<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION NOS. 333-79773, 333-79773-01 AND 333-79773-02
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANTA BUSINESS SERVICES CORP.
(SPONSOR OF THE SECURITIES DESCRIBED HEREIN)
ADVANTA LEASING RECEIVABLES CORP. VIII
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 6189 52-217-0910
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
639 ISBELL ROAD, SUITE 390-A
RENO, NEVADA 89509
(775) 823-3080
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES OF REGISTRANT)
ADVANTA LEASING RECEIVABLES CORP. IX
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
NEVADA 6189 52-217-0234
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
639 ISBELL ROAD,
SUITE 390-B
RENO, NEVADA 89509
(775) 823-3016
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF PRINCIPAL EXECUTIVE OFFICES OF REGISTRANT)
COLE SILVER, ESQ.
C/O ADVANTA BUSINESS SERVICES CORP.
1020 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
(609) 782-7300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
CAMERON L. COWAN, ESQ. PAUL MURPHY, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP MOORE & VAN ALLEN, PLLC
3050 K STREET, N.W. 100 NORTH TRYON STREET
WASHINGTON, D.C. 20007 CHARLOTTE, NC 28202
(202) 339-8488 (704) 331-3510
</TABLE>
Approximate date of commencement of proposed sale to the public: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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, check the following box. [ ]
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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE(2)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment Receivables Asset-Backed Notes,
Series 1999-1, Class A..................... $102,000,000 100% $102,000,000 $28,356
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act
(2) $278 of the Registration Fee has been paid previously
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THE INFORMATION IN THIS PROSPECTUS IS NOT
COMPLETE AND MAY BE AMENDED. WE MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED AUGUST 12, 1999
PROSPECTUS
ADVANTA LEASING RECEIVABLES CORP. VIII
ADVANTA LEASING RECEIVABLES CORP. IX
ISSUERS
ADVANTA BUSINESS SERVICES CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 1999-1
$51,460,585(1) CLASS A-1 NOTES
$38,232,647(1) CLASS A-2 NOTES
$10,213,977(1) CLASS A-3 NOTES
(1) APPROXIMATE INITIAL PRINCIPAL AMOUNTS
CONSIDER CAREFULLY THE RISK
FACTORS BEGINNING ON PAGE 6
IN THIS PROSPECTUS.
A note is not a deposit and
neither the notes nor the
underlying contracts or
receivables are insured or
guaranteed by any
governmental agency.
The notes offered in this
prospectus are obligations
of the issuers only. They
are payable only from a
limited pool of assets. The
notes are not obligations
of Advanta Business
Services Corp., Advanta
Corp. or any of their
affiliates.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS
INTEREST PUBLIC DISCOUNT TO ISSUER
CLASS RATE PER NOTE PER NOTE PER NOTE
----- -------- -------- ------------ ---------
<S> <C> <C> <C> <C>
A-1.................. % % % $
A-2.................. % % % $
A-3.................. % % % $
</TABLE>
The total price to public is $ , the total
amount of the underwriting discount is $ ,
and the total amount of proceeds plus accrued
interest and before deduction of expenses is
$ .
CREDIT ENHANCEMENT
The issuers also are issuing approximately
$11,720,956 of % Class B asset-backed notes. The
Class B notes are subordinated to, and provide credit
enhancement for, the Class A notes.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FIRST UNION CAPITAL MARKETS CORP. BARCLAYS CAPITAL
August , 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Issuers............................. 1
Limited Obligations................. 1
Originator and Servicer............. 1
Trustee............................. 1
The Pledged Assets.................. 1
The Contracts....................... 2
The Notes........................... 2
Payment Date........................ 3
Issuance Date....................... 3
Interest Payments................... 3
Principal Payments.................. 3
Stated Maturity..................... 3
Subordination....................... 3
Residual Receipts................... 4
Residual Account.................... 4
Reserve Account..................... 4
Collections by the Servicer......... 4
Flow of Funds....................... 4
Optional Redemption................. 5
Class B Special Redemption.......... 5
Limited Ability to Remove Defaulted
Contracts........................ 5
Federal Income Tax Status........... 5
ERISA Considerations................ 5
Ratings............................. 5
Risk Factors.......................... 6
You May Not Be Able to Sell Your
Notes............................ 6
Prepayments on the Contracts May
Cause Early Payment of Notes and
You May Not Be Able to Reinvest
at a Comparable Rate............. 6
Servicer's Possession of the
Contracts May Result in Delayed
Payments, Losses or Accelerated
Payments......................... 6
State Laws and Other Factors May
Restrict or Delay Recovery
Efforts and Adversely Affect the
Recovery of the Full Amount Due
on the Contracts................. 7
Security Interests in Most Equipment
Are Not Perfected and Other
Creditors May Have Rights to the
Equipment........................ 7
If the Promissory Notes Are Not
Delivered to the Trustee, the
Security Interests in the Loans
Are Not Perfected................ 9
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Residual Receipts Are Uncertain and
May Not Be Available or
Sufficient to Prevent Defaults on
the Notes........................ 9
Article 2A of the UCC May Diminish
Recoveries....................... 9
Recharacterization of the Transfer
of Contracts or Interests Therein
as a Secured Borrowing Could
Reduce or Delay Your Payments.... 9
Substantive Consolidation of Advanta
Business Services and the Issuers
May Result in Losses on Your
Investment....................... 10
Commingling of Trust Assets by
Advanta Business Services May
Result in Reduced or Delayed
Payments to You.................. 10
Insolvency of Advanta Business
Services May Result in an
Inability to Repurchase
Contracts........................ 10
Insolvency of the Issuers Could
Reduce or Delay Your Payments.... 11
Default or Insolvency of Users May
Reduce Payments to You........... 11
If the Pledged Assets Are Not
Sufficient, Defaults Will
Occur............................ 11
Technological Obsolescence of the
Equipment May Reduce the Value of
the Collateral................... 11
Geographic Concentration of the
Contract Portfolio Causes
Increased Risk From Local
Economic Conditions and Natural
Disasters........................ 11
Book-Entry Registration Will Result
in Your Inability to Exercise
Directly Your Rights as a
Noteholder....................... 11
Limited Nature of Credit Ratings
Assigned to the Notes............ 11
Risks Associated with Year 2000
Compliance....................... 12
Introduction.......................... 13
The Issuers........................... 13
Management's Discussion and Analysis
of Financial Condition.............. 13
Directors and Executive Officers of
the Issuers......................... 14
Use of Proceeds....................... 15
The Trustee........................... 16
The Pledged Assets.................... 16
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Advanta Business Services's
Underwriting, Origination and
Servicing Practices................. 19
Removal and Modifications of
Contracts, Sale and Re-Leasing of
Assets.............................. 24
Statistical Information............... 25
Servicing Portfolio Delinquency and
Default Information................. 31
Description of the Notes.............. 32
Prepayment and Yield Considerations... 51
Legal Matters Affecting the
Contracts........................... 57
Federal Income Tax Consequences....... 59
State Tax Consequences................ 62
Legal Investment...................... 62
ERISA Considerations.................. 62
Underwriting.......................... 64
Ratings of the Notes.................. 65
Experts............................... 65
Legal Matters......................... 65
Reports to Noteholders................ 66
Where You Can Find More Information... 66
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Index of Terms........................ 67
Appendix A: Global Clearance,
Settlement and Tax Documentation
Procedures.......................... A-1
Appendix B: Report of Independent
Accountants for Advanta Leasing
Receivables Corp. VIII.............. B-1
Appendix C: Financial Statements of
Advanta Leasing Receivables Corp.
VIII................................ C-1
Appendix D: Notes to Advanta Leasing
Receivables Corp. VIII Financial
Statements.......................... D-1
Appendix E: Report of Independent
Accountants for Advanta Leasing
Receivables Corp. IX................ E-1
Appendix F: Financial Statements of
Advanta Leasing Receivables Corp.
IX.................................. F-1
Appendix G: Notes to Advanta Leasing
Receivables Corp. IX Financial
Statements.......................... G-1
</TABLE>
The Underwriters may engage in transactions that stabilize, maintain, or in
some way affect the price of the notes. These types of transactions may include
stabilizing, the purchase of notes to cover syndicate short positions and the
imposition of penalty bids. For a description of these activities, please read
the section entitled "Underwriting."
If you have received a copy of this prospectus in an electronic format, and
if the legal prospectus delivery period has not expired, you may obtain a paper
copy of this prospectus from Advanta Business Services Corp. or an underwriter
by asking for it.
ii
<PAGE> 5
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU NEED TO MAKE YOUR INVESTMENT DECISION. IT PROVIDES GENERAL,
SIMPLIFIED DESCRIPTIONS OF CALCULATIONS, CASH FLOWS AND OTHER MATTERS THAT, IN
SOME CASES, ARE HIGHLY TECHNICAL AND COMPLEX. MORE DETAIL IS PROVIDED IN OTHER
SECTIONS OF THIS PROSPECTUS.
TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, CAREFULLY READ THIS
ENTIRE DOCUMENT.
ISSUERS
Advanta Leasing Receivables Corp. VIII and Advanta Leasing Receivables Corp. IX
will issue the notes and will be joint and several obligors on the notes.
Advanta Leasing Receivables Corp. VIII is a Nevada corporation. Its principal
place of business is 639 Isbell Road, Suite 390-A, Reno, Nevada 89509. Its
telephone number is (775) 823-3080.
Advanta Leasing Receivables Corp. IX is a Nevada corporation. Its principal
place of business is 639 Isbell Road, Suite 390-B, Reno, Nevada 89509. Its
telephone number is (775) 823-3016.
Each of the issuers is a newly created special purpose corporation.
LIMITED OBLIGATIONS
Our obligation to pay the notes is limited to a specific source of funds. We
will pay the notes only from payments received on the contracts and collateral
provided for the contracts. The contracts will be equipment leases and loan
agreements. We will identify all of the contracts at the time we issue the
notes.
ORIGINATOR AND SERVICER
Advanta Business Services Corp. originated or acquired the contracts or
interests therein. Advanta Business Services will transfer its interest in the
scheduled payments arising under the contracts and certain related property to
Advanta Leasing Receivables Corp. IX. Advanta Business Services will transfer
its interest in any residual payments coming due under the contracts and certain
related property to Advanta Leasing Receivables Corp. VIII.
Advanta Business Services or its successor will service the contracts for the
issuers. The servicer will collect payments on the contracts and enforce
defaulted contracts when necessary. The servicer may, but is not required to,
make advances to cover delinquent contract payments in certain circumstances.
Advanta Business Services is a Delaware corporation. Its principal place of
business is 1020 Laurel Oak Road, Voorhees, New Jersey 08043. Its telephone
number is (609) 782-7300.
The indenture will permit Advanta Business Services to assign its rights and
obligations as servicer to any affiliate of Advanta Corp. if the rating agency
condition is satisfied.
TRUSTEE
The trustee is Bankers Trust Company. The trustee's address is 4 Albany Street,
New York, New York 10006.
THE PLEDGED ASSETS
We will pledge our interest in the contracts, amounts due and to become due
under the contracts and our interests in the equipment to secure payments on the
notes. More specifically, the pledged assets will include:
- the contracts or interests therein owned by us;
- amounts which we are entitled to receive on the contracts;
- collections and collateral associated with the contracts to the extent we
are entitled to such amounts and collateral;
- amounts held by the trustee in the collection account, the reserve
account and other Series 1999-1 accounts;
- our interest in the sale and contribution agreement;
- our rights, if any, in the equipment; and
- any other proceeds of the Series 1999-1 contracts.
In approximately 16% of the contracts, based on the statistical aggregate
contract principal balance, we have acquired Advanta Business Services's
interest in certain periodic payments and the collateral securing such payments,
but if the user makes the required scheduled payments, at the end
1
<PAGE> 6
of the term of the lease, we will have no right to the equipment or the residual
interests in the equipment.
THE CONTRACTS
We will use the proceeds from the sale of the notes (i) to buy from Advanta
Business Services, a portfolio of contracts and interests therein and the
interest, if any, in the related equipment which secures such contracts, (ii) to
make the initial deposit to the reserve account and (iii) to pay certain costs
and expenses incurred in issuing the notes.
The contracts include leases for a wide variety of small-ticket equipment. The
equipment includes, but is not limited to, office equipment, telecommuni-
cations equipment, automotive repair equipment, surveillance equipment and
furniture. The lessees or borrowers are referred to in this prospectus
collectively as the users. The users are businesses and business owners
throughout the United States.
The leases are triple-net leases. This means that the lessee is required to pay
all taxes, maintenance and insurance associated with the equipment.
The leases cannot be cancelled by the lessees. Payments due under the leases are
unconditional obligations of the lessee without right of offset. The servicer
may, however, allow prepayments.
In addition to leases, approximately 1.19% of the contracts, based on the
statistical aggregate contract principal balance, are in the form of loan
agreements. The terms of the loan agreements differ from the leases as described
in this prospectus.
We will calculate the principal value of the contracts at any time by
discounting the contracts' remaining scheduled payments at the applicable
discount rate which is %.
The statistical characteristics of the contracts shown in this prospectus,
however, are calculated as of July 1, 1999, using a statistical discount rate of
7.18%.
The contracts had the following characteristics at July 1, 1999:
- statistical aggregate contract principal balance: $111,628,166
- statistical average contract principal balance: $5,631
- number of contracts: 19,823
We expect some variance between this information and the portfolio on the day we
issue the notes. The material characteristics of the portfolio on the date of
issuance will not vary by more than 5% from the information presented in this
document, based on the aggregate contract principal balance.
We will make payments on the notes from collections on the contracts or
collateral securing the contracts and certain other pledged assets.
THE NOTES
In this document, we are offering three classes of notes:
- % Class A-1 notes with an initial principal balance of approximately
$51,460,585;
- % Class A-2 notes with an initial principal balance of approximately
$38,232,647; and
- % Class A-3 notes with an initial principal balance of approximately
$10,213,977.
We also will issue approximately $11,720,956 % Class B notes at the same
time as the offered notes.
We are not offering the Class B notes by this document.
The notes represent non-recourse asset-backed debt obligations of the issuers.
The notes are secured by and payable only from the pledged assets.
We will issue the notes under the Advanta Business Receivables Master Facility
Agreement, dated as of the date the notes are issued. The terms of the notes
will be contained in the Series 1999-1 supplement to the master agreement. In
this prospectus, we refer to the master agreement, together with the supplement,
as the indenture.
The indenture allows for the issuance of series of notes in addition to Series
1999-1. If an additional series were issued, it would be payable from a separate
portfolio of contracts and related assets. We do not, however, currently
contemplate the issuance of any additional series under the indenture. Under the
indenture, we cannot issue any additional series of notes unless the issuance
satisfies the rating agency condition.
2
<PAGE> 7
PAYMENT DATE
We will pay interest and principal on the offered notes on the 15th day of each
month if the fifteenth is a business day. If the fifteenth is not a business
day, then the payment will be on the next business day. September 15, 1999 will
be the first payment date.
ISSUANCE DATE
We will issue the notes on or about August , 1999.
INTEREST PAYMENTS
Interest on the notes will accrue from one payment date to and including the day
before the next payment date. For the first payment, interest will begin to
accrue on the day we issue the notes.
The interest rate for each class of offered notes is specified in this
prospectus summary under "Description of the Notes."
Interest on the Class A-1 notes will be computed on the basis of actual days
elapsed and a 360-day year. Interest on the Class A-2 notes, Class A-3 notes and
Class B notes will be computed on the basis of a 360-day year comprised of
twelve 30-day months.
PRINCIPAL PAYMENTS
We will pay monthly principal on the notes from available funds only after
servicer advances are repaid and after servicing fees and interest on both the
Class A notes and the Class B notes are paid. Principal payments will be made
from remaining amounts.
Monthly principal payments due will be an amount equal to the excess of the
outstanding principal balance over the aggregate contract principal balance as
of the related calculation date.
We will pay principal monthly as follows:
- first to Class A-1, until it is paid in full, the entire monthly
principal amount to pay Class A-1;
- after Class A-1 is paid in full, a portion of the monthly principal
amount equal to the Class A principal payment amount to pay Class A-2
until it is paid in full; and then to pay Class A-3 until it is paid in
full;
- after Class A-1 is paid in full, a portion of the monthly principal
amount equal to the Class B principal payment amount to Class B until
Class B is paid in full (subject to the maintenance of certain credit
enhancement levels for the Class A notes);
- if the Class B floor exceeds the Class B target investor principal
amount, the difference between the monthly principal amount and the sum
of the Class A principal payment amount and Class B principal payment
amount will be paid sequentially to Class A-2, Class A-3 and Class B
notes.
We refer you to "Description of the Notes -- Flow of Funds" in this prospectus
for more detail on the payment of principal and interest.
