, to the Registration Statement.
In that connection, we have examined originals or
copies, certified or otherwise identified to our satisfaction
of such documents, corporate records, certificates of public
officials and other instruments as we have deemed necessary
or advisable for purposes of this opinion.
<PAGE>
2
Based upon the foregoing, we are of opinion as
follows:
1. The Pooling and Servicing Agreement has been
duly authorized, executed and delivered by the Bank, and
constitutes the legal, valid and binding obligation of the
Bank enforceable against the Bank in accordance with its
terms (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws
affecting creditors' rights generally from time to time in
effect). The enforceability of the obligations of the Bank
under the Pooling and Servicing Agreement is also subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law) and no opinion is expressed as to the availability of
equitable remedies, including specific performance and
injunctive relief.
2. When the Series Supplement relating to a
particular Series of Certificates is duly authorized,
executed and delivered by the Bank and the Trustee, such
Series Supplement will constitute the legal, valid and
binding obligation of the Bank enforceable against the Bank
in accordance with its terms (subject to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights
generally from time to time in effect). The enforceability of
the obligations of the Bank under such Series Supplement is
also subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in
equity or at law) and no opinion is expressed as to the
availability of equitable remedies, including specific
performance and injunctive relief.
3. When the Certificates of a particular Series
have been duly authorized by the Bank, when such Certificates
have been duly executed and authenticated in accordance with
the terms of the Pooling and Servicing Agreement and the
related Series Supplement and when such Certificates have
been delivered and sold as contemplated by the Registration
Statement, such Certificates will be validly issued and
outstanding, fully paid and non assessable and entitled to
the benefits provided for by the Pooling and Servicing
Agreement and such Series Supplement.
<PAGE>
3
We are admitted to practice only in New York and
our opinion is limited to matters governed by the laws of the
State of New York and the Federal laws of the United States.
We know that we are referred to under the heading
"Legal Matters" in the Prospectus forming a part of the
Registration Statement, and we hereby consent to such use of
our name therein and to the use of this opinion for filing
with the Registration Statement as Exhibits 5.1 and 24.1
thereto.
Very truly yours,
/s/ CRAVATH, SWAINE & MOORE
Providian National Bank
295 Main Street
Tilton, NH 03276
O
<PAGE>
[Letterhead of]
[Cravath, Swaine & Moore]
July 17, 1998
Christine R. Bianchine, Attorney-Advisor
Securities and Exchange Commission
Division of Corporate Finance
450 5th Street, N.W.
Washington, DC 20549
Re: Providian Master Trust (the "Trust")
Providian National Bank (the "Seller" and together with the
Trust, the "Registrants")
Registration Statement on Form S-3
Filed on July 2, 1998
File No. 333-55817
Dear Ms. Bianchine:
On behalf of Providian National Bank, as originator of the
Providian Master Trust, this letter responds to your letter dated July 10,
1998 (the "Comment Letter"), providing comments on the above-referenced
Registration Statement (the "Registration Statement"). For your
convenience, each comment from the Comment Letter has been reproduced
below, followed by the Seller's response to such comment. All references in
each response refer to Pre-Effective Amendment No. 1 to the Registration
Statement ("Amendment No. 1") which accompanies this letter and which has
been marked to show the changes from the initial filing of the Registration
Statement. Capitalized terms defined in the Prospectus included in the
Registration Statement (the "Prospectus") and used in the following
responses without definition shall have meanings specified in the
Prospectus.
<PAGE>
2
General
Comment 1.
The registration statement must include one or more forms of
prospectus supplement that are representative of the transactions
contemplated. Any prospectus supplement included must appear in
Part I of the registration statement.
Response 1.
Part I of the Registration Statement has been revised to include
a representative form of Prospectus Supplement.
Comment 2.
To the extent that the Registrants intend to issue Certificates
pursuant to this registration statement shortly after
effectiveness, the last pre-effective amendment should include a
prospectus supplement that contains all information relating to
the offering that is known or reasonably available to the
Registrants at the time of effectiveness. See Section II.A.5. of
Release No. 33-7168. In this regard, we note the use of Rule 415
and Rule 430A undertakings in Part II of the registration
statement.
Response 2.
The Seller notes that it has not yet determined when the initial
takedown from the Registration Statement will be made, which
decision will be a function of market conditions, the Seller's
funding requirements and the timing of the Registration Statement
being declared effective. However, the Seller acknowledges its
responsibilities pursuant to Section II.A.5 of Release No.
33-7168, and hereby undertakes to comply with such
responsibilities, as applicable.
Comment 3.
We note that prospectus supplements may differ in form and content
from those to be presented in the registration statement. Be
advised that if novel or unique securities are to be offered under
this registration statement, we intend to review and, if
necessary, comment upon the disclosure in the 424(b) prospectus.
You may wish to
<PAGE>
3
supplementally furnish us with copies of the draft pages prior to
the use of prospectus supplements that includes novel or unique
features. We would review these draft pages on an expedited
basis.
Response 3.
The Seller has taken notice of the stated advice for future
reference.
Comment 4.
We are of the view that a "Participation", as described in the
prospectus, is a security. The staff believes that any
Participations issued by the Seller or its affiliates which are
included in the Trust in respect of any series of Certificates
must in all cases be registered concurrently with an offering of
the Certificates. Moreover, if the Participations were issued by
an entity other than the Seller or its affiliates, such
Participations must (i) either (a) have been previously
registered under the Securities Act of 1933, or (b) are eligible
for sale under Rule 144(k); and (ii) be acquired in bona fide
secondary market transactions not from the issuer or an
affiliate.
Response 4.
The Seller has duly noted the advice in Comment 4 and will
undertake to comply with applicable rules and regulations to the
extent Participations are added to the Trust.
Comment 5.