STATED MATURITY
If the notes have not already been paid in full, we will be obligated to pay the
outstanding principal amount of the Class A-1 notes, Class A-2 notes, Class A-3
notes and Class B notes in full on their respective stated maturity dates. The
stated maturity dates are:
<TABLE>
<CAPTION>
STATED
CLASS MATURITY DATE
- ----- ------------------
<S> <C>
A-1.................. September 15, 2000
A-2.................. September 16, 2002
A-3.................. November 17, 2003
B.................... April 15, 2005
</TABLE>
We expect that payment on the notes of each class will be made before the
payment date set forth in the table above.
SUBORDINATION
The Class B notes will be subordinated to the Class A notes.
- on each payment date, the trustee will use available funds to pay
interest on the Class A notes and then interest on the Class B notes; and
- on each payment date, the trustee will use the available funds to pay
principal due on the Class A notes and then principal due on the Class B
notes.
We refer you to "Description of the Notes -- Subordination Provisions" in this
prospectus for a more complete description of the subordination of the Class B
notes.
3
<PAGE> 8
RESIDUAL RECEIPTS
Proceeds may be realized from the sale of the issuers' interest in the equipment
following the termination of a contract or from periodic payments made for the
continued use of the equipment after the termination date of a contract. These
proceeds, known as residual receipts, will be deposited into the collection
account and included as available funds.
If a residual event occurs and is continuing, the residual receipts not paid to
the servicer or distributed to you or used to fund the reserve account will be
deposited into the residual account.
RESIDUAL ACCOUNT
On the closing day, the trustee will establish the residual account. Deposits to
the residual account will not be made unless a residual event has occurred and
is continuing. If a residual event occurs and is continuing, deposits to the
residual account will be made only after payments with a higher priority in the
flow of funds are made.
During the continuation of a residual event, amounts that otherwise would be
released to Advanta Leasing Receivables Corp. VIII will be retained in the
residual account for application on future payment dates.
Once the residual event ends, amounts on deposit in the residual account will be
deposited into the collection account. If those amounts are not used on that
payment date, they will be released to Advanta Leasing Receivables Corp. VIII.
RESERVE ACCOUNT
The trustee will establish a reserve account. On the closing date, the issuers
will deposit to the reserve account an amount equal to 1% of the initial
aggregate contract principal balance. Additional deposits will be made from the
flow of funds until the required reserve amount is on deposit. The trustee will
use the amounts in the reserve account to pay the following amounts if
collections on the contracts are insufficient:
- amounts owed to the servicer;
- interest due on the notes; and
- principal due on the notes.
The required reserve amount is the greater of 1% of the initial aggregate
contract principal balance and 5% of the outstanding principal balance of the
notes. The required reserve amount will not, however, exceed the outstanding
amount of the notes.
COLLECTIONS BY THE SERVICER
Advanta Business Services or its successor will service the contracts under the
indenture. Advanta Business Services or any successor may be removed as servicer
if an event of servicer default occurs.
The servicer manages and administers the contracts. It also enforces and makes
collections on the contracts and any insurance policies and, if needed, realizes
on the issuers' interest. In exchange for its services, the servicer receives a
monthly servicer fee.
FLOW OF FUNDS
On each payment date, the trustee will make the following payments from the
available funds in the collection account. The available funds in the collection
account will include any amounts transferred from the residual account or the
reserve account. The trustee will make payments in the following order of
priority:
- first, to the servicer to pay for any unrecoverable servicer advances;
- then, to the servicer to pay the servicer fee along with miscellaneous
amounts;
- then, to the Class A noteholders to pay the Class A note interest,
ratably with respect to each class of Class A notes;
- then, to the Class B noteholders to pay the Class B note interest;
- then, until the Class A-1 notes are paid in full, the entire monthly
principal amount to pay principal of the Class A-1 notes;
- when the Class A-1 notes have been paid in full, a portion of the monthly
principal amount equal to the Class A principal payment amount to pay
principal of the Class A-2 notes until paid in full then to pay principal
of the Class A-3 notes until paid in full;
- when the Class A-1 notes have been paid in full, a portion of the monthly
principal amount equal to the Class B principal payment amount to pay
principal of the Class B notes;
4
<PAGE> 9
- then if the Class B floor is greater than the Class B target investor
principal amount, the difference between the monthly principal amount and
the sum of the Class A principal payment amount and the Class B principal
payment amount to pay principal sequentially to Class A-2, Class A-3 and
Class B;
- then, to the reserve account in the amount needed to increase the amount
in the reserve account to the required reserve amount;
- then, if a residual event has occurred and is continuing, to the residual
account the lesser of (i) the available funds remaining on deposit in the
collection account and (ii) the aggregate amount of residual receipts
originally included in available funds for that payment date; and
- finally, to the issuers, any remaining available funds in the collection
account.
OPTIONAL REDEMPTION
The servicer has the option to direct the redemption of all remaining notes when
the aggregate contract principal balance is 10% or less of the initial aggregate
contract principal balance.
If a redemption occurs, you will receive a final distribution equaling the
entire unpaid balance of your notes plus any accrued and unpaid interest. You
will not receive a redemption premium.
CLASS B SPECIAL REDEMPTION
The Class B notes may be redeemed on any payment date, at a price equal to the
Class B principal balance on that payment date, including any accrued and unpaid
interest, plus the Class B special redemption premium. The Class B special
redemption premium is payable only to the holders of the Class B notes if the
issuers exercise the Class B special redemption; it is not payable in the event
of an optional redemption as described in the immediately preceding paragraph.
If the Class B special redemption occurs, it will be treated as a purchase of
the Class B notes by the issuers and payments thereon will be made to the
issuers.
LIMITED ABILITY TO REMOVE DEFAULTED CONTRACTS
The issuers may, but have no obligation to, remove defaulted contracts from the
Series 1999-1 trust estate. The issuers may remove contracts with a contract
principal balance, calculated as if the contracts were not defaulted, in the
aggregate amount up to 5% of the initial aggregate contract principal balance.
Upon removal of a contract, the issuers must deposit the prepayment amount for
such contract into the collection account.
FEDERAL INCOME TAX STATUS
In the opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel to the
issuers, under existing law, the Class A-1 notes, Class A-2 notes, Class A-3
notes and Class B notes will be characterized as debt for federal income tax
purposes. By your acceptance of a note, you will agree to treat your note as
debt for federal, state and local income and franchise tax purposes. We refer
you to "Federal Income Tax Consequences" in this prospectus for additional
information about the application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
this prospectus, the Class A-1 notes, the Class A-2 notes, the Class A-3 notes
and Class B notes are eligible for purchase by persons investing assets of
employee benefit plans or individual retirement accounts. A fiduciary or other
person contemplating purchasing the notes on behalf of or with plan assets of
any plan should consult with its counsel regarding whether the purchase or
holding of the notes could give rise to a transaction prohibited or not
otherwise permissible under ERISA or section 4975 of the Internal Revenue Code.
RATINGS
We will not issue the notes unless the rating agencies have assigned the
following ratings (or higher) to each class of notes:
<TABLE>
<CAPTION>
CLASS MOODY'S FITCH
- ----- ------- -------
<S> <C> <C>
A-1..................... P-1 F1+/AAA
A-2..................... Aaa AAA
A-3..................... Aaa AAA
B....................... A1 A+
</TABLE>
The ratings may be lowered, qualified or withdrawn by the rating agencies in
their discretion. The ratings are not recommendations to buy, sell or hold the
notes. They do not address any risk of prepayment or that payment will be made
at any time before the stated maturity.
5
<PAGE> 10
RISK FACTORS
You should carefully consider the following risk factors before deciding to
invest in the notes offered by this prospectus.
YOU MAY NOT BE ABLE TO SELL
YOUR
NOTES
If no public market develops, you, as a
noteholder, may not be able to liquidate your
investment in the notes prior to maturity.
There currently is no public market for the
notes, and we offer no assurance that one will
develop. The underwriters expect, but are not
obligated, to make a market in the notes. There
is no assurance, however, that any market will
be created or, if created, will continue.
PREPAYMENTS ON THE CONTRACTS
MAY
CAUSE EARLY PAYMENT OF NOTES
AND
YOU MAY NOT BE ABLE TO
REINVEST AT
A COMPARABLE RATE
The rate of principal payments on the notes is
unpredictable because it depends on, among
other things, the rate of payment on the
contracts. In addition to the normally
scheduled payments on the contracts, payments
may come earlier as a result of a number of
different events, including:
- prepayments permitted by the servicer;
- prepayments permitted under contracts that
are in the form of loans;
- payments resulting from contracts that are
defaulted;
- payments resulting from contracts accelerated
by the servicer;
- payments due to loss, theft, destruction or
other casualty; and
- payments upon repurchases by Advanta Business
Services because of a breach of
representations and warranties.
Furthermore, the rate of early terminations of
contracts due to prepayments and defaults may
be influenced by a variety of economic and
other factors. For example, adverse economic
conditions and natural disasters such as
floods, hurricanes, earthquakes and tornadoes
may increase prepayments and defaults.
In addition, the servicer may direct the
redemption of all remaining notes on any
payment date when the aggregate contract
principal balance is 10% or less of the initial
aggregate contract principal balance. A
redemption may result in an early return of
your investment. You will not receive a premium
if your notes are redeemed.
There can be no assurance that you will be able
to reinvest any early payments at a rate of
return equal to or greater than that on your
offered notes.
Be aware that you bear the risk of reinvesting
distributions resulting from payment of the
notes earlier than expected.
SERVICER'S POSSESSION OF THE
CONTRACTS
MAY RESULT IN DELAYED
PAYMENTS,
LOSSES OR ACCELERATED PAYMENTS The servicer will retain possession of the
contracts, which will not be physically
segregated from other similar documents that
are in the servicer's possession or otherwise
stamped or marked to reflect the transfer to
the issuers or the trustee. If the servicer,
while in possession of the contracts, sells or
pledges and delivers them to another party, in
violation of its agreements, the other party
could
6
<PAGE> 11
acquire an interest in the contracts and take
priority over you. However, UCC financing
statements will be filed reflecting the sale
and assignment of the pledged assets by Advanta
Business Services to the issuers and by the
issuers to the trustee, and the servicer's
accounting records and computer files will be
marked to reflect such sales and assignments.
Because the contracts will remain in the
servicer's possession and will not be stamped
or otherwise marked to reflect the assignment
to the trustee, if a subsequent purchaser were
able to take physical possession of the
contracts without knowledge of such assignment,
such trustee's interest in the pledged assets
could be defeated. In such event, you may
experience delays in payments and losses on
your investments. Also, if the servicer becomes
insolvent while in possession of the contracts,
competing claims to ownership or security
interests in the contracts may result. Even if
unsuccessful, these claims could delay payments
to you. If successful, these claims could
result in losses to you or accelerate the
prepayment of the notes.
STATE LAWS AND OTHER FACTORS
MAY RESTRICT OR DELAY RECOVERY
EFFORTS AND ADVERSELY AFFECT
THE RECOVERY OF THE FULL AMOUNT
DUE ON THE CONTRACTS State laws may limit or delay recoveries on the
contracts. State laws impose requirements and
restrictions relating to foreclosure sales and
obtaining deficiency judgments. If we must rely
on repossession and disposition of equipment to
cover losses, we may not be able to realize the
full amount due.
Other factors that may affect our ability to
realize the full amount due on the contracts
include:
- for contracts for equipment that originally
cost $25,000 or less no financing statements
will be filed to perfect Advanta Business
Services's security interest or the issuers'
interest or the trustee's interest in the
equipment against a lessee;
- for some contracts, the issuers have only a
contractual right to scheduled payments
thereunder, but unless the user defaults on
the scheduled payments, the issuers have no
right, at the end of the term, to the
equipment or residual receipts; if the entity
that owns the right to the equipment and
residual receipts were to go into bankruptcy,
the timing or amount of payments to the
issuers could be adversely affected;
- depreciation of the equipment;
- obsolescence of the equipment; and
- damage to or loss of any piece of equipment.
As a result, you may experience delays in
payments and losses on your investments.
SECURITY INTERESTS IN MOST
EQUIPMENT ARE NOT PERFECTED
AND OTHER CREDITORS MAY HAVE
RIGHTS TO THE EQUIPMENT The users' obligation to make payment on the
contracts are secured by a security interest in
the related equipment. The security interests
are not perfected unless a UCC financing
statement has been filed in the appropriate
filing office. Advanta Business Services has
not filed and does not expect to file UCC
financing statements to perfect its security
interest in equipment that originally cost
$25,000 or less. Financing statements have, in
7
<PAGE> 12
most cases, been filed for equipment that
originally cost more than $25,000. Financing
statements in favor of Advanta Business
Services have, therefore, been filed for
equipment that represents approximately 36.45%
of the statistical aggregate contract principal
balance. As a result, the security interest in
equipment that represents approximately 63.55%
of the statistical aggregate contract principal
balance has not and will not be perfected in
favor of Advanta Business Services, the issuers
or the trustee. Advanta Business Services,
however, has not filed and does not expect to
file UCC-3 financing statements assigning its
security interest in such equipment against the
users in favor of the issuers or the trustee.
To the extent Advanta Business Services has
filed appropriate UCC-1 financing statements
against the users, the issuers and the trustee
will nevertheless have a perfected security
interest in the equipment against the users.
Another party (such as a creditor of the user)
may acquire rights in some of the equipment
superior to those of Advanta Business Services,
the issuers and the trustee. The lack of a
perfected security interest in the equipment
may result in claims against the users being
unsecured and may adversely affect the ability
of the servicer to realize on the equipment,
which may cause you to experience delays in
payments and losses on your investment.
To the extent any of the leases are determined
to be true leases for commercial law purposes,
as opposed to financing leases, title to the
equipment will be held by Advanta Business
Services. Advanta Business Services will
transfer all of its residual interests in the
equipment (including the residual receipts
thereon) to Advanta Leasing Receivables VIII,
and will represent in the contribution
agreement that such transfer is an absolute
sale. Advanta Leasing Receivables VIII will
pledge its interest in any such equipment to
the trustee to secure the notes. In the event
the transfer from Advanta Business Services to
Advanta Leasing Receivables VIII is
recharacterized as a pledge rather than an
absolute sale, the bankruptcy of Advanta
Business Services may result in delays in
realization of residuals and in payments to
you. To perfect the security interest of
Advanta Leasing Receivables VIII and the
trustee in any such equipment, the servicer
will, on or prior to the closing date, file UCC
financing statements in selected states and
local jurisdictions naming Advanta Business
Services as debtor and Advanta Leasing
Receivables VIII as secured party and Advanta
Leasing Receivables VIII as debtor and the
trustee as secured party. Financing statements
will not be filed in all jurisdictions and,
therefore, to the extent Advanta Business
Services's or Advanta Leasing Receivables
VIII's interest in equipment is not covered by
one of such statements other creditors may gain
a superior interest therein. The failure to
perfect in these circumstances could cause you
to experience delays in payments and losses on
your investment.
8
<PAGE> 13
IF THE PROMISSORY NOTES ARE
NOT DELIVERED TO THE TRUSTEE,
THE SECURITY INTERESTS IN
THE LOAN ARE NOT PERFECTED In the case of loans evidenced by promissory
notes, which loans represent 1.19% of the
contracts, the servicer does not expect to
deliver the promissory notes to the trustee. As
a result, the issuers' and the trustee's
interest in such loans will not be perfected,
which may cause you to experience delays in
payments and losses on your investment.
RESIDUAL RECEIPTS ARE
UNCERTAIN AND MAY NOT BE
AVAILABLE OR SUFFICIENT TO
PREVENT DEFAULTS ON THE NOTES The availability of residual receipts and the
amount thereof will depend on many factors.
Therefore, residual receipts may not exist or
may not be sufficient if needed to make
payments on the notes. The amount of residual
receipts will depend upon, among other factors,
the ability of the servicer to sell or re-lease
equipment upon the termination of a contract
whether that termination occurs as a result of
early termination or upon scheduled expiration
of the contract if the user determines to
return the equipment. The market value of the
equipment generally declines with use, age and
technological advances. Other factors which may
affect the amount of residual receipts will
include whether the equipment is returned to
the servicer upon termination or expiration of
the contract and whether there is damage to or
loss of the equipment. Also, the expected
residual value of the equipment subject to the
contracts which are financing leases is
commonly zero or insignificant.
In addition, residual receipts collected in any
month and not used on the next payment date to
pay interest or principal on the notes or
deposited into the reserve account or residual
account will be released to Advanta Leasing
Receivables Corp. VIII and will no longer be
available to make payments on the notes.
ARTICLE 2A OF THE UCC MAY
DIMINISH RECOVERIES Most states have adopted a version of Article
2A of the UCC. Article 2A purports to codify
many provisions of existing common law.
Although there is little precedent regarding
how Article 2A will be interpreted, it may
limit the enforceability of any
"unconscionable" lease or "unconscionable"
provisions in a lease.
Article 2A also may provide a lessee with
remedies, including the right to cancel the
lease contract for lessor breaches or defaults.
Article 2A may add to or modify the terms of
consumer leases and leases where the lessee is
a merchant lessee. Moreover, it recognizes
typical consumer lease "hell or high water"
rental payment clauses and validates reasonable
liquidated damages provisions in the event of
lessor or lessee defaults. Article 2A also
recognizes the freedom of contract and permits
the parties in a commercial context a wide
degree of latitude to vary provisions of the
law.
RECHARACTERIZATION OF THE
TRANSFER OF CONTRACTS OR
INTERESTS THEREIN AS A
SECURED BORROWING COULD
REDUCE OR DELAY YOUR
PAYMENTS If Advanta Business Services were to become a
debtor under the federal bankruptcy code or
similar applicable federal or state laws, a
creditor or trustee in bankruptcy (including
Advanta Business Services as
debtor-in-possession) might argue that the
transfer of Advanta Business Services's
interest in the contracts and the equipment to
the issuers was (or should be recharacterized
as) a pledge to secure a borrowing rather than
an absolute sale. If a court accepted this
position, then the issuers and the trustee
could
9
<PAGE> 14
experience a delay in or reduction of
collections on the contracts and the equipment.
Consequently, you could incur a loss on your
investment. If the transactions contemplated in
this prospectus are treated as a sale, the
contracts would not be part of Advanta Business
Services's bankruptcy estate and would not be
available to the creditors of Advanta Business
Services.
A case decided by the United States Court of
Appeals for the Tenth Circuit contains language
to the effect that accounts sold by an entity
that subsequently became bankrupt remained
property of the debtor's bankruptcy estate
because the sale of accounts is treated as a
"security interest" that must be perfected
under the UCC. Although the contracts
constitute chattel paper or general intangibles
rather than accounts under the UCC, sales of
chattel paper, like sales of accounts, must be
perfected under Article 9 of the UCC. If
Advanta Business Services were to become a
debtor in bankruptcy and a court were to follow
the reasoning of the Tenth Circuit Court of
Appeals and apply the same reasoning to chattel
paper, the issuers (and thus the trustee) could
experience a delay in or reduction of
collections on the contracts. You could incur a
loss on your investment as a result.
SUBSTANTIVE CONSOLIDATION OF
ADVANTA BUSINESS SERVICES
AND THE ISSUERS MAY RESULT
IN LOSSES ON YOUR INVESTMENT The issuers have taken and will take steps to
ensure that a voluntary or involuntary petition
for relief by or against Advanta Business
Services under the federal bankruptcy code will
not result in the substantive consolidation of
the assets and liabilities of the issuers with
those of Advanta Business Services.
Nevertheless, it is possible that, in the event
of a bankruptcy of Advanta Business Services, a
court would order the issuers' assets and
liabilities to be substantively consolidated
with those of Advanta Business Services. An
order to substantively consolidate could
adversely affect the issuers' ability to
receive payments on the contracts, and you
could therefore incur a loss on your
investment.
COMMINGLING OF TRUST ASSETS BY
ADVANTA BUSINESS SERVICES MAY
RESULT IN REDUCED OR DELAYED
PAYMENTS TO YOU While Advanta Business Services is the
servicer, cash collections held by Advanta
Business Services will be commingled and used
for its benefit until those collections are
required to be deposited into the collection
account. If the servicer were unable to remit
collections, or if the servicer became
insolvent, the issuers may not have a perfected
ownership or security interest in those
collections. As a result, you could incur a
loss on your investment.
INSOLVENCY OF ADVANTA BUSINESS
SERVICES MAY RESULT IN AN
INABILITY TO REPURCHASE
CONTRACTS Advanta Business Services will make
representations and warranties regarding the
contracts and the equipment. In the event that
a representation or warranty concerning a
specific contract is breached, if the breach is
not cured within a specified time period and
the value of the contract is materially and
adversely affected by the breach, Advanta
Business Services will be required to purchase
the contract from the issuers. In the event of
a bankruptcy or insolvency of Advanta Business
Services, the trustee may be unable to compel
Advanta Business Services to repurchase
contracts, and you could incur a loss on your
investment.
10
<PAGE> 15
INSOLVENCY OF THE ISSUERS
COULD REDUCE OR DELAY YOUR
PAYMENTS If one or both of the issuers were to become
bankrupt or insolvent under any bankruptcy or
insolvency law, delays in distributions to you
would be likely and you could incur a loss on
your investment. Each issuer has taken steps to
minimize the likelihood that it will become
bankrupt or otherwise insolvent.
DEFAULT OR INSOLVENCY OF USERS
MAY REDUCE PAYMENTS TO YOU To the extent users default on the contracts,
including through insolvency, contract payments
will decrease. Accordingly, funds available to
you, as a noteholder, will be reduced.
IF THE PLEDGED ASSETS ARE NOT
SUFFICIENT, DEFAULTS WILL
OCCUR The notes are debt of the issuers secured by
and payable only from the pledged assets. If
the contract payments and other assets pledged
to secure the notes are insufficient to pay the
notes in full, you have no rights to obtain
payment from Advanta Business Services or any
of its affiliates or from any other source.
TECHNOLOGICAL OBSOLESCENCE OF
THE EQUIPMENT MAY REDUCE THE
VALUE OF THE COLLATERAL If the user does not pay the amount due on a
contract, the only other source of monies to
pay amounts due will be the income and proceeds
from the disposition of the related equipment
or other security, if any, provided by the
user. If the servicer or the trustee must
repossess and sell equipment, it may not
recover the entire amount due on a contract
because the market value of equipment usually
declines with age and may be subject to sudden,
significant declines in value because of
technological advances. As a result, you may
experience delays in receiving payments and
suffer losses on your investment in the notes.
GEOGRAPHIC CONCENTRATION OF
THE CONTRACT PORTFOLIO CAUSES
INCREASED RISK FROM LOCAL
ECONOMIC CONDITIONS AND NATURAL
DISASTERS As of the statistical calculation date,
approximately 15.39%, 11.04%, 8.92%, 8.12% and
8.04% of the contracts (based on the
statistical aggregate contract principal
balance) were located in California, Florida,
New York, Texas and New Jersey, respectively.
No other state accounts for more than 5.00% of
the statistical aggregate contract principal
balance. Accordingly, adverse economic
conditions, natural disasters or other factors
particularly affecting any of these states
could have a disproportionate affect on the
performance of the portfolio.
BOOK-ENTRY REGISTRATION WILL
RESULT IN YOUR INABILITY TO
EXERCISE DIRECTLY YOUR RIGHTS
AS A NOTEHOLDER The notes will be registered in the name of
Cede & Co., as nominee of The Depository Trust
Company. As a result, unless and until
definitive notes are issued, you will not be
recognized by the issuers or the trustee as a
noteholder. You will only be able to exercise
the rights of noteholders indirectly, through
The Depository Trust Company, Euroclear or
Cedelbank and their respective participating
organizations. You will receive reports and
other information provided for in the indenture
only to the extent provided by The Depository
Trust Company, Euroclear or Cedelbank. If you
are a beneficial owner of book-entry notes,
your ability to pledge your notes, and the
liquidity of your notes in general, may be
limited by the fact that you will not have a
physical certificate. In addition, you may
experience delays in receiving payments on your
notes.
LIMITED NATURE OF CREDIT
RATINGS ASSIGNED TO THE NOTES Each credit rating assigned to your notes
reflects the rating agency's assessment only of
the likelihood that interest will be
11
<PAGE> 16
paid to you on each payment date and principal
will be paid to you on or before the stated
maturity date of your notes, not that it will
be paid when expected or scheduled. These
ratings are based on the rating agencies'
determination of the value of the contracts,
the reliability of the payments on the
contracts in the portfolio and the
subordination provisions.
The ratings do not address the following:
- the likelihood that the principal on your
notes will be prepaid, paid on a scheduled
date or paid on any particular date before
the stated maturity date for your class;
- the possibility that your notes will be paid
early or the possibility of the imposition of
United States withholding tax for non-U.S.
noteholders;
- the marketability of the notes, or any market
price; or
- that an investment in the notes is a suitable
investment for you.
A rating is not a recommendation to purchase,
hold or sell notes.
RISKS ASSOCIATED WITH YEAR
2000 COMPLIANCE Advanta Business Services is faced with the
task of completing its Year 2000 compliance
goals. The Year 2000 issue results from the
two-digit format programmed into nearly all
computers. Without adjustment, computers will
recognize "00" as 1900 instead of 2000, and
will begin to generate incomplete or inaccurate
information. Advanta Business Services
reasonably believes that its servicing system
will be Year 2000 compliant before the Year
2000.
Nevertheless, it presently is engaged in
various procedures to determine if its computer
systems and software will be Year 2000
compliant. Advanta Business Services also is
determining if the computer systems and
software of its material suppliers, customers,
brokers and agents will be Year 2000 compliant.
In the event that Advanta Business Services, or
any of its suppliers, customers, brokers or
agents do not successfully and timely achieve
Year 2000 compliance, the performance of
Advanta Business Services's obligations as
servicer could be adversely affected. Failure
to achieve Year 2000 compliance could result in
delays in processing payments on the contracts
or a shut down of operations for a period of
time which could have a material adverse effect
on our ability to pay the notes.
12
<PAGE> 17
INTRODUCTION
On August , 1999 (the "CLOSING DATE"), Advanta Leasing Receivables Corp.
VIII ("ADVANTA LEASING RECEIVABLES VIII,") and Advanta Leasing Receivables Corp.
IX ("ADVANTA LEASING RECEIVABLES IX") will issue approximately $111,628,165 of
their Equipment Receivables Asset-Backed Notes, Series 1999-1 in three classes
of Class A Notes, Class A-1, Class A-2 and Class A-3 (the "CLASS A-1 NOTES,"
"CLASS A-2 NOTES" and "CLASS A-3 NOTES," respectively) and one class of Class B
Notes (the "CLASS B NOTES") (each a "CLASS"). Only the Class A-1, Class A-2 and
Class A-3 Notes (the "CLASS A NOTES" or "OFFERED NOTES") are offered by this
prospectus (this "PROSPECTUS"). The Class B Notes will be placed privately by
the Issuers. The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and
the Class B Notes are collectively the "NOTES." Capitalized terms used in this
Prospectus are defined on the pages indicated in the table entitled "Index of
Terms" at the back of this Prospectus.
The Notes will be issued under the terms of the Advanta Business
Receivables Master Facility Agreement, dated as of the date of issuance of the
Notes (the "MASTER AGREEMENT"), among Advanta Leasing Receivables VIII, Advanta
Leasing Receivables IX, together as the Issuers, Advanta Business Services Corp.
("ADVANTA BUSINESS SERVICES"), as servicer, and Bankers Trust Company, as
Trustee (the "TRUSTEE"). The specific terms of the Notes will be set forth in
the Series 1999-1 Supplement, dated the date of issuance of the Notes, to the
Master Agreement (the "SERIES SUPPLEMENT" and, together with the Master
Agreement, the "INDENTURE") also among the Issuers, Advanta Business Services
and the Trustee.
The Indenture will allow the Issuers to issue additional series of notes
subsequent to the issuance of Series 1999-1. Any additional series would be
issued under a separate series supplement and would be payable from a separate
pool of assets. The Issuers do not currently expect to issue any additional
series of notes under the Indenture. The Indenture will require that the Rating
Agency Condition be satisfied before any additional series could be issued.
The Issuers will enter into a Master Sale and Contribution Agreement dated
the date of issuance of the Notes and a Series 1999-1 Supplement thereto
(collectively, the "CONTRIBUTION AGREEMENT"), with Advanta Business Services.
Pursuant to the Contribution Agreement, Advanta Leasing Receivables IX will
acquire Advanta Business Services's right to receive certain scheduled payments
arising under the Contracts and Advanta Leasing Receivables VIII will acquire
any monies due or to become due under the Contracts upon termination (whether
under the Contract, upon acceleration or otherwise) (the "RESIDUAL INTEREST").
Advanta Business Services, as originator of the Contracts, including
origination by acquisition from other entities, is referred to herein as the
"ORIGINATOR."
THE ISSUERS
The Issuers are Advanta Leasing Receivables VIII and Advanta Leasing
Receivables IX. Each of Advanta Leasing Receivables VIII and Advanta Leasing
Receivables IX is referred to in this Prospectus individually as an "ISSUER,"
and collectively they are referred to as the "ISSUERS." The Issuers will be
jointly and severally liable on the Notes.
Each Issuer is a Nevada corporation formed May 5, 1999. Each Issuer is a
wholly-owned subsidiary of Advanta Business Services. The principal office of
Advanta Leasing Receivables VIII is located at 639 Isbell Road, Suite 390-A,
Reno, Nevada 89509 and the principal office of Advanta Leasing Receivables IX is
located at 639 Isbell Road, Suite 390-B, Reno, Nevada 89509.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this Prospectus, neither of the Issuers has an operating
history. The net proceeds of the sale of the Notes will be used by the Issuers
to acquire the Contracts or Advanta Business Services's rights therein and the
Residual Interest, to pay costs and expenses and to make the initial deposit to
the Reserve Account. See "Use of Proceeds." The Issuers are prohibited by their
respective articles of incorporation from
13
<PAGE> 18
engaging in business other than (i) the purchase of equipment leases and lease
receivables (including equipment), loan agreements and other financing
agreements from Advanta Business Services and its affiliates, (ii) the issuance
of notes collateralized by its assets and (iii) engaging in acts incidental,
necessary or convenient to the foregoing and permitted under Nevada law. The
Issuers' abilities to incur, assume or guaranty indebtedness for borrowed money
are also restricted by their respective articles of incorporation.
DIRECTORS AND EXECUTIVE OFFICERS OF THE ISSUERS
The following table sets forth the executive officers and directors of the
Issuers and their ages and positions as of August , 1999. Because the Issuers
are organized as special purpose companies and will be largely passive, it is
expected that the officers and directors of each Issuer in such capacity will
participate in the management of each Issuer to a limited extent. Most of the
actions related to maintaining and servicing the assets will be performed by
Advanta Business Services or any successor thereto, as servicer (with any
successors, the "SERVICER").
ADVANTA LEASING RECEIVABLES CORP. VIII
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George Deehan............................. 56 Director
John Paris................................ 41 President and Director
Michael Coco.............................. 34 Chief Financial Officer and Director
Cole Silver............................... 42 Secretary and Director
Janice C. George.......................... 52 Assistant Secretary and Director
Francis B. Jacobs, II..................... 57 Director
Mark D. Shapiro........................... 37 Treasurer
</TABLE>
ADVANTA LEASING RECEIVABLES CORP. IX
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
George Deehan............................. 56 Director
John Paris................................ 41 President and Director
Michael Coco.............................. 34 Chief Financial Officer and Director
Cole Silver............................... 42 Secretary and Director
Janice C. George.......................... 52 Assistant Secretary and Director
Francis B. Jacobs, II..................... 57 Director
Mark D. Shapiro........................... 37 Treasurer
</TABLE>
George Deehan has served as Director of the Issuers since being elected on
May 6, 1999. Mr. Deehan was appointed president and chief executive officer of
Advanta Leasing Services, the business equipment leasing unit of Advanta
Business Services, in August 1998. In this position, Mr. Deehan is responsible
for overseeing strategic planning, systems integration and national marketing
and sales initiatives for the leasing products. Prior to joining Advanta
Business Services, Mr. Deehan served as president and chief operating officer of
Information Technology Services for AT&T Capital. As chief operating officer, he
helped AT&T to launch a worldwide outsourcing business which managed clients
computer network systems.
John Paris has served as President and Director of the Issuers since being
elected on May 6, 1999. Mr. Paris joined Advanta Business Services in December
1993 and has served in a variety of assignments, including responsibility for
the planning, finance and accounting functions of Advanta Business Services,
supporting both the leasing and business credit card divisions. In November 1998
Mr. Paris was promoted to Senior Vice President and chief financial officer of
Advanta Leasing Services and currently focuses exclusively on lease products.
Prior to joining Advanta Business Services, Mr. Paris was a financial consultant
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with BISYS, Inc., controller, asset-liability manager and vice president of
finance with First Peoples Financial Corp. and a senior auditor with CoreStates
Corp.
Michael Coco has served as Chief Financial Officer and Director of the
Issuers since being elected on May 6, 1999. Mr. Coco is Director of Structured
Finance for Advanta Corp. He has held this position since November 1998. In this
role, he is responsible for all securitization and securitization-like
structuring activities. His responsibility covers Advanta Corp.'s securitization
program, which includes closed-end mortgages, open-end mortgages, leases and
business credit cards.
Cole Silver has served as Secretary and Director of the Issuers since being
elected on May 6, 1999. Mr. Silver is General Counsel of Advanta Business
Services, Advanta Insurance Company and Advanta Bank Corp. Prior to coming to
Advanta Business Services, Mr. Silver was the sole litigator in Pennsylvania for
one of the "big three" automobile finance companies and one of the largest
mortgage companies in the United States. Mr. Silver had his own law practice
from 1988 until 1992 when he joined Advanta Business Services.
Janice C. George has served as Assistant Secretary and Director of the
Issuers since being elected on May 6, 1999. For the last six years, Ms. George
has been employed by Griffin Corporate Services.