Please note that, to the extent that an offering consists of
Certificates collateralized by Participations, the prospectus
supplement must clearly and concisely disclose the material terms
of the underlying Participations. In this regard, please be
advised that if the Participations constitute 20% or more of the
pool, you must provide all of the information that would be
provided in a direct offering of the Participations. For
offerings comprising less than 10% of the pool, provide
statistical information, and for offerings in the range between
the two provide intermediate- type disclosure.
Response 5.
<PAGE>
4
The Seller hereby undertakes to provide the applicable
information described in Comment 5 to the extent that an offering
consists of Certificates collateralized by Participations.
Comment 6.
To the extent that an offering consists of Certificates
collateralized by Participations of one issuer or related
issuers, each of the underlying issuers must be reporting
pursuant to Sections 12 or 15(d) of the Exchange Act at the time
of the offering (and if the underlying issuer ceases reporting or
if it was never a reporting entity, the Trust must provide the
same information regarding the Participations in its reports) on
a going-forward basis.
Response 6.
The Seller acknowledges its obligations described in Comment 6 to
the extent that an offering consists of Certificates
collateralized by Participations of one issuer or related
issuers.
Comment 7.
Moreover, an offering consisting of Certificates collateralized
by private asset-backed securities (which includes
Participations) of one issuer or related issuers may involve
co-issuers pursuant to Rule 140 under the Securities Act.
Response 7.
The Seller has duly noted the advice provided in Comment 7.
Comment 8.
The staff notes that the phrase "unless as otherwise provided in
the related Prospectus Supplement", and other similar phrases
appear throughout the prospectus. Be advised that disclosure in
prospectus supplements may enhance disclosure in the prospectus
but should not contradict it. Please revise as applicable.
<PAGE>
5
Response 8.
The type of language referenced in Comment 8 has been removed or
modified except in certain limited circumstances where a variety
of options are available and the option that will almost always
be used is described in the Prospectus but other options (which
would be difficult to describe except in the context of a
particular offering) may be if used if so specified in the
Prospectus Supplement.
Comment 9.
On EDGAR, Providian National Bank is tagged as First Deposit
National Bank. Please contact our Filer Support office at
202/942-8900 to inform them of the name change and correct the
name on EDGAR. This must be done prior to the effectiveness of
this Registration Statement.
Response 9.
The Seller has previously contacted the Filer Support office to
inform them of the name change and has submitted a Form ID to
reflect the name change on EDGAR. The Seller will not request
effectiveness of the Registration Statement until the name of the
Seller is corrected on EDGAR.
Base Prospectus
Prospectus Outside Front Cover Page
Comment 10.
Clarify in the heading and the first paragraph that the Trust is
issuing the Certificates.
Response 10.
The first paragraph on page 1 of the Prospectus has been revised
in response to Comment 10.
Report to Certificateholders
Comment 11.
Revise to clarify that Monthly Reports will be sent to
certificateholders after Definitive Certificates are issued.
<PAGE>
6
Response 11.
The paragraph entitled "Reports to Certificateholders" on page 2
of the Prospectus has been revised in response to Comment 11.
Incorporation of Certain Documents by Reference
Comment 12.
Please revise to explicitly state that the documents incorporated
by reference are filed in the name of Providian National Bank.
Response 12.
The paragraph entitled "Incorporation of Certain Documents by
Reference" on page 2 of the Prospectus has been revised in
response to Comment 12.
Prospectus Summary
Comment 13.
Revise the lead-in paragraph to provide a page number
cross-reference to the index of defined terms.
Response 13.
The lead-in paragraph of the "Prospectus Summary" has been
revised by including a cross-reference to the Prospectus
Glossary.
Comment 14.
The summary should provide an overview of the material aspects of
the prospectus, and should not repeat verbatim information
contained elsewhere in the document. We note, for example, the
interest discussions on pages 6 and 24 and the early amortization
period discussions on pages 8 and 25. Please revise the summary
to provide investors with a clear, concise and coherent
"snapshot" description of the most significant aspects of the
prospectus. See Rule 421(b).
<PAGE>
7
Response 14.
The Prospectus Summary has been revised in response to Comment
14.
Trust
Comment 15.
Indicate that a description of the prior issuances will be set
forth in an Annex to the prospectus supplement.
Response 15.
The paragraph entitled "Trust" in the Prospectus Summary has been
revised in response to Comment 15.
Comment 16.
Clarify that the Trust does not own the accounts.
Response 16.
The definition of "Accounts" has been revised in response to
Comment 16.
Comment 17.
Clarify what you mean on page 3 by "any Participations included
in the Trust." We may have further comment.
Response 17.
The Trust does not currently include any Participations and the
Seller has no plans to add Participations to the Trust.
Participations are defined in "Description of the
Certificates--Addition of Trust Assets" as "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".
<PAGE>
8
The Certificates
Comment 18.
We note that a series may include multiple classes of
Certificates that (a) may be senior or subordinate to the rights
of one or more of the other Classes of the Series, and (b) may
vary with respect to the amount, percentage, and timing of
distributions of principal or interest or both. Accordingly,
provide a brief description of the most significant
characteristics of any such class of Certificates, together with
a brief explanation of the most significant risks associated with
such Certificates.
Response 18.
As noted in Comment 18, a Series may include multiple Classes of
Certificates that (a) may be senior or subordinated to the rights
of one or more of the other Classes of the Series, and (b) may
vary with respect to the amount, percentage, and timing of
distributions of principal or interest or both. With respect to
additional disclosure relating to the characteristics of any
particular Class of Certificates, the Prospectus indicates that
the applicable Prospectus Supplement will disclose the
information relating to the Series-specific terms that are
material to investors of such Series, including the calculation
and timing of distributions of interest, the amount and timing of
distributions of principal, credit enhancement and expected final
payment dates. The disclosure relating to senior and subordinated
Classes will be included in the applicable Prospectus Supplement.
Because each of these items is applicable only to the specific
Series to which it relates, it is not possible to provide more
detailed information in the Prospectus. The Seller intends to
provide such additional information, to the extent material, and
the representative form of Prospectus Supplement included in the
Registration Statement anticipates including the information
identified above.
Comment 19.
Furthermore, disclose the material risks associated with such
Certificates under one or more of the risks factors in the "Risk
Factors" section of the related prospectus supplement. Also
provide in the related prospectus supplement additional detailed
disclosure of any other
<PAGE>
9
material information pertaining to any such Class of
Certificates.
Response 19.
The Seller undertakes to disclose in the "Risk Factors" section
of the related Prospectus Supplement, any additional material
risks to a Class of Certificateholders including any material
risk to any subordinate Class with respect to its subordination
to senior Classes. As stated in our response to comment 18, the
Seller will also disclose in the Prospectus Supplement any
additional material information pertaining to each Class of
Certificates.
Tax Status
Comment 20.
Delete the following clause from the first sentence of this
section: "Except to the extent otherwise provided in the related
prospectus supplement". A prospectus supplement may provide
additional, but not different, tax consequences.
Response 20.
The clause has been retained because the tax consequences
described in the Prospectus may not apply in certain limited
circumstances that are difficult to describe except in the
context of a particular offering.
Comment 21.
If additional tax consequences are addressed in a prospectus
supplement, tax counsel for that transaction must file an opinion
as to these consequences by means of a post-effective amendment
or Form 8-K prior to the time of any sales of the related
securities. Supplementally undertake to cause a tax opinion to be
filed under these circumstances.
Response 21.
The Seller hereby undertakes to cause such tax opinion to be
filed.
Comment 22.
<PAGE>
10
Revise to identify tax counsel. Also disclose your opinion as to
the tax treatment of the Trust.
Response 22.
The summary paragraph regarding Tax Status has been revised in
response to Comment 22.
Comment 23.
To the extent that holders of Certificates will be required to
report income in respect of those securities on the accrual
basis, disclose that they may be required to report taxable
income before actually receiving a corresponding cash
distribution.
Response 23.
The summary paragraph regarding Tax Status has been revised in
response to Comment 23.
ERISA Considerations
Comment 24.
We note the ERISA discussion later in the prospectus,
particularly the last paragraph. Revise the summary ERISA
discussion to indicate that it is not anticipated that the
Certificates will be eligible for purchase by benefit plans. If
the Bank will not know at the time the final prospectus
supplement is printed whether the publicly-offered security
exception is available, the summary ERISA discussion should also
indicate that it is not anticipated that the Certificates will be
eligible for purchase by benefit plans.
Response 24.
In response to your Comment 24, the summary ERISA section in the
Prospectus has been modified. The Seller believes that the
summary ERISA section does not enhance disclosure to investors
since the Seller intends to include in each Prospectus Supplement
a summary ERISA section for the applicable offering. The Seller
believes that the summary ERISA section in the Prospectus
Supplement should state whether a Class of Certificates "may be
eligible" or "is not expected to be eligible" for purchase by
Benefit Plans. The Seller will not be able to ascertain whether
or not a Class
<PAGE>
11
of Certificates will be eligible for purchase by Benefit Plans by
the time that the final Prospectus Supplement is printed.
However, to include in the summary ERISA section in every
Prospectus Supplement the statement that "it is not anticipated
that the Certificates will be eligible for benefit plans" would
be inaccurate in those cases where it is anticipated (but not
certain) that Certificates will be eligible. Such disclosure will
also discourage Benefit Plans from buying what are ERISA eligible
securities and may eventually, after Benefit Plans learn that
such disclosure is required even in transactions where
eligibility is expected, lead Benefit Plans to discount the
negative language. The Seller believes that disclosure will be
enhanced by stating whether a Class of Certificates "may be
eligible" if the Seller reasonably believes that the offering
will be ERISA eligible and "is not expected to be eligible" if
the Seller does not reasonably believe that the offering will be
ERISA eligible. The Seller also notes that there is a mechanism
for Benefit Plans to determine if the Certificates of a Class
will be held by at least 100 separately named persons at the
conclusion of the offering thereof by contacting the Trustee. See
"ERISA Considerations".
Certificate Rating
Comment 25.
The Certificates must be rated investment grade in order for you
to register their issuance on Form S-3. Revise this disclosure
accordingly.
Response 25.
The first paragraph of "Certificate Rating" has been revised in
response to this Comment.
Risk Factors
Comment 26.
Include a lead-in paragraph to this section stating that the risk
factor disclosure here and in the prospectus supplement
summarizes all material risk factors.
<PAGE>
12
Response 26.
A lead-in paragraph has been added to the "Risk Factors" section
in response to Comment 26.
Comment 27.
Revise the headings of the risk factors to clearly and succinctly
identify the effect on prospective investors of the risks
identified.
Response 27.
The subheadings in the Risk Factors section have been revised, as
needed, to briefly describe the risks presented.
Comment 28.
Revise each risk factor to clearly and succinctly explain the
risk to the Trust and prospective investors.
Response 28.
The disclosure has been revised to clarify, as needed, the
consequences of each risk factor to Certificateholders.
Comment 29.
Include a risk factor describing risks associated with the use of
financial instruments like swaps and caps, including limitations
on these forms of credit enhancement, credit risk and legal
enforceability risk.
Response 29.
The Seller acknowledges its obligation to disclose the material
risks associated with swaps and caps and other similar financial
instruments that may be used as a form of Credit Enhancement for
one or more Classes in a particular Series. The Seller, however,
believes that such disclosure would be more appropriate if made
in the applicable Prospectus Supplement since the risks of such
financial instruments will be limited to the Series to which they
relate and the specific terms of such financial instruments will
determine the material risks to the Certificateholders of such
Series from such financial instruments.
<PAGE>
13
The Bank's Credit Card and Consumer Lending Business
Comment 30.
Include subsections that addresses the delinquency and loss
experience and revenue experience of the Providian Portfolio.
Indicate that the prospectus supplement will provide specific
statistical information.
Response 30.
A subsection has been added to the section "The Bank's Credit
Card and Consumer Lending Business" to describe the information
with respect to delinquency and loss experience that will be
included in the related Prospectus Supplement.