Francis B. Jacobs, II has served as Director of the Issuers since being
elected on May 6, 1999. For the last six years, Mr. Jacobs has been employed by
Delaware Trust Capital Management.
Mark D. Shapiro has served as Treasurer of the Issuers since being elected
on May 6, 1999. Mr. Shapiro joined Advanta Business Services in 1996, and is
currently the Director of Commercial Structured Finance. Prior to joining
Advanta Business Services, Mr. Shapiro was the structured finance manager for
DVI, Inc., a medical equipment finance company. Mr. Shapiro is currently
responsible for the execution, management and maintenance of all leasing and
business credit card securitizations. He also assists in all aspects of
relationship management to Advanta Business Services's securitization programs.
None of the above-listed directors and officers of the Issuers will be
compensated directly by the Issuers with any funds or assets of the Issuers nor
will the directors and officers receive compensation in the capacities in which
they act for the Issuers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), may be permitted to directors,
officers and controlling persons of the Issuers pursuant to the foregoing
provisions, or otherwise, each of the Issuers has been advised that in the
opinion of the Securities and Exchange Commission (the "SEC"), the
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against liabilities (other than the payment by the Issuers of expenses incurred
or paid by a director, officer or controlling person of the Issuers in the
successful defense of any action, suit or proceeding) is asserted by a director,
officer or controlling person in connection with the securities being
registered, the Issuers will, unless in the opinion of their counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether the indemnification by them is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of the issue.
USE OF PROCEEDS
The Issuers will apply the net proceeds from the sale of the Notes as
follows: (i) to make the initial deposit to the Reserve Account, in the amount
of $ (equal to 1% of the Initial Aggregate Contract Principal Balance)
(the "RESERVE ACCOUNT INITIAL DEPOSIT"); (ii) to acquire the portfolio of
Contracts (or interests therein) and the Residual Interest from Advanta Business
Services and (iii) to pay costs and expenses. To the extent that the value of
the Contracts and other rights and interests including the Residual Interest
acquired from Advanta Business Services exceeds the amount of proceeds to
purchase such assets, Advanta Business Services will contribute the balance of
such assets to the capital of the Issuers.
Advanta Business Services has, in a series of transactions, previously
transferred contracts to affiliates and the affiliates have transferred the
contracts to commercial paper conduits in return for cash or have
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pledged the contracts as security for or a source of payment for notes issued by
the affiliates. The Issuers will use proceeds from the sale of the Notes to
acquire contracts from Advanta Business Services, and Advanta Business Services
will use proceeds from the sale of the Contracts in part to acquire the
Contracts from the current owners. The balance of the Contracts (or interests
therein) to be included in the portfolio are contracts originated or acquired by
Advanta Business Services and currently held by Advanta Business Services.
THE TRUSTEE
Bankers Trust Company will be the Trustee under the Indenture. Advanta
Business Services, as Originator or Servicer, and its affiliates may from time
to time enter into normal banking and trustee relationships with the Trustee and
its affiliates. The Trustee, the Originator, the Servicer, and any of their
respective affiliates may hold Notes in their own names. In addition, for
purposes of meeting the legal requirements of some local jurisdictions, the
Trustee shall have the power to appoint a co-trustee or a separate trustee under
the Indenture. If a separate trustee or co-trustee is appointed, all rights,
powers, duties and obligations of the Trustee will be exercised jointly by the
Trustee and the separate trustee or co-trustee, except in any jurisdiction in
which the Trustee is incompetent or unqualified to act. In those jurisdictions
in which the Trustee cannot act, the separate trustee or co-trustee shall
exercise and perform its rights, powers, duties and obligations alone at the
direction of the Trustee.
The Trustee may resign at any time, in which event the Issuers will be
obligated to appoint a successor Trustee. The Issuers may also remove the
Trustee if the Trustee ceases to be eligible to continue as Trustee under the
Indenture, fails to perform in any material respect its obligations under the
Indenture, or becomes insolvent. The Issuers will be obligated to appoint a
successor Trustee.
THE PLEDGED ASSETS
GENERAL
The assets pledged by the Issuers to the Trustee to secure the Notes
(collectively, the "PLEDGED ASSETS") will consist of the Issuers' right, title
and interest in:
- leases and loans included on a list delivered to the Trustee on the
Closing Date (collectively, the "CONTRACTS"); the Contracts provide
financing for the purchase or lease of a variety of "small-ticket"
equipment items for businesses, including, without limitation, office
equipment (such as computers, copy machines, facsimile machines, printers
and telephones), telecommunications equipment, automotive repair
equipment, surveillance equipment and furniture (the "EQUIPMENT");
- all monies due or to become due on the Contracts after the opening of
business on August 1, 1999 (the "CUT-OFF DATE") and all related security;
- all amounts in the Collection Account, the Reserve Account and the
Residual Account;
- all of the Issuers' rights in the Contribution Agreement;
- proceeds of each of the foregoing, but excluding any insurance premiums,
taxes, late charge fees for those Contracts for which a Servicer Advance
has been made, any initial unpaid amounts; and
- interests, if any, of the Issuers in the Equipment (and proceeds,
including net insurance proceeds thereof) and the Residual Receipts
related thereto.
To facilitate servicing, the Servicer will retain possession of the
Contracts and the related Contract Files and will hold the Contract Files in
accordance with the provisions of the Indenture, subject to the interests of the
Trustee and the Holders of the Notes.
The "CONTRACT FILES" means, with respect to each Contract, the following
documents:
- the executed original counterparts of the Contract;
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- a copy of the related agreement, if any, between the Originator and a
broker pursuant to which the Originator acquired Contracts;
- copies of all documents (which may be in microfiche form or on the
Servicer's computerized information system), if any, that the Originator
or the Servicer keeps on file for the benefit of the Originator in
accordance with the Originator's or Servicer's customary procedures; and
- copies (together with all amendments, assignments and continuations
thereof and including evidence of filings with the appropriate office) of
all Uniform Commercial Code ("UCC") financing statements filed with
respect to the Contracts, identifying the User as debtor and the
Originator as secured party, if applicable.
TRUST ESTATE
Under the Series Supplement, the Issuers will pledge all of the Pledged
Assets to the Trustee to secure the payment of the Notes. The Trustee will hold
the interests in the Pledged Assets as the "TRUST ESTATE."
THE CONTRACTS
The Contracts are in the form of leases or loans. Loans may include
installment sale contracts.
Of the Contracts, 98.81%, measured by the Statistical Aggregate Contract
Principal Balance, are leases and the remaining 1.19% are loan agreements.
The Servicer has represented that, for accounting purposes, all of the
leases included as Contracts are financing leases rather than "true" leases or
operating leases.
With respect to Contracts representing approximately 16% of the Statistical
Aggregate Contract Principal Balance, Advanta Business Services has acquired
from vendors or other lease financing entities (and transferred to Advanta
Leasing Receivables Corp. IX) only a right to receive certain periodic lease
payments made by the Users. With respect to such Contracts, unless the User is
in default, at the end of the term of such lease Advanta Business Services is
required to reassign the Equipment or Residual Interest to the vendor or other
lease financing entity.
Statistical information concerning the Contracts is included in this
Prospectus under the caption "Statistical Information."
References to the "USER" means any obligor, under any Contract, whose
obligations thereunder constitute the sources of payments under the Contract,
including any guarantor of the obligation.
The Contracts typically require a "residual" payment at the end of the term
most of which payments are in the form of a purchase option. These purchase
options are exercisable at varying amounts, and are referred to as "PURCHASE
OPTION PAYMENTS." If a User under a Contract with such a purchase option does
not exercise its purchase option, the User is required to either continue the
lease of the Equipment on a month-to-month basis or return the Equipment to the
Servicer.
The Purchase Option Payments are either (i) an option to purchase the
equipment for $1.00, (ii) an option to purchase the equipment for fair market
value or (iii) an option to purchase the equipment for a stated amount. See the
table captioned "Distribution of Contracts by Purchase Option" under the caption
"Statistical Information" in this Prospectus. Those leases described above in
which the vendor or other lease financing entity is entitled to the Equipment or
the Residual Interest at the end of the term of the lease and the loans are
listed in the table as "Other." For such leases the Purchase Option Payments,
however determined, are not available to the Issuers or the Trust Estate.
Contracts that take the form of leases contain "hell or high water" clauses
unconditionally obligating the User to make periodic payments at the time and on
the dates specified in the Contract. The language of the leases varies, but all
state that the lease cannot be canceled for any reason. The leases specifically
state that the obligation to make payments is unconditional notwithstanding
equipment failure, damage, loss or any other problem. The leases also state that
the lessor is not responsible for any representations or acts of the
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equipment vendor, or otherwise state that the lessor has no obligation with
respect to the equipment and any problems therewith are the responsibility of
the User.
Some of the Contracts that are loans may be prepaid at the option of the
User.
Pursuant to the terms of the Indenture, however, the Servicer may allow
prepayment of a Contract, whether in the form of a lease or a loan, in an amount
not less than the Prepayment Amount of the Contract. To the extent the Servicer
receives an amount in excess of the Prepayment Amount of a prepaid contract,
such excess amount will also be deposited in the Collection Account for the
benefit of the Noteholders. Such excess amount will be considered a part of
Residual Receipts (such amount, an "EXCESS AMOUNT").
Upon the prepayment of a Contract which is a loan, the Issuers will pay to
the Servicer and the Servicer will deposit to the Collection Account, the excess
of the Prepayment Amount over the amount prepaid by the User.
In addition, in the event that a User requests an upgrade or trade-in of
Equipment, the Servicer may permit a prepayment of the lease, remove the
Equipment and related Contract from the Trust Estate, and deposit the Prepayment
Amount received from the User into the Collection Account.
The "PREPAYMENT AMOUNT" means, for a Contract, as of any date, the sum of
(a) the Contract Principal Balance of the Contract (without deduction for any
security deposit paid by the User, unless the security deposit has been applied
to the Contract Principal Balance pursuant to the Servicer's credit and
collection policy and deposited into the Collection Account), plus (b) the
product of the Contract Principal Balance and one-twelfth of the Applicable
Discount Rate, plus (c) the Booked Residual Value for the Contract.
Under some of the Contracts, the User may, upon prior written notice to the
Servicer, assign or sublease the related Equipment, provided that the Servicer
consents to the assignee or sublessee in accordance with the terms of the
related Contract. The right to receive prior written notice and grant or deny
consent shall be exercised by the Servicer. Notwithstanding any assignment or
sublease, each User will remain liable for the lessee obligations under the
related Contract and the Contract will remain part of the Trust Estate.
The leases are "triple-net" leases (i.e., the User assumes all
responsibility with respect to the related Equipment, including the obligation
to pay all costs relating to its operation, maintenance, repair and insurance).
The leases also contain provisions that unconditionally obligate the User
to make all Scheduled Payments thereunder.
On any date of calculation with respect to a Contract, the present value of
the Scheduled Payments to become due with respect to the Contract on and after
the date of calculation (but in any event on or prior to March 31, 2005)
(excluding Scheduled Payments previously due and unpaid), discounted monthly at
one-twelfth of the Applicable Discount Rate is the "CONTRACT PRINCIPAL BALANCE"
of the Contract, except that a Defaulted Contract has a Contract Principal
Balance of $0. Likewise, any Contract that has been prepaid or otherwise
terminated prior to its termination date or which has been repurchased as a
result of a breach of the representations and warranties made by the Originator
or the Issuers with respect to such Contract, will have a Contract Principal
Balance of $0.
The "SCHEDULED PAYMENTS" with respect to any Contract are the stated
periodic rental or loan payments (exclusive of any amounts in respect of
insurance or taxes) set forth in the Contract and due from the User.
"AGGREGATE CONTRACT PRINCIPAL BALANCE" means, for any Calculation Date, the
aggregate of the Contract Principal Balances of all Contracts in the Trust
Estate as of such date.
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ADVANTA BUSINESS SERVICES'S
UNDERWRITING, ORIGINATION AND SERVICING PRACTICES
GENERAL
Advanta Business Services is a wholly-owned subsidiary of Advanta Leasing
Holding Corp., a Delaware corporation. Advanta Leasing Holding Corp. is a
wholly-owned subsidiary of Advanta Corp. (a publicly-traded company based in
Spring House, Pennsylvania and listed on the NASDAQ as ADVNA, ADVNB and ADVNZ).
Advanta Business Services is headquartered at 1020 Laurel Oak Road, Voorhees,
New Jersey 08043-7228 and its phone number is (609) 782-7300.
As of October 1, 1998, Advanta Business Services ceased originating
contracts related to equipment financing. Since October 1, 1998, Advanta Bank
Corp., a Utah industrial loan corporation based in Draper, Utah and an affiliate
of Advanta Corp., the ultimate parent of Advanta Business Services, has assumed
the origination of the equipment financings. Advanta Business Services currently
services equipment financing arrangements originated by Advanta Bank Corp. and
Advanta Business Services continues to service contracts which it originated or
acquired prior to October 1, 1998.
CONTRACT ORIGINATION
Prior to October 1, 1998, Advanta Business Services originated contracts
primarily through its sales and marketing programs at its Voorhees, New Jersey
headquarters. Advanta Business Services no longer originates and funds leases or
other equipment financing arrangements; however, it provides origination
services to Advanta Bank Corp. in connection with Advanta Bank Corp.'s equipment
financing program. The Contracts which will be included in the Pledged Assets
are Contracts which were originated or acquired or an interest in which was
acquired by Advanta Business Services prior to October 1, 1998. Most of the
Contracts were, after origination or acquisition by Advanta Business Services,
sold, contributed or pledged in various securitization programs. Most of the
Contracts included in the Pledged Assets will be acquired by Advanta Business
Services from the current owners under the securitization programs and sold or
contributed to the Issuers in connection with the issuance of the Notes.
The Contracts were originally either (i) originated in the name of Advanta
Business Services directly or through a vendor or broker; (ii) originated with
funding by Advanta Business Services through a vendor or broker which vendor or
broker assigned the Contract to Advanta Business Services but did not reveal the
name of the originator to the User or (iii) originated by another funding source
and purchased by Advanta Business Services. With respect to approximately 16% of
the Statistical Aggregate Contract Principal Balance of the Contracts, Advanta
Business Services has acquired only the rights to the scheduled payments and has
agreed that, unless the User is in default, at the end of the term of the lease,
all remaining rights in the Equipment will be returned to the vendor or other
lease financing entity; and the interest conveyed to the Issuers will be only
such right to scheduled payments (and a security interest in the equipment which
can be exercised if the User defaults).
The following describes Advanta Business Services's origination practices
with respect to equipment financing arrangements, originated or acquired by
Advanta Business Services prior to October 1, 1998, including the Contracts.
Advanta Business Services continues to use these practices in connection with
the origination services performed for Advanta Bank Corp.
Advanta Business Services originates leases through marketing programs,
vendors, brokers and bulk or portfolio purchases. Advanta Business Services
establishes both formal and informal relationships with equipment vendors. As a
result of previous transactions with Advanta Business Services, vendors may
recommend that prospective customers make a credit application to Advanta
Business Services for financing. A more formal program between Advanta Business
Services and a vendor may offer prospective customers financing at pre-arranged
rates, based upon the vendor's equipment, and terms and conditions approved by
Advanta Business Services.
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Advanta Business Services also originates contracts through the use of
brokers. In a typical broker transaction, the broker refers potential customers
to Advanta Business Services and the broker is paid a referral fee. Contracts
originated under the broker program are reviewed in a manner consistent with
Advanta Business Services's then-existing policies and procedures.
In a majority of these programs, the Equipment is leased by Advanta
Business Services and it bills the User and collects payments in its own name.
For some select vendor and broker programs, Advanta Business Services bills
and collects payments in the vendor's name or the broker's name so that the User
is not aware that Advanta Business Services is a party to the transaction. Under
this program, once a contract becomes 61 days past due, Advanta Business
Services is then immediately identified to the User.
Vendors or brokers may choose to use Advanta Business Services's standard
contract or they may use their own contract. In either case, the credit approval
remains with Advanta Business Services. Contract documents for all programs are
either identical to Advanta Business Services's standard lease documents or are
reviewed by the legal staff of Advanta Business Services to insure substantial
compliance with its standard terms.
In instances where Advanta Business Services originated a Contract or
acquired a Contract but does not own the equipment, it has, in cases where the
initial value of the equipment exceeded $25,000, obtained a perfected security
interest in the Equipment.
Advanta Business Services also arranges purchases of contracts on a bulk or
portfolio basis. These contracts may be originated by a variety of originators
under several different underwriting guidelines. When reviewing potential bulk
or portfolio acquisitions, the existing originator's contracts are reviewed and
approved by the Advanta Business Services credit staff, using pre-determined
guidelines. For each potential bulk or portfolio purchase, Advanta Business
Services is able to accept or reject individual contracts.
CREDIT REVIEW
In connection with the origination or acquisition of contracts prior to
October 1, 1998 and in connection with the origination services currently
performed for Advanta Bank Corp., Advanta Business Services performed and
performs a thorough credit review of all prospective obligors. Typically, the
credit review process begins when the prospective obligor completes a credit
application. The completed credit application is entered into the company's
computerized application processing system called ACE. Applications can be
entered into ACE either internally or externally. A customized credit scoring
model is employed and the credit decision based on several criteria which may
include verification of a credit bureau report for the principal(s) of the
prospective obligor, verification of a Dunn & Bradstreet listing for the
company, and a review of the total dollar amount of exposure for all contracts
the obligor has outstanding with Advanta Business Services, which may not exceed
a specified dollar limit. Credit applications can be automatically approved
and/or rejected based on the dollar amount of the application and a score
falling within a range in the model. For those credit applications not falling
within a specified dollar amount and/or credit score, the decision is based on
an analysis by the credit staff utilizing criteria developed by Advanta Business
Services. Authority to make credit decisions is based on seniority and the
lending experience of the credit personnel. In general, transactions in excess
of $500,000 must be approved by the senior management. The overall credit due
diligence process is supported by a comprehensive set of policies and procedures
that outline Advanta Business Services's credit processes and philosophies.
Advanta Business Services's senior credit committee provides a forum for
making credit decisions on transactions which exceed the authority of individual
or paired credit approvers either in size or complexity. The senior credit
committee also identifies strategic credit issues and establishes the credit
polices and procedures throughout the company.
In addition, the credit department has staff dedicated to perform reviews
of potential new vendors and brokers to ensure compliance with the company's
overall credit policies and procedures. In reviewing new relationships with
vendors and brokers, Advanta Business Services considers, among other things,
length of
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time in business, bank, credit and trade references, Dunn & Bradstreet reports,
and credit bureau reports on all of the officers of the vendor being reviewed.
COLLECTION/SERVICING
Collection activities with respect to delinquent contracts are performed by
Advanta Business Services's servicing staff in Voorhees, New Jersey. Each
contract has a provision for assessing late charges in the event that an obligor
fails to make a payment on the contract on the related due date. Telephone
contact is normally initiated when an account is twenty days past due. All
collection activity is entered into Advanta Business Services's computerized
collection system. Collectors input activity notes (i.e., notes summarizing
recent collection activities) directly into the collection system, which enables
company personnel to monitor the status of the account and take any necessary
actions. Collectors have the latest status and collection history on each
account available on their computer terminals.
If a contract is delinquent the following action is taken:
-- If a payment has not been received by the third day after the due
date, the system automatically generates a computerized late notice which
is sent directly to the User (except for the select vendor programs where
the User does not recognize Advanta Business Services as a party to the
transaction, in those situations the vendor is notified).
-- If a payment has not been received by the 15th day after the due
date, a past due letter is sent out to the User (except for the select
vendor programs where the User does not recognize Advanta Business Services
as a party to the transaction, in those situations, the vendor is
notified).
-- If a payment has not been received by the 31st day after the due
date, a default letter is sent out to the User (except for the select
vendor programs where the obligor does not recognize Advanta Business
Services as a party to the transaction, in those situations, the vendor is
notified).
-- If a payment has not been received by the 61st day after the due
date, a demand letter is sent out directly to the User.
Telephone contact is continued throughout the delinquency period. If the
transaction continues to be delinquent, Advanta Business Services may exercise
any remedies available to it under the terms of the contract, including
termination, acceleration and/or repossession. Each contract is evaluated on the
merits of the individual situation, with the equipment value and the current
financial strength of the User.
If collection activities do not rectify the account, Advanta Business
Services typically charges off the account at 121 days past due. An account may
be charged off prior to 121 days by Advanta Business Services if it is
determined that there will be no further payments made.
At the time of charge-off, the account is turned over to Advanta Business
Services's in-house litigation department for suit purposes. In general, a
decision is made whether to pursue the obligor and/or personal guarantor through
litigation. All third party collection agency assignments are made via the
collection department in order to enforce the original terms of the contract
should an account not be suit worthy. The litigation decision is dependent on a
review of the account including credit bureau reports, obligor payment history,
and/or Dunn & Bradstreet reports.
In cases where the User filed for bankruptcy, the Advanta Business
Services's bankruptcy department follows up with the User to determine whether
the User intends to assume or reject the contract. In addition, the department
pursues the non-bankrupt obligors while reviewing the fair market value of the
equipment, the remaining balance of the contract, and the credit of the
non-bankrupt obligors. If the bankruptcy department cannot settle with the
non-bankrupt obligors, the file may be passed to the litigation department for
suit. In many cases, although the User has filed for bankruptcy protection from
its creditors, it continues to make regular payments on its contract to Advanta
Business Services.
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RESIDUAL VALUES
Advanta Business Services has for every year since 1991 realized residual
values which, on average, exceeded the booked residual values for the contracts.
For contracts in which there is a pre-determined buy-out price, the buy-out
price is the residual value recorded on Advanta Business Services's books. In
the event the equipment is returned, Advanta Business Services utilizes the
services of its vendors and brokers and also participates in an active secondary
market for the sale of this returned, used equipment.
YEAR 2000
The "YEAR 2000 ISSUE" affects computer and information technology ("IT")
systems, as well as non-IT systems which include embedded technology such as
micro-processors and micro-controllers that have date sensitive programs that
may not properly recognize the Year 2000 or beyond. If the systems and products
used by Advanta Corp. and its subsidiaries, including Advanta Business Services
(collectively, "ADVANTA"), are not properly equipped to identify and recognize
the Year 2000, its systems could fail or create erroneous results.
In connection with the Year 2000 Issue, Advanta has organized a separate
Year 2000 Project Office (the "PROJECT OFFICE"), led by a senior information
technology manager to assess whether the computer systems and applications used
are Year 2000 compliant and to implement appropriate corrective action for those
that are not compliant.
The Project Office has developed standards for its work based on work of
leading authorities in the field. In addition, Advanta's internal audit
department has assigned a senior information technology auditor to monitor all
Year 2000 issues and developments for the Audit Committee of its Board of
Directors. Independent consultants have assisted in the verification and
validation processes to assure the reliability of Advanta's risk and cost
estimates.
Advanta has implemented a Year 2000 compliance program in accordance with
applicable guidelines and regulations of the Federal Financial Institutions
Examination Council ("FFIEC") as adopted by the Office of the Comptroller of the
Currency and the Federal Deposit Insurance Corporation, and has evaluated
whether Advanta's systems are Year 2000 compliant. This evaluation includes
identifying and prioritizing "mission-critical" systems, whose failure would
have a severe impact on Advanta's financial condition and ability to perform its
business functions.
As of June 30, 1999, Advanta has completed the Awareness, Assessment and
Validation phases, and has substantially completed the Renovation, Contingency
Planning and Implementation phases of its Year 2000 compliance program with
respect to its internal and external mission-critical systems. As stated before,
Advanta is following guidelines set by the FFIEC, which required that all
mission-critical systems be substantially implemented by June 30, 1999.
In addition, Advanta has contacted significant business partners, including
vendors, customers and asset management and funding counterparties to assess the
potential impact on operations if those third parties or their products fail to
become Year 2000 compliant in a timely manner. The internet websites of these
significant business partners are also reviewed regularly to monitor and assess
their level of Year 2000 compliance. Non-compliant products have been evaluated
for correction, replacement or retirement. To date, Advanta is not aware of any
material third party business relationship, product or system with a Year 2000
problem that management believes would have a material adverse effect on
Advanta. Advanta's contingency plans have been developed in the event that
remediation or replacement plans are not successfully implemented. The plans are
reviewed and validated quarterly. The contingency plans are designed to protect
its business and operations from business interruptions related to the Year 2000
Issue and, for example, may include back-up procedures or the identification of
alternative suppliers, where practical. Many of the functions performed by the
products and systems used, which operate automatically, can be performed
manually. Consequently, in the event these products or systems experience
isolated failures as a result of the Year 2000 Issue, management believes that
disruption caused by such isolated failures should not have a material adverse
effect on Advanta.
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Although there can be no assurances, Advanta believes that the Year 2000
Issue will not pose significant operational problems for it and will not have a
material adverse effect on its future financial condition, liquidity or results
of operations during 1999 and in future periods.
Notwithstanding the foregoing, there are many uncertainties associated with
the Year 2000 Issue and there can be no assurance that the Year 2000 Issue will
not have a material adverse effect on the operations of the Originator and
Servicer, including a shut down of operations for a period of time, which may,
in turn, have a material adverse effect on the Notes.
MATTERS RELATED TO ADVANTA CORP.
On January 22, 1999, Fleet Financial Group, Inc. and some of its affiliates
("FLEET") filed a lawsuit (the "COMPLAINT") against Advanta Corp. and some of
its subsidiaries relating to the transaction with Fleet which closed on February
20, 1998 in which Advanta Corp. contributed substantially all of its consumer
credit card business to a limited liability company owned by Fleet (the "FLEET
TRANSACTION"). The Complaint centers around post-closing adjustments and other
matters relating to the Fleet Transaction. Fleet seeks damages of approximately
$141 million.
On February 16, 1999, Advanta Corp. filed an answer to the Complaint
denying the material allegations of the Complaint. Advanta Corp. also has filed
counterclaims against Fleet seeking damages from Fleet. Although the outcome of
the litigation between Fleet and Advanta Corp. cannot be determined, Advanta
Corp. does not expect this litigation to have a material adverse effect on the
financial position or future operating results of Advanta Corp. or Advanta
Business Services.
This Prospectus contains forward-looking statements that are subject to
risks and uncertainties that could cause actual results to differ materially
from those projected. Additional risks that may affect Advanta Corp.'s
performance are detailed in Advanta Corp.'s filings with the SEC, including its
most recent Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.
The ability of Advanta Corp.'s subsidiaries, including Advanta Business
Services, to honor their financial and other obligations is to some extent
influenced by the financial condition of Advanta Corp. Those obligations,
insofar as they relate to the Trust Estate and the Notes, primarily consist of
Advanta Business Services's obligation to repurchase Contracts which are
inconsistent with representations and warranties set forth in the Contribution
Agreement as well as the obligations of the Servicer pursuant to the Indenture.
To the extent that the Servicer's ability to perform its functions and
obligations is adversely affected, the Contracts may experience an increased
level of delinquencies and losses.
23
<PAGE> 28
REMOVAL AND MODIFICATIONS OF CONTRACTS, SALE AND RE-LEASING OF ASSETS
Under the terms of the Indenture, upon discovery by an Issuer, the Trustee
or the Servicer of a breach of any of the representations or warranties of the
Originator set forth in the Contribution Agreement, including, primarily, that
the Contracts, as of the Closing Date are Eligible Contracts, the party
discovering such breach shall give prompt written notice to the other parties.
As of the last day of the calendar month in which such breach was discovered or,
if later, the last day of the calendar month in which the Servicer received the
notice thereof (or, at the Servicer's and such Issuer's election, any earlier
date), unless such breach has been waived or cured prior to such time, the
Issuers shall remove such Contract from the Trust Estate. In consideration for
the removal of such Contract, the Issuers will be obligated to deposit the
Prepayment Amount for such Contract into the Collection Account no later than
the Determination Date prior to the next Payment Date. Under the Contribution
Agreement, the Originator will be obligated to repurchase such Contracts from
the Issuers.
In addition, the Issuers may, at their option, remove Defaulted Contracts
from the Trust Estate. The aggregate amount of Defaulted Contracts which the
Issuers may remove from the Trust Estate shall not, however, exceed 5% of the
Initial Aggregate Contract Principal Balance of the Contracts. The Issuers shall
have no obligation to remove any Defaulted Contract. In determining the amount
of a Defaulted Contract which is removed, the amount of such Contract shall be
equal to the Contract Principal Balance of such Contract calculated immediately
prior to classification as a Defaulted Contract. Upon removal of a Defaulted
Contract from the Trust Estate, the Issuers shall pay the Prepayment Amount to
the Servicer for deposit into the Collection Account.
In the event that a User requests an upgrade or trade-in of Equipment, the
Issuers may remove the Equipment and the related Contract from the Trust Estate
during any Collection Period by remitting to the Trustee the applicable
Prepayment Amount received from the User for deposit in the Collection Account
on or prior to the Determination Date relating to such Collection Period.
The Servicer has the right to modify the payment terms of the Contracts in
accordance with its credit and collection policies, provided the Contract, as
modified, (i) has a Contract Principal Balance not lower than the Contract
Principal Balance of the Contract prior to the modification, (ii) does not have
a maturity date later than March 31, 2005 and (iii) has a Booked Residual Value
not lower than the Booked Residual Value of the Contract prior to the
modification. See "Description of the Notes -- Rebates, Refunds, Modifications,
Payment from Third Parties" for a description of additional provisions regarding
modifications.
With respect to Contracts that are Defaulted Contracts, at the request of
the Issuers, the Trustee will release the lien of the Indenture with respect to
the Defaulted Contracts and the Issuers may sell the Contracts provided that any
proceeds of the sale of any Defaulted Contract shall be treated as Recoveries
and deposited into the Collection Account as Available Funds.
Upon repossession and disposition of any Equipment subject to a Defaulted
Contract, the Servicer is directed to maximize the Recoveries, and, to do so,
the Servicer may sell the Equipment at the best available price, refurbish the
Equipment and re-lease or sell the Equipment to third parties, or take any other
commercially reasonable steps to maximize the proceeds from the Equipment.
Recoveries, including any future payments received for Defaulted Contracts,
shall be paid to the Collection Account as Available Funds. If the Servicer
reasonably believes that the value of any Equipment is zero or de minimis, it
will dispose of the Equipment in accordance with its standard procedures.
24
<PAGE> 29
STATISTICAL INFORMATION
The statistical information presented in this Prospectus concerning the
Contracts reflects those cashflows from August 1, 1999 and onward related to the
portfolio of Contracts as of the opening of business on July 1, 1999 (the
"STATISTICAL CALCULATION DATE"), and has been calculated using an assumed
discount rate of 7.18% per year (the "STATISTICAL DISCOUNT RATE"). The Aggregate
Contract Principal Balance of the Contracts as of the Statistical Calculation
Date is $111,628,166 using the Statistical Discount Rate. The Aggregate Contract
Principal Balance of the Contracts as of August 1, 1999 (the "CUT-OFF DATE") is
$ using the Applicable Discount Rate (the "INITIAL AGGREGATE CONTRACT
PRINCIPAL BALANCE"). The "APPLICABLE DISCOUNT RATE" is %, which is equal to
the sum of (a) the weighted average interest rate of the Class A-1 Notes, the
Class A-2 Notes, the Class A-3 Notes, and the Class B Notes, each weighted by
(i) the initial principal balance of each Class of Notes, as applicable, and
(ii) the weighted average life to call of each Class of Notes under a 6.0%
conditional prepayment rate ("CPR") prepayment and no loss scenario, as
applicable, and (b) the Servicing Fee of 1.0% per annum. As of the Cut-Off Date,
the total number of Contracts in the final pool was 19,598.
The statistical distribution of the characteristics of the Contracts as of
the Cut-Off Date using the Applicable Discount Rate may vary somewhat from the
statistical distribution of the characteristics of the Contracts as of the
Statistical Calculation Date using the Statistical Discount Rate as presented in
this Prospectus, due to the fact that some Contracts reflected in the
statistical information presented herein may have had payments made in respect
thereof or may be determined not to meet the eligibility requirements for the
final pool and also due to the fact that, during the period from the Statistical
Calculation Date to the Cut-Off Date, some contracts may have been added to the
Contracts. The variance in the material characteristics of the final pool will
not be greater than 5% (plus or minus) compared to the characteristics that are
described in this Prospectus, based upon the Aggregate Contract Principal
Balance. The statistical characterization of the final pool will be filed with
the SEC on a current report on Form 8-K.
As used in the tables below, the "STATISTICAL AGGREGATE CONTRACT PRINCIPAL
BALANCE" is the aggregate of the Contract Principal Balances of the related
Contracts, calculated as of the Statistical Calculation Date using the
Statistical Discount Rate. Unless otherwise noted, all calculations of Contract
Principal Balances with respect to the Contracts and all statistical percentages
in this Prospectus are measured by the Statistical Aggregate Contract Principal
Balance. Furthermore, in all instances in this Prospectus where the Statistical
Discount Rate is used to calculate the Contract Principal Balances, the
calculation is performed by discounts related to Scheduled Payments at the same
frequency as the payment interval of the related Contract.
The percentages and balances set forth in each of the following tables may
not total due to rounding.
25
<PAGE> 30
The following is statistical information relating to the Contracts
calculated as of the Statistical Calculation Date.