Comment 31.
The delinquency and loss tables to be provided in prospectus
supplements should be accompanied by a management's discussion
and analysis that discusses trends and reasons for changes in the
tables, trends that management is aware of that are expected to
impact the future performance of the portfolio and an explanation
of any anomalies. Please supplementally confirm that this
disclosure will be provided.
Response 31.
The delinquency and loss tables included in each Prospectus
Supplement will be accompanied by a discussion of material trends
and reasons for any material changes in the delinquency and loss
experience tables.
Comment 32.
Any material information known by management relating to trends
in the credit card industry, generally, and in the legal, social
and economic situation in the states where the accounts are
billed that could likely have an adverse effect on the Trust
portfolio should also be discussed. Please supplementally confirm
that this disclosure will be provided.
Response 32.
<PAGE>
14
The Seller has provided information relating to trends in the
credit card industry in "Risk Factors--Competition in the Credit
Card and Consumer Revolving Loan Industry". At the present time
the Seller does not believe that there are any material risks to
investors relating to the legal, social and economic situation in
the states where the accounts are billed that would be likely to
have an adverse effect on the Trust. The Seller undertakes to
include in the Prospectus Supplement any additional material
information which may become known by management relating to
trends in the credit card industry, generally, and in the legal,
social and economic situation in the states where the accounts
are billed that would be likely to have an adverse effect on the
Trust.
Business Overview
Comment 33.
We note the statement in the first paragraph of this section that
the Providian Portfolio consists "primarily" of unsecured credit
card receivables. If any of the receivables in accounts presently
included in the Trust or to be included in the Trust are secured,
please disclose this. If the property securing the receivables
will ever be held by the Trust, please also disclose this.
Response 33.
The Providian Portfolio consists "primarily" of unsecured credit
card receivables but, as stated in the first paragraph of the
"Business Overview", it also includes receivables arising in
revolving line of credit accounts which are accessed by checks
rather than credit cards. As also stated, the Providian Portfolio
does not at this time include any secured receivables. To the
extent that the Seller elects to add Accounts in which the
Receivables are secured by a form of collateral assigned to the
Trust, the Seller undertakes to include appropriate disclosure
with respect to such Accounts, the related collateral and the
rights of the Trust to such collateral.
Comment 34.
The second paragraph of this section is inappropriate for the
prospectus, because you provide no statistical information here
about the portfolio that substantiates this
<PAGE>
15
claim. Please move this paragraph to the prospectus supplement.
Response 34.
The second paragraph of the "Business Overview" has been removed.
Comment 35.
Revise the fifth paragraph of this section to make clear that
accounts acquired from third parties are part of the Providian
Portfolio.
Response 35.
The fifth paragraph of the "Business Overview" has been revised
to make clear that accounts acquired from third parties are part
of the Providian Portfolio.
Collection Efforts
Comment 36.
Please provide more information about the Bank's standards for
accepting qualified partial payments, which is mentioned in the
third paragraph of this section.
Response 36.
The third paragraph of "Collection Efforts" has been revised to
clarify this disclosure.
The Accounts
General
Comment 37.
Please clearly detail all types of accounts included and to be
included in the Trust portfolio. We note that you indicate on the
cover page and page 3 that the accounts are "consumer revolving
credit card accounts and other consumer revolving credit
accounts".
<PAGE>
16
Response 37.
The Accounts are selected from the among the accounts in the
Providian Portfolio and can include any of the types of accounts
included in the Providian Portfolio. The Providian Portfolio
currently consists only of credit card accounts and revolving
line of credit accounts which are accessed by checks rather than
credit cards. The first paragraph under "The Accounts--General"
has been revised to include a cross-reference to a discussion of
the types of accounts in the Providian Portfolio.
Comment 38.
We note the statement in the second paragraph that accounts with
charged-off receivables may be included in the Trust. Please
disclose why this is done. For what purposes are they deemed to
have "zero" balances? Clarify whether investors are benefited or
harmed by this practice.
Response 38.
As stated in the second paragraph under "The Accounts-- General"
accounts originated by the Seller from a specific solicitation
program are treated for administrative convenience as a group, a
"rollout". The Seller may choose to designate an entire rollout
as an Addition to the Trust, the effect of which is to transfer
to the Trust Receivables in Accounts that may have been
previously charged-off as uncollectible in accordance with the
Seller's practices as described under "The Bank's Credit Card and
Consumer Lending Business--Collection Efforts". These Accounts
are treated as having a zero balance of Principal Receivables and
Finance Charge Receivables. Accordingly, for purposes of
determining whether the Seller has satisfied the Trust's Required
Principal Balance and Required Seller's Participation Amount
requirements, the charged-off Receivables would not be counted.
Nevertheless, subsequent to the Addition to the Trust, amounts
recovered during a Monthly Period with respect to the charged-off
Receivables will be applied to offset losses for such Monthly
Period that would otherwise be allocated to the
Certificateholders to their benefit.
<PAGE>
17
Comment 39.
We note the third paragraph of this section. Please provide a
more detailed description of the Bank's selection process for
accounts. How does that Bank select accounts for the Trust that
are "generally representative" of the Providian Portfolio?
Supplementally advise us what the Bank does with the other
accounts in its portfolio.
Response 39.
The third paragraph under "The Accounts--General" has been
revised in response to Comment 39. Please also note that on or
prior to the date of any Addition of Accounts to the Trust, the
Seller will provide an officer's certificate stating that no
selection procedure was utilized by the Seller which would result
in a selection of Additional Accounts (from the available
Eligible Accounts owned by the Seller) that would be materially
adverse to the interests of the Certificateholders of any Series
as of the date of addition. See "Description of the
Certificates--Addition of Trust Assets". Supplementally, the
Seller funds the remaining Providian Portfolio not included in
the Trust through various on-balance and off-balance sheet
vehicles.
Comment 40.