SUMMARY INFORMATION CONCERNING CONTRACTS
(As of July 1, 1999)
<TABLE>
<S> <C>
Number of Contracts......................................... 19,823
Statistical Aggregate Contract Principal Balance............ $111,628,166
Statistical Average Contract Principal Balance.............. $ 5,631
Statistical Minimum Contract Principal Balance.............. $ 13
Statistical Maximum Contract Principal Balance.............. $ 173,318
Aggregate Original Equipment Cost........................... $227,325,593
Average Original Equipment Cost............................. $ 11,468
Minimum Original Equipment Cost............................. $ 250
Maximum Original Equipment Cost............................. $ 246,600
Weighted Average Original Term in Months.................... 52.3
Minimum Original Term in Months............................. 8
Maximum Original Term in Months............................. 72
Weighted Average Remaining Term in Months................... 28.5
Minimum Remaining Term in Months............................ 1
Maximum Remaining Term in Months............................ 68
Weighted Average Seasoning in Months........................ 23.8
Largest User................................................ 0.17%
Loan Contracts.............................................. 1.19%
</TABLE>
26
<PAGE> 31
DISTRIBUTION OF CONTRACTS BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
STATE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ----- --------- ------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama.............. 206 1.04% $ 1,080,960 0.97% $ 2,145,885 0.94%
Alaska............... 25 0.13 155,078 0.14 375,930 0.17
Arizona.............. 306 1.54 1,652,494 1.48 3,545,872 1.56
Arkansas............. 99 0.50 571,846 0.51 1,256,181 0.55
California........... 2,853 14.39 17,174,788 15.39 34,280,363 15.08
Colorado............. 291 1.47 1,354,895 1.21 3,256,680 1.43
Connecticut.......... 425 2.14 2,049,466 1.84 4,344,031 1.91
Delaware............. 66 0.33 330,607 0.30 748,044 0.33
District of
Columbia........... 109 0.55 756,359 0.68 1,405,918 0.62
Florida.............. 2,108 10.63 12,321,897 11.04 23,421,460 10.30
Georgia.............. 710 3.58 4,192,743 3.76 8,307,505 3.65
Hawaii............... 43 0.22 355,502 0.32 657,441 0.29
Idaho................ 53 0.27 278,310 0.25 424,691 0.19
Illinois............. 445 2.24 2,590,007 2.32 5,600,668 2.46
Indiana.............. 164 0.83 763,675 0.68 1,641,424 0.72
Iowa................. 43 0.22 301,298 0.27 598,452 0.26
Kansas............... 56 0.28 330,998 0.30 682,655 0.30
Kentucky............. 144 0.73 687,207 0.62 1,430,267 0.63
Louisiana............ 75 0.38 385,001 0.34 724,017 0.32
Maine................ 91 0.46 438,346 0.39 828,910 0.36
Maryland............. 452 2.28 2,673,038 2.39 4,963,366 2.18
Massachusetts........ 688 3.47 3,578,602 3.21 7,667,400 3.37
Michigan............. 289 1.46 1,510,269 1.35 2,838,945 1.25
Minnesota............ 190 0.96 1,017,321 0.91 2,212,081 0.97
Mississippi.......... 87 0.44 561,356 0.50 943,185 0.41
Missouri............. 218 1.10 1,272,266 1.14 2,518,594 1.11
Montana.............. 34 0.17 195,082 0.17 390,898 0.17
Nebraska............. 30 0.15 157,574 0.14 427,280 0.19
Nevada............... 110 0.55 642,090 0.58 1,174,363 0.52
New Hampshire........ 124 0.63 734,825 0.66 1,393,315 0.61
New Jersey........... 1,523 7.68 8,974,709 8.04 18,560,737 8.16
New Mexico........... 108 0.54 433,794 0.39 901,891 0.40
New York............. 1,779 8.97 9,960,951 8.92 21,774,533 9.58
North Carolina....... 607 3.06 2,526,967 2.26 5,628,257 2.48
North Dakota......... 7 0.04 10,481 0.01 36,086 0.02
Ohio................. 631 3.18 3,343,248 2.99 6,499,946 2.86
Oklahoma............. 140 0.71 834,646 0.75 1,510,374 0.66
Oregon............... 214 1.08 1,075,306 0.96 2,056,020 0.90
Pennsylvania......... 1,032 5.21 5,190,552 4.65 10,877,365 4.78
Puerto Rico.......... 2 0.01 4,229 0.00 10,647 0.00
Rhode Island......... 153 0.77 830,241 0.74 1,605,578 0.71
South Carolina....... 261 1.32 1,841,117 1.65 3,564,182 1.57
South Dakota......... 15 0.08 106,334 0.10 145,828 0.06
Tennessee............ 191 0.96 1,005,596 0.90 2,169,011 0.95
Texas................ 1,517 7.65 9,061,134 8.12 18,848,112 8.29
Utah................. 80 0.40 541,614 0.49 1,084,466 0.48
Vermont.............. 58 0.29 213,326 0.19 459,667 0.20
Virgin Islands....... 8 0.04 22,949 0.02 56,430 0.02
Virginia............. 506 2.55 2,733,929 2.45 5,513,541 2.43
Washington........... 256 1.29 1,638,745 1.47 3,261,069 1.43
West Virginia........ 39 0.20 173,926 0.16 381,086 0.17
Wisconsin............ 141 0.71 864,843 0.77 1,878,097 0.83
Wyoming.............. 21 0.11 125,631 0.11 296,850 0.13
------ ------ ------------ ------ ------------ ------
Total............ 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
27
<PAGE> 32
DISTRIBUTION OF CONTRACTS BY CONTRACT PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- -------------------------- --------- ------------- ------------------ -------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00 -- $ 100.00... 94 0.47% $ 6,686 0.01% $ 210,064 0.09%
$ 100.01 -- $ 500.00.... 1,474 7.44 455,970 0.41 5,302,537 2.33
$ 500.01 -- $ 1,000.00... 1,951 9.84 1,455,902 1.30 8,403,760 3.70
$ 1,000.01 -- $ 2,500.00... 5,042 25.44 8,501,295 7.62 27,948,750 12.29
$ 2,500.01 -- $ 5,000.00... 4,530 22.85 16,345,346 14.64 40,476,091 17.81
$ 5,000.01 -- $ 10,000.00... 3,712 18.73 26,185,769 23.46 52,315,557 23.01
$ 10,000.01 -- $ 25,000.00... 2,424 12.23 35,835,540 32.10 60,220,758 26.49
$ 25,000.01 -- $ 50,000.00... 507 2.56 16,496,891 14.78 23,241,970 10.22
$ 50,000.01 -- $100,000.00... 78 0.39 4,961,404 4.44 7,376,153 3.24
$100,000.01 -- $150,000.00... 9 0.05 1,060,039 0.95 1,401,424 0.62
Greater than $150,000.00.... 2 0.01 323,324 0.29 428,529 0.19
------ ------ ------------ ------ ------------ ------
Total................... 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL EQUIPMENT COST
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
ORIGINAL EQUIPMENT COST CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ----------------------- --------- ------------- ------------------ -------------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
$ 100.01 -- $ 500.00.... 13 0.07% $ 2,352 0.00% $ 5,128 0.00%
$ 500.01 -- $ 1,000.00... 121 0.61 46,711 0.04 107,023 0.05
$ 1,000.01 -- $ 2,500.00... 2,173 10.96 1,965,262 1.76 4,106,298 1.81
$ 2,500.01 -- $ 5,000.00... 4,315 21.77 7,513,993 6.73 15,944,381 7.01
$ 5,000.01 -- $ 10,000.00... 5,816 29.34 19,800,953 17.74 41,740,069 18.36
$ 10,000.01 -- $ 25,000.00... 5,421 27.35 41,612,325 37.28 84,154,686 37.02
$ 25,000.01 -- $ 50,000.00... 1,640 8.27 28,183,646 25.25 55,925,543 24.60
$ 50,000.01 -- $100,000.00... 268 1.35 8,568,354 7.68 17,244,573 7.59
$100,000.01 -- $150,000.00... 37 0.19 2,256,902 2.02 4,490,315 1.98
Greater than $150,000.00.... 19 0.10 1,677,668 1.50 3,607,577 1.59
------ ------ ------------ ------ ------------ ------
Total................... 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
REMAINING TERM (MONTHS) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ----------------------- --------- ------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12.............. 7,062 35.63% $ 13,566,449 12.15% $ 67,832,975 29.84%
13 -- 24.............. 6,843 34.52 36,403,048 32.61 77,964,173 34.30
25 -- 36.............. 3,280 16.55 28,262,350 25.32 43,268,642 19.03
37 -- 48.............. 2,040 10.29 24,568,903 22.01 28,823,670 12.68
49 -- 60.............. 591 2.98 8,717,763 7.81 9,329,056 4.10
61 -- 72.............. 7 0.04 109,654 0.10 107,077 0.05
------ ------ ------------ ------ ------------ ------
Total............. 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
28
<PAGE> 33
DISTRIBUTION OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
ORIGINAL TERM CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
(MONTHS)----- --------- ------------- ------------------ ------------------ -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12............. 85 0.43% $ 67,178 0.06% $ 430,184 0.19%
13 -- 24............. 923 4.66 2,161,158 1.94 5,033,383 2.21
25 -- 36............. 7,836 39.53 26,579,418 23.81 61,346,256 26.99
37 -- 48............. 2,184 11.02 12,030,168 10.78 27,020,067 11.89
49 -- 60............. 7,851 39.61 62,080,774 55.61 120,798,181 53.14
61 -- 72............. 944 4.76 8,709,470 7.80 12,697,522 5.59
------ ------ ------------ ------ ------------ ------
Total............ 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
PAYMENT TYPE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ------------ --------- ------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Monthly.............. 19,024 95.97% $106,985,349 95.84% $218,924,684 96.30%
Non-monthly.......... 799 4.03 4,642,817 4.16 8,400,909 3.70
------ ------ ------------ ------ ------------ ------
Total............ 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
PURCHASE OPTION CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- --------------- --------- ------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout....... 6,713 33.86% $ 38,511,375 34.50% $ 75,664,257 33.28%
Fair Market Value.... 6,820 34.40 37,437,870 33.54 78,653,512 34.60
Stated Residual...... 3,475 17.53 16,890,302 15.13 36,716,667 16.15
Other(1)............. 2,815 14.20 18,788,619 16.83 36,291,157 15.96
------ ------ ------------ ------ ------------ ------
Total............ 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
- ---------------
(1) "Other" includes loans and Contracts in which the Issuers will obtain only
the right to Scheduled Payments and will not have the right to any Residual
Interests.
29
<PAGE> 34
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE OF STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
EQUIPMENT DESCRIPTION CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- --------------------- --------- ------------- ------------------ ------------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Microcomputers and
Printers................. 3,771 19.02% $ 21,674,775 19.42% $ 48,705,812 21.43%
Copiers.................... 4,323 21.81 19,867,050 17.80 41,174,351 18.11
Surveillance System........ 2,110 10.64 12,123,613 10.86 19,505,175 8.58
Telephones................. 1,398 7.05 6,803,144 6.09 14,775,053 6.50
Automotive Equipment....... 790 3.99 6,198,214 5.55 11,720,471 5.16
Medical Equipment.......... 409 2.06 3,916,940 3.51 8,798,741 3.87
Security/Alarm System...... 761 3.84 2,992,520 2.68 6,098,110 2.68
Restaurant Equipment....... 482 2.43 2,420,570 2.17 4,242,901 1.87
Point of Sale Items........ 338 1.71 2,416,293 2.16 4,952,160 2.18
Mailing Machines........... 441 2.22 2,041,385 1.83 4,600,019 2.02
A/V Equipment.............. 528 2.66 2,036,986 1.82 3,657,809 1.61
Software................... 223 1.12 1,926,514 1.73 4,022,814 1.77
Computer Peripherals....... 227 1.15 1,682,625 1.51 2,954,703 1.30
Heavy Machinery............ 194 0.98 1,638,090 1.47 4,335,233 1.91
Furniture.................. 200 1.01 1,433,552 1.28 3,122,923 1.37
Construction Equipment..... 100 0.50 1,221,940 1.09 1,978,690 0.87
Vending Equipment.......... 148 0.75 1,137,252 1.02 1,812,758 0.80
Forklifts.................. 148 0.75 984,820 0.88 2,164,824 0.95
Laundry Equipment.......... 94 0.47 866,618 0.78 1,847,774 0.81
Welding Equipment.......... 170 0.86 820,436 0.73 1,850,051 0.81
Commercial/Industrial
Cleaning................. 168 0.85 791,412 0.71 1,456,617 0.64
Printing Press............. 91 0.46 721,384 0.65 2,030,626 0.89
Stenograph................. 275 1.39 695,992 0.62 1,651,654 0.73
Photography Equipment...... 129 0.65 662,916 0.59 1,455,342 0.64
Landscaping Equipment...... 84 0.42 547,372 0.49 979,564 0.43
Cash Registers............. 97 0.49 471,392 0.42 1,311,193 0.58
Sewing and Embroidery...... 52 0.26 437,690 0.39 1,198,148 0.53
Freezer/Refrigerator/
Restaurant............... 76 0.38 351,507 0.31 801,511 0.35
Fax Machines............... 196 0.99 312,803 0.28 714,150 0.31
Ice Machine................ 95 0.48 257,984 0.23 415,680 0.18
Mobile Communications...... 80 0.40 248,523 0.22 509,753 0.22
Woodworking Equipment...... 16 0.08 184,633 0.17 298,549 0.13
Air Compressors............ 27 0.14 153,250 0.14 366,932 0.16
Pressure Washers........... 50 0.25 151,449 0.14 281,835 0.12
Scales..................... 19 0.10 142,903 0.13 252,408 0.11
Signs/Display.............. 16 0.08 126,189 0.11 205,061 0.09
Commercial Fitness
Equipment................ 24 0.12 92,945 0.08 280,180 0.12
Water Coolers.............. 53 0.27 92,921 0.08 251,471 0.11
Theft Security............. 26 0.13 71,651 0.06 217,490 0.10
Safes...................... 13 0.07 58,451 0.05 142,937 0.06
Other...................... 1,381 6.97 10,851,461 9.72 20,184,119 8.88
------ ------ ------------ ------ ------------ ------
Total.................. 19,823 100.00% $111,628,166 100.00% $227,325,593 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
30
<PAGE> 35
SERVICING PORTFOLIO DELINQUENCY AND DEFAULT INFORMATION
The following delinquency and default information relates to all equipment
financing contracts serviced by Advanta Business Services for the periods shown.
The information subsequent to October 1, 1998 includes equipment financing
contracts originated by Advanta Bank Corp. and serviced by Advanta Business
Services.
HISTORICAL DELINQUENCY INFORMATION
Delinquency information for all equipment financing contracts in the
Servicer's servicing portfolio is set forth below.
HISTORICAL DELINQUENCY EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
--------------- ---------------------------------------------------------------------
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Receivables
Balance(1)......... $800,396 $718,418 $674,570 $614,828 $460,224
No. of Delinquent
Days
31-60 Days........... $ 30,180 3.77% $ 36,522 5.08% $ 31,226 4.63% $ 34,521 5.61% $ 24,481 5.32%
61-90 Days........... 12,529 1.57 14,172 1.97 11,920 1.77 9,705 1.58 5,890 1.28
91 Days or more...... 11,859 1.48 9,462 1.32 9,189 1.36 6,702 1.09 4,828 1.05
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total Delinquency.... $ 54,568 6.82% $ 60,156 8.37% $ 52,335 7.76% $ 50,928 8.28% $ 35,199 7.65%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
</TABLE>
- ---------------
(1) The "Total Receivables Balance" is equal to the aggregate future payments
owing on all equipment financing contracts in the Servicer's servicing
portfolio.
HISTORICAL DEFAULT EXPERIENCE
Loss information for all equipment financing contracts in the Servicer's
servicing portfolio is set forth below.
HISTORICAL LOSS EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
---------- ---------------------------------------------------------
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1998 1997 1996 1995
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)............... $763,873 $676,817 $652,607 $551,645 $394,910
Net Losses..................... $ 10,526 $ 16,217 $ 15,293 $ 10,356 $ 6,320
Net Losses as a Percentage of
Average Receivables.......... 2.76%(2) 2.40% 2.34% 1.88% 1.60%
</TABLE>
- ---------------
(1) Equals the arithmetic average of each month's Receivable Balance within the
period specified. The "Receivable Balance" is equal to the aggregate future
payments owing on all equipment financing contracts in the Servicer's
servicing portfolio.
(2) Annualized.
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<PAGE> 36
DESCRIPTION OF THE NOTES
GENERAL
The Notes will be issued pursuant to the Indenture and the Series
Supplement. The Notes will be available only in book-entry form. See
"Description of the Notes -- Book-Entry Registration." The holders of the Notes
(the "HOLDERS" or "NOTEHOLDERS") are those entities registered as the owner of a
Note or Notes on the registration books maintained by the Trustee. Unless and
until Definitive Notes are issued under the limited circumstances described
herein, all references to actions taken by Noteholders or Holders shall, in the
case of the book-entry Notes, refer to actions taken by DTC upon instructions
from its Participants, and all references herein to distributions, notices,
reports and statements to Noteholders or Holders shall, in the case of the
book-entry Notes, refer to distributions, notices, reports and statements to DTC
or Cede & Co., as the registered holder of the book-entry Notes, as the case may
be, for distribution to the ultimate owners of interests in the Notes (the
"BENEFICIAL OWNERS") in accordance with DTC procedures.
The Offered Notes will be issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof, except that one Note of each
class may be issued in another denomination.
PAYMENT DATES, BUSINESS DAYS AND STATED MATURITY DATE
Payments of principal and interest on the Notes will be made on the 15th
day of each month (or if the 15th day is not a Business Day, the next succeeding
Business Day), beginning on September 15, 1999 (each, a "PAYMENT DATE"), to
holders of record on the calendar day immediately preceding each Payment Date
(each, a "RECORD DATE"); provided, however, that for any Definitive Note, the
Record Date is the last day of the immediately preceding calendar month. The
Indenture defines a "BUSINESS DAY" to be any day other than a Saturday, a Sunday
or a day on which banks in New York, New York, Philadelphia, Pennsylvania,
Voorhees, New Jersey or Reno, Nevada are authorized or obligated by law,
executive order or governmental decree to be closed.
The stated maturity date for the Class A-1 Notes will be the Payment Date
in September 2000 (the "CLASS A-1 STATED MATURITY DATE"). The stated maturity
date for the Class A-2 Notes will be the Payment Date in September 2002 (the
"CLASS A-2 STATED MATURITY DATE"). The stated maturity date for the Class A-3
Notes will be the Payment Date in November 2003 (the "CLASS A-3 STATED MATURITY
DATE" and, together with the Class A-1 Stated Maturity Date and the Class A-2
Stated Maturity Date, the "CLASS A STATED MATURITY DATE"). The stated maturity
date for the Class B Notes will be the Payment Date in April 2005 (the "CLASS B
STATED MATURITY DATE"). However, if all payments on the Contracts are made as
scheduled, final payment with respect to each Class of the Notes would occur
prior to its respective Stated Maturity Date (each of the Class A-1 Stated
Maturity Date, the Class A-2 Stated Maturity Date, the Class A-3 Stated Maturity
Date and the Class B Stated Maturity Date is a "STATED MATURITY DATE"). The
Issuers expect that the Notes of each Class will be paid prior to the respective
Stated Maturity Date for such Class.
DETERMINATION DATE AND COLLECTION PERIODS
On the third Business Day prior to each Payment Date (each, a
"DETERMINATION DATE"), the Servicer will determine the amount of payments
received on the Contracts in respect of the immediately preceding calendar month
(each calendar month, a "COLLECTION PERIOD") which will be available for
distribution on the Payment Date.
INTEREST PAYMENTS
On each Payment Date, the interest due (the "INTEREST PAYMENTS") on the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and the Class B Notes will be
the interest that has accrued since the last Payment Date, or in the case of the
September 1999 Payment Date, since the Closing Date (each, an "INTEREST ACCRUAL
PERIOD") at the applicable interest rate applied to the then unpaid principal
amounts after giving
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<PAGE> 37
effect to payments of principal on the preceding Payment Date (the amount for
the Class A-1 Notes, the "CLASS A-1 NOTE INTEREST," for the Class A-2 Notes, the
"CLASS A-2 NOTE INTEREST," for the Class A-3 Notes, the "CLASS A-3 NOTE
INTEREST," and for the Class B Notes, the "CLASS B NOTE INTEREST"). In each
case, the Class A-1 Note Interest, the Class A-2 Note Interest, the Class A-3
Note Interest and the Class B Note Interest shall include any interest due on
such Class on any preceding Payment Date and not paid plus interest on such
overdue amount.
The interest rates applicable to the four Classes of Notes are as follows:
The Class A-1 Notes shall bear interest at % per annum (the "CLASS A-1
INTEREST RATE").
The Class A-2 Notes shall bear interest at % per annum (the "CLASS A-2
INTEREST RATE").
The Class A-3 Notes shall bear interest at % per annum (the "CLASS A-3
INTEREST RATE").
The Class B Notes shall bear interest at % per annum (the "CLASS B
INTEREST RATE").
Interest on the Class A-1 Notes will be calculated on the basis of actual
days and a 360-day year. Interest on the Class A-2 Notes, Class A-3 Notes and
Class B Notes will be calculated on the basis of a year of 360 days and twelve
30-day months.
PRINCIPAL PAYMENTS
For any Payment Date the "MONTHLY PRINCIPAL AMOUNT" will be the excess of
(a) the Outstanding Principal Balance of all Notes as of the immediately
preceding Payment Date and after taking into account payments made on such
preceding Payment Date over (b) the Aggregate Contract Principal Balance as of
the related Calculation Date.
On each Payment Date until all Class A-1 Notes are paid, the entire amount
of the Monthly Principal Amount will be applied to pay the Class A-1 Notes.
Thereafter, on each Payment Date, the remaining Class A Notes and the Class B
Notes will be entitled to receive payments of principal, to the extent funds are
available therefor, in the priorities set forth in the Indenture and described
below and under "Description of the Notes -- Flow of Funds."
On each Payment Date, to the extent funds are available therefor, the
principal will be paid to the Noteholders in the following priority:
(a) The Class A Principal Payment Amount (which, until the Class A-1 Notes
have been paid in full will be equal to the full amount of the Monthly Principal
Amount) will be paid to the Class A-1 Notes, the Class A-2 Notes and the Class
A-3 Notes sequentially until the Class A Principal Balance has been reduced to
zero, so that no principal will be paid on the Class A-2 Notes or the Class A-3
Notes until the full amount of the Class A-1 Notes has been paid and so that no
principal will be paid to the Class A-3 Notes until the full amount of the Class
A-1 Notes and the Class A-2 Notes has been paid.
(b) When the full amount of the Class A-1 Notes have been paid, then that
portion of the Monthly Principal Amount equal to the Class B Principal Payment
Amount will be paid to the Class B Notes on each Payment Date until the Class B
Principal Balance has been reduced to zero.
(c) If for any Payment Date, the Class B Floor exceeds the Class B Target
Investor Principal Amount, the Additional Principal for such Payment Date, to
the extent of amounts remaining in Available Funds, will be used first to pay
the Class A-2 Notes until they are paid in full, then to pay the Class A-3 Notes
until they are paid in full and finally to pay Class B Notes until they are paid
in full.
The "CLASS A PRINCIPAL PAYMENT AMOUNT" is (a) for any Payment Date on which
all or a portion of the Class A-1 Notes remain outstanding after giving effect
to payments on such day, the Monthly Principal Amount; (b) for any Payment Date
on which the outstanding principal of Class A-1 Notes is reduced to $0, the sum
of (1) the amount necessary to reduce the Class A-1 Notes to $0 and (2) the
amount necessary to reduce the sum of the outstanding principal amount of the
Class A-2 Notes and Class A-3 Notes to the Class A Target Investor Principal
Amount; or (c) on any subsequent Payment Date, the amount necessary to reduce
the sum of the outstanding principal amount of the Class A-2 Notes and Class A-3
Notes to the Class A Target Investor Principal Amount.
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<PAGE> 38
The "CLASS A TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each Payment
Date is an amount equal to the product of (a) the Class A Percentage and (b) the
Aggregate Contract Principal Balance as of the related Calculation Date.
The "CLASS B PRINCIPAL PAYMENT AMOUNT" is (a) for any Payment Date on which
all or a portion of the Class A-1 Notes remain outstanding after giving effect
to payments on such day, $0 and (b) on any subsequent Payment Date, the amount
necessary to reduce the aggregate outstanding principal amount of the Class B
Notes to the greater of the Class B Target Investor Principal Amount and the
Class B Floor.
The "CLASS B TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each Payment
Date is an amount equal to the product of (a) the Class B Percentage and (b) the
Aggregate Contract Principal Balance as of the related Calculation Date.
The "CLASS B FLOOR" with respect to each Payment Date means (a) 2.875% of
the Initial Aggregate Contract Principal Balance, plus (b) the Cumulative Loss
Amount as of such Payment Date, minus (c) the sum of the amounts on deposit in
the Reserve Account and the Residual Account after giving effect to payments and
withdrawals on such Payment Date.
The "CLASS A PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the sum of the initial principal amount of the Class A-2 and Class A-3 Notes
divided by (ii) the Initial Aggregate Contract Principal Balance minus the
initial principal amount of the Class A-1 Notes, and being approximately
80.5195%.
The "CLASS B PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class B Notes divided by (ii) the
Initial Aggregate Contract Principal Balance minus the initial principal amount
of the Class A-1 Notes, and being approximately 19.4805%.
The outstanding Class A-1 Note principal balance for any Payment Date shall
be equal to the Class A-1 Initial Principal Balance less any principal payments
previously made on the Class A-1 Notes (the "CLASS A-1 PRINCIPAL BALANCE"); the
outstanding Class A-2 Note principal balance for any Payment Date shall be equal
to the Class A-2 Initial Principal Balance less any principal payments
previously made on the Class A-2 Notes (the "CLASS A-2 PRINCIPAL BALANCE"); the
outstanding Class A-3 Note principal balance for any Payment Date shall be equal
to the Class A-3 Initial Principal Balance less any principal payments
previously made on the Class A-3 Notes (the "CLASS A-3 PRINCIPAL BALANCE" and,
together with the Class A-1 Principal Balance and the Class A-2 Principal
Balance, the "CLASS A PRINCIPAL BALANCE"); and the outstanding Class B Note
principal balance for any Payment Date shall be equal to the Class B Initial
Principal Balance less any principal payments previously made on the Class B
Notes (the "CLASS B PRINCIPAL BALANCE"). The "OUTSTANDING PRINCIPAL BALANCE" for
any date is the sum of the Class A Principal Balance and the Class B Principal
Balance as of the same date.
The "CLASS A-1 INITIAL PRINCIPAL BALANCE" is approximately $51,460,585. The
"CLASS A-2 INITIAL PRINCIPAL BALANCE" is approximately $38,232,647. The "CLASS
A-3 INITIAL PRINCIPAL BALANCE" is approximately $10,213,977. The "CLASS B
INITIAL PRINCIPAL BALANCE" is $11,720,956.
The "ADDITIONAL PRINCIPAL" means, with respect to each Payment Date, an
amount equal to the Monthly Payment Amount less the Class A Principal Payment
Amount and the Class B Principal Payment Amount.
The "CUMULATIVE LOSS AMOUNT" means, with respect to each Payment Date, an
amount equal to the excess, if any, of (a) the remainder of (i) the Outstanding
Principal Balance minus (ii) the lesser of (A) Monthly Principal Amount and (B)
Available Funds after providing for reimbursement of Servicer Advances and the
Servicer Fee payments to the Servicer and payments of interest on the Notes on
such Payment Date over (b) the Aggregate Contract Principal Balance as of the
related Calculation Date.
The "CALCULATION DATE" for a Collection Period is the close of business on
the last day of that Collection Period.
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<PAGE> 39
DEFINITIVE NOTES
The Notes will be issued in fully registered, authenticated form to
Beneficial Owners or their nominees (the "DEFINITIVE NOTES"), rather than to DTC
or its nominee, only if (a) the Issuers advise the Trustee in writing that The
Depository Trust Company ("DTC") is no longer willing or able to discharge
properly its responsibilities as Depository, and the Trustee or the Issuers are
unable to locate a qualified successor or (b) the Issuers at their option elect
to terminate the book-entry system through DTC.
Upon the occurrence of an event described in (a) or (b) of the immediately
preceding paragraph, the Trustee is required to notify all Beneficial Owners
through DTC of the availability of Definitive Notes. Upon surrender by DTC of
the certificate representing the Notes and instructions for re-registration, the
Trustee will issue the Definitive Notes, and thereafter the Trustee will
recognize the holders of the Definitive Notes as Holders under the Indenture.
The Trustee will also notify the Holders of any adjustment to the Record Date
necessary to enable the Trustee to make distributions to Holders of the
Definitive Notes.
Additionally, upon the occurrence of any event described above,
distribution of principal of and interest on the Notes will be made by the
Trustee directly to the Holders in accordance with the procedures set forth
herein and in the Indenture. Distributions will be made by check, mailed to the
address of such Holder as it appears on the Note register. Upon at least 10 days
notice to Holders of the Class, however, the final payment on any Note (whether
the Definitive Notes or the Note for the Class registered in the name of Cede &
Co. ("CEDE"), as nominee for DTC, representing the Notes of the Class) will be
made only upon presentation and surrender of the Note at the office or agency
specified in the notice of final distribution to the Holders.
Definitive Notes of each Class will be transferable and exchangeable at the
offices of the Trustee or its agent in New York, New York, which the Trustee
shall designate on or prior to the issuance of any Definitive Notes. No service
charge will be imposed for any registration of transfer or exchange, but the
Trustee may require payment of a sum sufficient to cover any tax or other
governmental charge imposed in connection therewith.
BOOK-ENTRY REGISTRATION
The Beneficial Owners of the Class A-1, Class A-2, Class A-3 and Class B
Notes may hold their interests through DTC (in the United States) or Cedelbank
or Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations that are participants in the systems.
Cede, as nominee for DTC, will be the registered holder of each Class of
the Notes. Cedelbank and Euroclear will hold omnibus positions on behalf of
Cedelbank Customers and Euroclear Participants, respectively, through customers'
securities accounts in Cedelbank's and Euroclear's names on the books of their
respective Depositaries (the "DEPOSITARIES"), which in turn will hold the
positions in customers' securities accounts in the Depositaries' names on the
books of DTC.
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 New York Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934, as amended. 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 notes. Participants include
securities brokers and dealers (who may include the underwriters of any Series),
banks, trust companies and clearing corporations and may include other
organizations. Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ("INDIRECT PARTICIPANTS").
DTC management is aware that some computer applications and systems used
for processing data were written using two digits rather than four to define the
applicable year, and therefore may not recognize a date using "00" as the Year
2000. This could result in the inability of these systems to properly process
35
<PAGE> 40
transactions with dates in the Year 2000 and thereafter. DTC has developed and
is implementing a program to address this problem so that its applications and
systems relating to the payment of distributions (including principal and income
payments) to securityholders, book-entry deliveries and settlement of trades
within DTC continue to function properly. This program includes a technical
assessment and a remediation plan, each of which is complete. DTC plans to
implement a testing phase of this program which is expected to be completed
within appropriate time frames.
In addition, DTC is contacting (and will continue to contact) third party
vendors that provide services to DTC to determine the extent of their Year 2000
compliance, and DTC will develop contingency plans as it deems appropriate to
address failures in Year 2000 compliance on the part of third party vendors.
However, there can be no assurance that the systems of third party vendors will
be timely converted and will not adversely affect the proper functioning of
DTC's services.
THE INFORMATION SET FORTH IN THE PRECEDING TWO PARAGRAPHS HAS BEEN PROVIDED
BY DTC FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED TO SERVE AS A
REPRESENTATION, WARRANTY OR CONTRACT MODIFICATION OF ANY KIND. THE ISSUERS MAKE
NO REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF THAT INFORMATION.
Transfers between Participants will occur in the ordinary way in accordance
with DTC rules. Transfers between Cedelbank Customers (as defined herein) and
Euroclear Participants (as defined herein) will occur in the ordinary way in
accordance with their respective rules and operating procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through Cedelbank
Customers or Euroclear Participants, on the other, will be effected through DTC
in accordance with DTC rules on behalf of the relevant European international
clearing systems by its Depositary. Cross-market transactions will require
delivery of instructions to the relevant European international clearing system
by the counterparty in the 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. Cedelbank Customers and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities received in
Cedelbank or Euroclear as a result of a transaction with a participant will be
made during subsequent securities settlement processing and dated the business
day following the DTC settlement date. The credits or any transactions in the
securities settled during processing will be reported to the relevant Euroclear
Participants or Cedelbank Customers on that business day. Cash received in
Cedelbank or Euroclear as a result of sales of securities by or through a
Cedelbank Customer or a Euroclear Participant to a Participant will be received
with value on the DTC settlement date but will be available in the relevant
Cedelbank or Euroclear cash account only as of the business day following
settlement in DTC. For information on tax documentation procedures relating to
the Notes, see "Federal Income Tax Consequences."
Beneficial Owners of the Notes that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Notes may do so only through Participants and Indirect
Participants. In addition, Beneficial Owners will receive all distributions of
principal of and interest on the Notes from the paying agent or the Trustee
through DTC and its Participants. Under a book-entry format, Beneficial Owners
may experience some delay in their receipt of payments, since the payments will
be forwarded by the Trustee to Cede, as nominee for DTC. DTC will forward the
payments to its Participants which thereafter will forward them to Indirect
Participants or holders of beneficial interests in the Notes. It is anticipated
that the only Holder will be Cede, as nominee of DTC, and that holders of
beneficial interests in the Notes, under the Indenture will only be permitted to
exercise the rights of Holders, under the Indenture indirectly through DTC and
its Participants who 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 Notes
36
<PAGE> 41
and is required to receive and transmit distributions of principal of and
interest on the Notes. Participants and Indirect Participants with which holders
of beneficial interests in the Notes have accounts similarly are required to
make book-entry transfers and receive and transmit the payments on behalf of
these respective holders. Accordingly, although Beneficial Owners will not
possess Notes, Beneficial Owners will receive payments and will be able to
transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and some banks, the ability of holders of
beneficial interests in the Notes to pledge Notes to persons or entities that do
not participate in the DTC system, or otherwise take actions in respect of the
Notes, may be limited due to the lack of a Definitive Note for the Notes.