Please confirm that no accounts are located outside of the United
States. In the alternative, please revise to specifically address
risks relating to assets located outside of the United States and
identify the location of all such assets. In this regard, address
political, economic and legal risks, such as perfection of a
security interest, in each country in which assets are located.
We may have further comment.
Response 40.
The definition of "Eligible Account" under "The Pooling
Agreement--Representations and Warranties" specifically provides
that an Eligible Account at the time it is designated to the
Trust must have an accountholder who has provided, as his or her
billing address, an address located in the United States (or its
territories or possessions) or a military address. Accordingly,
there are no material risks related to assets located outside of
the United States and no additional disclosure has been added.
<PAGE>
18
Description of the Certificates
General
Comment 41.
Revise the first paragraph of this section to indicate that it is
a summary of the material terms of the Certificates. If
necessary, expand the disclosure to include all such information.
Prospectus descriptions of securities must be materially
complete. It is inappropriate to qualify the entire discussion by
reference to the pooling agreement. You may indicate that
additional material information relating to the terms of a
specific transaction will be contained in the prospectus
supplement.
Response 41.
The first paragraph under "General" has been revised in response
to Comment 41.
Comment 42.
Will you have paired series? If so, disclose the terms, purpose
and effects of paired series.
Response 42.
The Seller has no plans to issue a Paired Series. However, the
Seller has included in the form of Prospectus Supplement a
section detailing material information to investors with respect
to the possibility of the related Series being paired with a
future Series. See "Series Provisions--Paired Series" in the
Prospectus Supplement".
Addition of Trust Assets
Comment 43.
Please clarify whether receivables conveyed to the Trust after
funding periods arise from "Additional Accounts" subject to the
conditions described on page 26. Please also clarify which of
these conditions apply to Participations and which do not.
Elaborate on the accounts and receivables underlying the
Participations.
Response 43.
<PAGE>
19
As stated in the first paragraph under "Description of the
Certificates--Funding Period", during the Funding Period amounts
will be held in the Prefunding Account pending the transfer of
additional Receivables to the Trust or a reduction of the
Certificateholders' Interest of other Series. Additional
Receivables can be added to the Trust either through an aggregate
increase in the balances of cardholders or through an Addition of
Accounts. Any Addition of Accounts will be subject to the
conditions described in the third paragraph under "Description of
the Certificates--Addition of Trust Assets". Such paragraph has
been revised to distinguish the conditions applicable to
Participations from Additions. The Seller also notes that the
Trust does not include Participations and the Seller has no plans
to add Participations to the Trust.
Funding Period
Comment 44.
Disclose the maximum length of a funding period. If this amount
is longer than one year, supplementally provide the staff with
your legal analysis as to why the Trust should not be registered
as an Investment Company under the Investment Company Act of
1940. We may have further comment.
Response 44.
The Seller undertakes that the Funding Period with respect to a
prefunded Series shall not exceed one year.
Credit Enhancement
Comment 45.
The staff notes that the credit enhancements with respect to one
or more classes of certificates of a series may include third
party credit enhancement. If 10% or more of the cashflow to a
series is represented by payments from one entity or a group of
affiliated entities, provide summarized financial statement of
such entity. If 20% or more of the cashflow to a series is
represented by payments from an entity or a group of affiliated
entities, provide audited financial information of such entity in
accordance with Regulation S-X. By way of analogy, see Staff
Accounting Bulletins 71 and 71A.
<PAGE>
20
Response 45.
The Seller hereby undertakes to provide the information described
in Comment 45 in the related Prospectus Supplement to the extent
applicable.
Comment 46.
Please be advised that such disclosure obligations apply not only
to the prospectus or related prospectus supplement, but also to
periodic reports filed under the Exchange Act. Accordingly,
confirm supplementally that the Registrants are aware of and will
comply with the foregoing disclosure obligations.
Response 46.
The Seller is aware of the disclosure obligations described in
Comment 46 and confirms that it will comply with such disclosure
obligations to the extent required by the Exchange Act and the
rules and regulations thereunder.
Other Series Enhancement
Comment 47.
We note the disclosure that there may interest rate cap
agreements, interest rate swap agreements or similar
arrangements. Confirm supplementally that you will identify the
counterparty to a swap agreement or cap agreement in the related
prospectus supplement, and file the agreement as an exhibit in a
Current Report on Form 8-K.
Response 47.
In the event that an offered Series includes an interest rate cap
agreement or interest rate swap agreement or other similar
arrangement as of the Series Issuance Date the Seller confirms
that, to the extent the credit exposure to a rate cap or swap
agreement counterparty equals 10% or more of the cashflow of a
Series, it will identify the counterparty to such agreement in
the related Prospectus Supplement and will file such agreement as
an exhibit in a Current Report on Form 8-K. To the extent that
the documentation for a Series provides that an interest rate cap
agreement or similar arrangement may be added at a future date,
the Prospectus Supplement will describe the
<PAGE>
21
conditions precedent thereto and, to the extent the credit
exposure to a rate cap or swap agreement counterparty equals 10%
or more of the cashflow of a Series, the Seller confirms that it
will file such agreement as an exhibit in a Current Report on
Form 8-K.
Comment 48.
To the extent the credit exposure pursuant to a swap agreement or
cap agreement equals 10% or more of the cashflow to a series, the
Registrants must provide summarized financial statements of the
counterparty. To the extent the credit exposure pursuant to a
swap agreement or cap agreement equals or exceeds 20% of the
cashflow to a series, the Registrants must provide audited
financial statements of the counterparty. Confirm supplementally
that you are aware of and will comply with the foregoing
disclosure requirements.
Response 48.
The Seller is aware of the disclosure requirements described in
Comment 48 and confirms that information satisfying the
applicable disclosure requirements will be included in the
related Prospectus Supplement.
Comment 49.
We note that credit enhancement may take the form of a guaranteed
rate agreement. If there is a guaranty of the Certificates rather
than a guaranty of payment on the underlying Trust assets, the
Registrants must register the guaranty separately. See Section
2(a)(1) of the Securities Act. Please revise to indicate the
nature of anticipated guaranties.
Response 49.
The Seller does not currently anticipate including any type of
guaranteed rate agreement as credit enhancement for a Series.
However, the Seller duly notes the advice provided in Comment 49.
The Pooling Agreement
Comment 50.
<PAGE>
22
Delete the word "generally" from this heading.
Response 50.
The word "generally" has been deleted from the heading "The
Pooling Agreement".
Comment 51.
Include an introductory paragraph in this section indicating that
the discussion is a summary of the material terms of the pooling
agreement. If necessary, expand the disclosure to include all
such information. Prospectus descriptions of operative agreements
must be materially complete. You may indicate that additional
material information relating to the terms of a specific
transaction will be contained in the prospectus supplement.
Response 51.
An introductory paragraph has been added under "The Pooling
Agreement" in response to Comment 51.
Tax Matters
Comment 52.
Revise the first sentence of this section to state that the
following is a summary of the material federal income tax
consequences to holders of Certificates. Additional tax
consequences may be addressed in the prospectus supplement.
Delete the indication that the discussion only applies to
certificates characterized as debt. Also delete the statement
that "different" tax considerations being disclosed in the
prospectus supplement.
Response 52.
The first paragraph of this section has been revised in response
to Comment 52.
Comment 53.
Summarize in the first few paragraphs of this section what
matters are the subject of the opinion of tax counsel. You
indicate in the first paragraph that you are only giving an
opinion as to the characterization of certificates as debt,
<PAGE>
23
at the bottom of page 51 two opinions of counsel are listed, and
on page 52 you indicate that tax counsel is of the opinion that
the Trust will not subject to federal income tax.
Response 53.
This section has been revised in response to Comment 53.
Comment 54.
If you intend the disclosure to be your opinion, clearly state
this.
Response 54.
The first paragraph of this section has been revised in response
to Comment 54.
Comment 55.
All factual assumptions and qualifications relating to your
opinion must be described in the prospectus.
Response 55.
The first paragraph of "Certificate Rating" has been revised in
response to Comment 55. Assuming that the rating of the
Securities is sufficient to receive the opinions of Tax Counsel,
all such factual assumptions and qualifications have been
described.
Comment 56.
It is inappropriate to advise prospective investors to consult
their own tax advisors; however, it is appropriate to recommend
that they do so.
Response 56.
The first paragraph of "Tax Matters" has been revised in response
to Comment 56.
<PAGE>
24
Comment 57.
The foregoing comments also apply to the discussions of state and
local tax consequences.
Response 57.
The discussions of state and local tax consequences have been
revised in response to such comments.
FASIT Election
Comment 58.
We note from discussions with counsel that the Seller may cause
an election to be made to qualify the Trust as a FASIT. If so,
expand the tax section to clearly state whether, in the opinion
of Tax Counsel, the Trust will qualify as a FASIT. Additionally,
state in the opinion whether the proposed method of operation
will enable it to continue to meet the requirements for
qualification and taxation as a FASIT under the Internal Revenue
Code of 1986, as amended.
Response 58.
Neither the Seller nor counsel for the Seller have had
discussions with any of the Commission's staff regarding the
Seller electing to qualify the Trust as a FASIT. Moreover, the
Seller notes that it has no plans to elect to qualify the Trust
as a FASIT.
Comment 59.
If a FASIT election is contemplated, provide a materially
complete summary of the tax law regarding the FASIT provisions of
the Code and the potential changing nature of the FASIT; for
example, indicate when additional assets to the FASIT would be
added and how such assets will be selected and purchased, etc.
The discussion should also address the Trust's qualification as a
FASIT, the asset qualification and interest requirements of a
FASIT, as well as a summary of the tax treatment accorded to
owners holding FASIT securities.
<PAGE>
25
Response 59.
The Seller has duly noted your advice in Comment 59 and further
notes that it has no plans to qualify the Trust as FASIT. In the
event that a FASIT election were made, a post-effective amendment
providing the above-mentioned summary would be filed. The Seller
notes that it is not expected that a FASIT election would affect
previously issued Series.
Plan of Distribution
Comment 60.
We note that Certificates will be sold at varying or negotiated
prices during their initial distribution. Please supplementally
advise whether the Registrants intend to file pricing supplements
disclosing the prices at which sales occur and, if not, the
reasons for the decision not to do so.
Response 60.
The Seller has not previously sold Certificates to an underwriter
to be offered to the public in "negotiated transactions", i.e., a
variable price reoffering, and although the Seller has no plans
do so in the future, the Seller prefers not to preclude this
option. The Seller, in part because it has no plans to issue
Certificates in this manner, has not at this time fully
determined its obligation to file pricing supplements disclosing
the prices at which such sales occur. If the Seller elects to
issue Certificates in an offering in which the Underwriters will
offer the Certificates in negotiated transactions, the Seller
will determine its obligations under, and comply with, the
Securities Act of 1933 and the rules and regulations thereunder.
The remaining language that Comment 60 refers to is not intended
to disclose the possibility of multiple initial public offerings
with respect to a Series, variable-price reofferings or
take-downs of a particular Series in initial public offerings at
variable prices over time. This language is standard disclosure
indicating that while the Seller has sold the Certificates to the
Underwriters in a firm commitment underwriting, and the price at
which the
<PAGE>
26
Underwriters will offer the Certificates to the public in the
initial public offering has been set, the management of the
syndicate of Underwriters may not place all of the Certificates
at the offering price. If that is the case, offers to the public
subsequent to the initial public offering may be at differing
prices as determined by the Underwriters.
Neither the Seller, nor to the Seller's knowledge, any other
capital markets participant, interprets the instructions of Form
S-3, Item 16 of Schedule A to the Securities Act of 1933 or Item
501 of Regulation S-K to require the preparation and/or filing of
pricing supplements setting forth the different prices to the
public that may occur when the underwriters do not place all of
the primary securities at the original price to the public agreed
to by the syndicate and, therefore, the syndicate is terminated.
The Seller believes, and has been advised by counsel, that its
current practice of disclosing the initial price to the public or
"the price at which it is proposed that the security shall be
offered to the public . . . " is consistent with each of the
instructions to Form S-3, Item 16 of Schedule A to the Securities
Act of 1933 and Item 501 of Regulation S-K.
To the Seller's knowledge, and based upon discussions with
counsel, no other issuers currently volunteer to, or have been
required to, file pricing supplements due to placements of
securities at other than the initial price to the public after
the underwriting syndicate has not placed all of the primary
securities. To interpret the various items as requiring
disclosure of pricing information in connection with trades made
after an unsuccessful syndication effort would create several
extremely difficult hurdles for issuers including, but not
limited to, (i) adverse pricing pressures due to the fact that
underwriters will price into the transaction the added burden of
the requirement that they continuously work with the issuer in
order to provide the relevant information to the issuer and
forward the resulting pricing supplement to each related
purchaser, and (ii) a requirement that the issuer file pricing
supplements relating to transactions of which the issuer will
have no knowledge unless informed by a third party -- the
relevant underwriter. Also, the requirement to file such
supplements does not seem to add any investor protection that
might outweigh the problems created for issuers. The purchasers
at issue are aware of the price they are paying for the
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27
securities, and they are also provided with the original
prospectus or prospectus supplement that details the initial
price to public of the securities.
For these reasons, the Seller believes that none of the
instructions to Form S-3, Item 16 of Schedule A to the Securities
Act of 1933 or Item 501 of Regulation S-K require issuers to,
and, therefore, the Registrant does not intend to, file or cause
to be filed pricing supplements setting forth the different
prices to the public at which sales are made after unsuccessful
efforts to place the primary securities. If the Securities and
Exchange Commission (the "Commission") interprets the
instructions to Form S-3, Item 16 of Schedule A to the Securities
Act of 1933 or Item 501 of Regulation S-K to require issuers to
file such supplements in connection such sales, the Seller
believes that since the current market practice does not seem to
reflect that view, such interpretation should be presented to all
market participants simultaneously either through the channel of
rule-making or through the channel of an interpretive release, in
either case, with the opportunity for market participants to
comment.
Comment 61.
If affiliates of the Seller may make a market in the securities,
then those market-making transactions must be registered. These
transactions may be registered in a footnote to the Calculation
of Registration Fee table, which must identify the entity(ies)
registering the market-making transactions. Moreover, since a
current prospectus must be delivered at the time that an
affiliate engages in a market-making transaction, tell us how the
affiliate intends to satisfy the current prospectus delivery
requirement.
Response 61.
Affiliates of the Seller do not plan to make a market in the
Certificates. To the extent affiliates of the Seller plan to make
a market in the Certificates in the future, the Seller notes the
advice provided in Comment 61.
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28
Form of Prospectus Supplement
General
Comment 62.
The information contained in the prospectus supplement should be
updated to the most recent interim period.
Response 62.
The Seller has included in Amendment No. 1 a form of Prospectus
Supplement in Part I of the Registration Statement. The Seller
confirms that the Prospectus Supplement for an issuance will
include updated financial information on the Providian Portfolio.
Comment 63.
The prospectus supplement should include a discussion/description
of any prefunding account where one is to be used in connection
with the issuance of a series. The disclosure should include, but
not be limited to, a discussion of the following matters: (1) the
term or duration of the prefunding account; (2) the percentage of
the particular offering that may be represented by the prefunding
account; (3) standards for additional assets to be acquired with
the amounts on deposit in the prefunding account; and (4) the
types of investments that prefunding account amounts may be
invested prior to the time such amounts are used to purchase
additional assets. In addition, disclosure should describe any
material risks for investors, including yield and reinvestment
risks, which may result from the inability to apply amounts on
deposit in the prefunding account to purchase and sell additional
assets to the Trust during a funding period. Undertake to provide
this information.
Response 63.
The Seller undertakes to provide the information described in
Comment 63 with respect to an offering of a prefunded Series. The
Seller currently does not have plans to issue a prefunded Series.
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29
Cover Page
Comment 64.
The outside front cover page of a prospectus supplement relating
to an offering of interest only or principal only securities
should prominently highlight in bold face type the risks
associated with such securities, including loss of entire
investment. Each class of securities that is an interest only or
principal only class should be identified by name. Please
undertake to provide the requested disclosure.
Response 64.
The Seller undertakes to provide the disclosure described in
Comment 64 with respect to a public offering of interest only or
principal only Certificates. The Seller currently does not have
plans to issue interest only or principal only Certificates.
Summary
Comment 65.
Identify tax counsel. Summarize the material tax consequences.
Response 65.
The Summary in the Prospectus Supplement and the form of
Prospectus Supplement has been revised in response to Comment 65.
Risk Factors
Comment 66.
The prospectus supplement should discuss known risks associated
with accounts and receivables concentrated in a specific state or
geographic region. It may not be sufficient to indicate that
geographic concentration exists; it may be necessary to discuss
unique economic or other factors specific to that state or
region, and the consequences on the pool of receivables. This may
include a specific discussion of the relevant state laws in each
state where telephone area codes indicate a concentration exists.
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30
We note in particular the concentration of accounts in
California.
Response 66.
The Seller believes that there are no particular material legal
or economic risks to Certificateholders with respect to the
states where the highest concentration of accountholders live
other than the types of risk that result generally from having
any concentration of Accounts, i.e. regional economic downturns,
natural disasters, etc. The Seller believes that the geographic
distribution of Receivables in the Providian Portfolio among the
states generally reflects the distribution of the United States
population. The Seller believes that the breakdown of the
Accounts by geographic distribution (from highest to lowest by
percentage) sufficiently discloses the risks to investors
resulting from any concentration of accounts in the portfolio.
Composition of the Accounts
Comment 67.
The relevant state laws where a significant percentage of the
accounts are located should be discussed with particularity. We
note the concentration of accounts in California.
Response 67.
The Seller believes that there are no material risks to
Certificateholders resulting from existing state laws where a
significant percentage of the accounts are located. The Seller
has disclosed the possibility that states may enact new laws and
amendments to existing laws that could affect the credit card and
consumer revolving loan industry. See "Risk Factors--Certain
Legal Aspects". Additionally, the Seller, as a national bank
located in New Hampshire, is not subject to the laws of other
states restricting the interest and fees a bank may charge on its
loans. New Hampshire, where the Seller is located, has no usury
limit applicable to credit cards and has no other material
restrictions that would impair the Servicer's ability to collect
the Receivables. The Seller believes that to the extent other
states' laws may be applicable, such as state laws governing
consumer disclosures and the use of certain credit bureau
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31
information, such laws do not materially impair the Seller's
consumer credit business as now conducted.
Part II
Item 15. Indemnification of Directors and Officers
Comment 68.
Summarize the general effect of the indemnification provisions
included in the Form of Underwriting Agreement.
Response 68.
The Form of Underwriting Agreement includes the indemnification
of the Seller as well as its officers and directors by the
Underwriters for the limited information that the Underwriters
provide for inclusion in the related Prospectus Supplement. The
Seller does not believe that Item 702 of Regulation S-K is
directed at this type of limited third party indemnification.
Additionally, the Seller believes that such information is not
material to investors and is of the opinion that disclosure would
be better served if such information was not included.
Signatures
Comment 69.
Please revise the signature block to explicitly state that the
Registrants believe that the security rating requirement will be
met by the time of sale, as required by Signatures Instruction 3
of Form S-3.
Response 69.
The signature page of the Registration Statement has been revised
in response to Comment 69.
Comment 70.
The Bank should also sign the registration statement on behalf of
the Trust, because the Trust is a co-registrant. Please revise.
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32
Response 70.
The Bank has been added as a signatory to the Registration
Statement on behalf of the Trust.
Exhibit 5.1
Comment 71.
We note that the legality opinion assumes each Series Supplement
and the issuance of each Series of Certificates has been duly
authorized by the appropriate corporate action. Since this
assumption is part and parcel of the opinion that is required to
be rendered, the staff is of the view that what has been filed is
a qualified, or form of, legality opinion, and is not a firm
legality opinion. The staff will accept this form of legality
opinion, subject to the understanding by the Registrants that
they will cause to have filed an unqualified opinion or opinions,
as applicable, and related consent(s) with respect to each class
of each Series of offered securities, by means of a
post-effective amendment or Form 8-K prior to the time any sales
of such securities are made under the registration statement.
Response 71.
Item 16 of Form S-3 and Item 601 of Regulation S-K together
require that a legality opinion be filed as an exhibit to the
Registration Statement. Such an opinion has previously been filed.
Counsel for the Seller has not taken any qualifications in its
legality opinion other than those necessitated by the fact that
the securities will be issued on a delayed or continuous basis
pursuant to Rule 415. Neither Item 16 of Form S-3 nor Item 601 of
Regulation S-K require the filing of supplemental opinions prior
to the sale of securities. The Seller however undertakes to
insure that such an unqualified legality opinion is obtained
prior to any sale of securities.
Comment 72.
Revise to provide the opinion that the Certificates will be fully
paid and non assessable, as required by Item 601(b)(5) of
Regulation S-K.
Response 72.
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33
The opinion filed as Exhibit 5.1 has been revised in response to
Comment 72.
Exhibits 8.1. 8.2 and 83
Comment 73.
An opinion as to the accuracy of the disclosure in a document is
not an opinion as to tax consequences required by Item 601(b)(8)
of Regulation S-K. Please file a substantive tax opinion that
addresses each of the disclosed material tax consequences. If
necessary, you may file a qualified opinion at this time due to
unknown transaction- specific facts. In this case, an unqualified
opinion must be filed via Form 8-K or post-effective amendment
prior to the time of sales.
Response 73.
The opinions provided in the "Tax Matters" section constitute
such opinion as to tax consequences required by Item 601(b)(8) of
Regulation S-K.
Comment 74.
If you intend the prospectus tax disclosure to be your opinion,
file a short form opinion that explicitly confirms and adopts the
opinions set forth in the prospectus.
Response 74.
The Seller hereby undertakes to cause such short form opinion to
be filed.
Acceleration Request
Comment 75.
Please formally withdraw this request as soon as possible. For
future reference, it is inappropriate to include an acceleration
request at the time of filing a registration statement. You
should wait for the staff to screen the filing and inform you of
the review status prior to requesting acceleration.
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34
Response 75.
The acceleration request previously filed with respect to the
Registration Statement has been formally withdrawn.
Closing Comments
Comment 76.
Comments are provided for the core prospectus and prospectus
supplement. However, to the extent comments issued with respect
to one apply to both, please consider and revise one or both as
appropriate.
Response 76.
The Seller has duly noted this comment.
Comment 77.
Please see revised Staff Legal Bulletin 5 (CF/IM). In this
bulletin, we explain what public companies should disclose about
year 2000 issues in their filings. Please supplementally confirm
to us that you disclose in this filing all required information
about Year 2000 issues.
Response 77.
The Seller confirms that all required information about Year 2000
issues has been disclosed in this filing.
Comment 78.
To the extent that you state you are including forward- looking
statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act (or otherwise refer to
those sections or the Private Securities Litigation Reform Act
generally), please note that, except as noted above, we are not
making any determination as to whether the disclosure (including,
e.g., cautionary language or the placement of disclosure)
satisfies the requirements of those sections.
Response 78.
The Seller duly notes the advice contained in Comment 78.
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35
If you should have any questions or comments concerning the
contents of this response letter, please contact the undersigned at (212)
474-1026.
Very truly yours,
/s/ Lawrence H. Altman
----------------------
Lawrence H. Altman