DTC has advised the Issuers that it will take any action permitted to be
taken by a Holder under the Indenture only at the direction of one or more
Participants to whose account with DTC the Notes are credited. Additionally, DTC
has advised the Issuers that it will take actions with respect to specified
percentages of the Holders' only at the direction of and on behalf of
Participants whose holdings include undivided interests that satisfy the
specified percentages. DTC may take conflicting actions with respect to other
undivided interests to the extent that actions are taken on behalf of
Participants whose holdings included the undivided interest.
Cedelbank, societe anonyme ("CEDELBANK"), is incorporated under the laws of
Luxembourg as a professional depository. Cedelbank holds securities for its
participating organizations ("CEDELBANK CUSTOMERS") and facilitates the
clearance and settlement of securities transactions between Cedelbank Customers
through electronic book-entry changes in accounts of Cedelbank Customers,
thereby eliminating the need for physical movement of certificates. Transactions
may be settled in Cedelbank in any of 38 currencies, including United States
dollars. Cedelbank provides to Cedelbank Customers, among other things, services
for safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Cedelbank interfaces
with domestic markets in several countries. As a registered bank in Luxembourg,
Cedelbank is subject to regulation by the Luxembourg Commission for the
Supervision of the Financial Sector. Cedelbank Customers are world-wide
financial institutions, including underwriters, securities brokers and dealers,
banks, trust companies, clearing corporations and other organizations and may
include the underwriters of any Series of Notes. Indirect access to Cedelbank is
also available to others, such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a Cedelbank
Customer, either directly or indirectly.
Euroclear 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 35 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 (the "EUROCLEAR SYSTEM") is operated
by the Brussels, Belgium office of Morgan Guaranty Trust Company of New York
(the "EUROCLEAR OPERATOR" or "EUROCLEAR"), under contract with Euroclear
Clearance System S.C., a Belgian cooperative corporation (the "COOPERATIVE").
All operations are conducted by the Euroclear Operator, and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include any underwriters,
agents or dealers with respect to the Notes. 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. It is,
therefore, regulated and examined by the Board of Governors of
37
<PAGE> 42
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 Notes held through Cedelbank or Euroclear
will be credited to the cash accounts of Cedelbank Customers or Euroclear
Participants in accordance with the relevant system's rules and procedures, to
the extent received by its Depositary. The distributions will be subject to tax
reporting in accordance with relevant United States tax laws and regulations.
See "Federal Income Tax Consequences." Cedelbank or the Euroclear Operator, as
the case may be, will take any other action permitted to be taken by a Holder,
under the Indenture on behalf of a Cedelbank Customer or Euroclear Participant
only in accordance with its relevant rules and procedures and subject to its
Depositary's ability to effect the actions on its behalf through DTC.
Although DTC, Cedelbank and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Notes among participants of DTC,
Cedelbank and Euroclear, they are under no obligation to perform or continue to
perform those procedures and the procedures may be discontinued at any time.
FLOW OF FUNDS
The Indenture will require that the Trustee establish an account (the
"COLLECTION ACCOUNT") and that the Servicer deposit to the Collection Account,
all collections or receipts received by the Servicer on the Contracts no later
than two Business Days following the Servicer's receipt of such amounts.
Under the terms of the Indenture, "AVAILABLE FUNDS" for a Payment Date
means (i) amounts collected during the immediately preceding Collection Period
for the Contracts and the Equipment, including, without limitation, Scheduled
Payments, Servicer Advances, Residual Receipts, Prepayment Amounts including
deposits made to the Collection Account as a result of the release of Defaulted
Contracts or Contracts released as a result of a breach of representation and
warranties, amounts of Security Deposits deposited into the Collection Account
to cover User defaults on the related Contract, and investment earnings on each
of the Accounts, plus (ii) amounts transferred from the Reserve Account and/or
the Residual Account for that Payment Date and deposited in the Collection
Account.
On each Payment Date, the Trustee will be required to make the following
payments from the Available Funds for that Payment Date, in the following order
of priority:
(i) to the Servicer, any Servicer Advances which the Servicer has
determined it will not be able to recover;
(ii) to the Servicer, the Servicer Fee then due, together with
miscellaneous amounts which revert to the Servicer in consideration of the
servicing function performed by the Servicer such as late fees (if a
Servicer Advance was made for such late payment) and insufficient funds
charges;
(iii) to the Holders of the Class A Notes (the "CLASS A NOTEHOLDERS"),
accrued and unpaid Class A Note Interest for the related Interest Accrual
Period, pro rata based on interest due with respect to each Class of Class
A Notes;
(iv) to the Holders of the Class B Notes (the "CLASS B NOTEHOLDERS"),
accrued and unpaid Class B Note Interest for the related Interest Accrual
Period;
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(v) from the Available Funds then remaining in the Collection Account,
until the Class A-1 Principal Balance has been reduced to zero, to the
Class A-1 Noteholders, the Class A Principal Payment Amount; after the
Class A-1 Principal Balance has been reduced to zero, then until the Class
A-2 Principal Balance has been reduced to zero, to the Class A-2
Noteholders, the Class A Principal Payment Amount; after the Class A-1
Principal Balance and the Class A-2 Principal Balance have been reduced to
zero, then until the Class A-3 Principal Balance has been reduced to zero,
the Class A-3 Noteholders, the Class A Principal Payment Amount;
(vi) until the Class B Principal Balance has been reduced to zero, to
the Class B Noteholders, the Class B Principal Payment Amount;
(vii) if on such Payment Date, the Class B Floor is greater than the
Class B Target Investor Principal Amount, an amount equal to the Additional
Principal to be paid sequentially to the Class A-2 Noteholders, Class A-3
Noteholders and Class B Noteholders;
(viii) to the Reserve Account, the amount needed to increase the
amount in the Reserve Account to the Required Reserve Amount for that
Payment Date;
(ix) upon the occurrence and continuance of a Residual Event, the
lesser of (A) the remaining Available Funds and (B) the aggregate amount of
Residual Receipts originally included in Available Funds for that Payment
Date, will be deposited to the Residual Account; and
(x) to the Issuers, as owner of the Pledged Assets, any remaining
Available Funds on deposit in the Collection Account (the "ISSUERS'
INTEREST").
OPTIONAL REDEMPTION
The Servicer will have the option to direct the redemption of all, but not
less than all, of the Notes of all Classes on any Payment Date on which the
Aggregate Contract Principal Balance as of the related Calculation Date is less
than or equal to 10% of the Initial Aggregate Contract Principal Balance. The
Servicer shall give notice of the redemption to the Trustee at least 30 days
before the Payment Date fixed for the prepayment. Upon deposit of funds
necessary to effect the redemption, the Trustee shall pay the Outstanding
Principal Balances of the Notes that were called for redemption and all accrued
and unpaid interest as of the Payment Date fixed for redemption.
CLASS B SPECIAL REDEMPTION
Under the terms of the Indenture, the Class B Notes may be redeemed (the
"CLASS B SPECIAL REDEMPTION") on any Payment Date, at the option of the Issuers
at a price equal to the sum of (i) the then Class B Principal Balance and
accrued and unpaid interest thereon and (ii) the Class B Special Redemption
Premium described in the next paragraph.
The Class B Special Redemption Premium will equal the excess, if any,
discounted as described below, of (i) the amount of interest that would accrue
on the aggregate outstanding principal balance of the Class B Notes at the Class
B Interest Rate during the period beginning on and including the Payment Date on
which the premium is required to be paid to but excluding the Class B Stated
Maturity Date, over (ii) the amount of interest that would have accrued on the
aggregate outstanding Class B Principal Balance over the same period at a per
annum rate of interest equal to the bond equivalent yield to maturity on the
Determination Date preceding such Payment Date of a United States Treasury
security, which is trading in the public securities market, maturing on a date
closest to the date equal to the remaining average life of the Class B Notes
minus 0.5%. Such excess shall be discounted to the present value to such Payment
Date at the applicable yield described in clause (ii) of the preceding sentence.
For such purposes only, (i) the Class B Principal Balance upon which interest
will be deemed to accrue, and (ii) the average weighted life of the Class B
Notes, shall be determined based upon the amortization of the Aggregate Contract
Principal Balance remaining at such Payment Date at a rate of 6.0% CPR and no
losses.
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If the Class B Notes are redeemed pursuant to a Class B Special Redemption,
the Class B Notes will be deemed to have been purchased by the Issuers. In such
an event, the Issuers will be entitled to receive payments of principal and
interest on the Class B Notes, and the Class B Principal Balance will thereafter
continue to amortize as described in this Prospectus.
SUBORDINATION PROVISIONS
Credit enhancement for Class A Noteholders is provided by the subordination
of the Class B Notes and by the Reserve Account and the Residual Receipts.
The cash flow and subordination provisions of the Indenture provide that
Available Funds on each Payment Date will be used to fund payments to the
Noteholders (and to repay Servicer Advances and to pay the fees and expenses of
the Servicer) with (i) interest on the Class B Notes being paid only after
interest on the Class A Notes, (ii) principal on the Class B Notes commencing
only after the Class A-1 Notes are paid in full and (iii) when the Class A-1
Notes have been paid in full, the Class B Principal Payment Amount being paid in
each month only after the Class A Principal Payment Amount.
DEFAULTED CONTRACTS
A "DEFAULTED CONTRACT" means any Contract (i) that is a Delinquent Contract
with respect to which a User is contractually delinquent for 121 days or more
(without regard to any Servicer Advances or the application of any security
deposit provided by the User) or (ii) as to which the Servicer has determined in
accordance with its customary servicing practices that eventual payment of the
remaining Scheduled Payments thereunder is unlikely or (iii) that has been
rejected by or on behalf of the User in a bankruptcy proceeding.
A Defaulted Contract has, by definition, a Contract Principal Balance of
zero; given the cashflow mechanics of the Indenture, the effect of assigning a
zero balance is to require that the Noteholders receive on the next Payment Date
an amount of principal equal to the Defaulted Contract's Contract Principal
Balance, calculated immediately prior to the Contract becoming a Defaulted
Contract. The Issuers may direct the Trustee to release the lien of the
Indenture on any Defaulted Contract and the Issuers may then sell the Contracts.
A "DELINQUENT CONTRACT" is, as of any date, a Contract as to which a
Scheduled Payment, or part thereof, remains unpaid for more than 60 days from
the original due date thereof.
APPLICATION OF RESIDUAL RECEIPTS
The Trustee will establish and maintain an Eligible Account designated as
the Residual Account (the "RESIDUAL ACCOUNT"). If an Event of Default or any of
certain other limited events described in the Indenture (an Event of Default and
each other such event, a "RESIDUAL EVENT") has occurred and is continuing, then
on each Payment Date, if any Available Funds remain after the Servicer provides
for the repayment of Servicer Advances, the payment of the Servicing Fee, the
payment of interest and principal on the Notes, and the deposit of any required
amounts into the Reserve Account, then the Servicer shall deposit into the
Residual Account the lesser of (i) the remaining Available Funds and (ii) the
aggregate amount of Residual Receipts originally included in Available Funds for
such Payment Date.
Actual Residual Receipts may be more or less than the residual value of the
Equipment recorded on the books of the Issuers (the "BOOKED RESIDUAL VALUE").
As provided in the Indenture, funds on deposit in the Residual Account will
be available to cover shortfalls in the amount available to repay Servicer
Advances and to pay the Servicer Fee owing to the Servicer and to make interest
and principal payments on the Notes and to maintain the balance in the Reserve
Account at the Required Reserve Account. If, on any Payment Date, shortfall(s)
exist and both the Residual Account and the Reserve Account have amounts on
deposit therein, the Indenture provides that the shortfall shall first be funded
from Residual Account moneys. Following the termination of a Residual Event,
amounts on deposit in the Residual Account will be deposited into the Collection
Account which if unutilized on that Payment Date will be released to the
Issuers.
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RESERVE ACCOUNT
The Noteholders will have the benefit of funds on deposit in an account
(the "RESERVE ACCOUNT") to the extent that, on any Payment Date, there is a
shortfall in the amount available to repay the Servicer Advances and to pay the
Servicer Fee owing the Servicer or to make interest and principal payments on
the Notes. The Reserve Account will be funded by an initial deposit of 1% of the
Initial Aggregate Contract Principal Balance (that amount, the "RESERVE ACCOUNT
INITIAL DEPOSIT"). Thereafter, additional deposits will be made to the Reserve
Account on each Payment Date, to the extent that the amount on deposit in the
Reserve Account (the "AVAILABLE RESERVE AMOUNT") is less than the Required
Reserve Amount. See "Flow of Funds" in this prospectus. The "REQUIRED RESERVE
AMOUNT" as of any Payment Date equals the lesser of (i) the greater of 1% of the
Initial Aggregate Contract Principal Balance and 5% of the aggregate outstanding
note balance and (ii) the aggregate principal amount of the Notes. Amounts on
deposit in the Reserve Account in excess of the Required Reserve Amount will be
disbursed to the Issuers in accordance with the provisions of the Indenture.
Amounts on deposit in the Reserve Account on any Payment Date shall be
withdrawn therefrom and transferred to the Collection Account if the Available
Funds (exclusive of the amounts transferred from the Reserve Account but after
taking into account any transfer to the Collection Account from the Residual
Account) for that Payment Date are insufficient to fund in full the items
described above under "-- Flow of Funds" which items are of a higher priority
than the funding of the Reserve Account.
If, on any Payment Date, the aggregate amounts on deposit in the Collection
Account, Reserve Account and Residual Account are greater than or equal to the
sum of (i) the remaining principal balance of the Class A and Class B Notes,
(ii) the accrued and unpaid interest, (iii) the accrued and unpaid Servicing Fee
and (iv) the unreimbursed Servicer Advances, the amount on deposit in both the
Reserve Account and Residual Account will be deposited in the Collection Account
and used to repay in full the Class A and Class B Notes.
SECURITY DEPOSITS
Amounts paid by a User to the Originator as a security deposit (the
"SECURITY DEPOSIT") will be transferred to the Issuers. The Issuers shall hold
the Security Deposits on behalf of the Users and the Trustee.
In the event that (i) any User requests that a Security Deposit be applied
as an offset against such User's payment obligations or Booked Residual Value
under a Contract or (ii) any Contract becomes a Defaulted Contract, the Servicer
shall demand that the Issuers remit to the Servicer, on the next Business Day,
out of the applicable User's Security Deposit an amount (the "OFFSET AMOUNT")
equal to the lesser of (a) the amount of such Security Deposit and (b) the
amount of all unpaid and remaining Scheduled Payments and Booked Residual Value.
The Servicer shall deposit any Offset Amount so delivered to it into the
Collection Account within two Business Days after its receipt thereof.
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
The Originator will provide warranties in the Contribution Agreement (as of
the Closing Date with respect to the Contracts), the benefits of which will be
assigned to the Trustee, including that, as of the Closing Date or, where
indicated, the Cut-Off Date, each Contract is an "ELIGIBLE CONTRACT" meeting the
following requirements:
- The Contract is with an obligor whose billing address is in the United
States or its territories and possessions and requires all payments under
such Contract to be made in United States dollars;
- The Contract is with an obligor who, if a natural person, is a resident
of the United States or its territories and possessions with legal
capacity to contract or, if a corporation or other business organization,
is organized under the laws of the United States, its territories or any
political subdivision thereof and has its chief executive office in the
United States or its territories;
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- The Contract has not had any of its terms, conditions or provisions
modified or waived other than in compliance with the credit and
collection policy of Advanta Business Services and has not been
restructured at any time when such Contract was delinquent over 60 days;
- The payments arising under the Contracts constitute an account or general
intangible which is evidenced by a Contract that constitutes "chattel
paper" within the meaning of Section 9-105(b) of the UCC of all
applicable jurisdictions and for which there is only one original of such
Contract that constitutes "chattel paper" for purposes of the UCC;
- The Contract does not contravene any applicable federal, state and local
laws, and regulations thereunder;
- The Contract satisfies in all material respects all applicable
requirements of the credit and collection policy of Advanta Business
Services;
- The Contract is not a municipal contract;
- As of the Cut-Off Date, the Contract is not a Delinquent Contract;
provided, however, that a Contract can be a Delinquent Contract so long
as the Contract is not more than 90 days delinquent. Furthermore, the sum
of the Contract Principal Balances of all other Contracts which are more
than 60 days delinquent is less than 2% of the Initial Aggregate Contract
Principal Balance;
- As of the Cut-Off Date, the Contract is not a Defaulted Contract;
- The Contract (other than a Contract which is a loan in form), (a)
contains "hell or high water" provisions requiring the User to assume all
risk of loss or malfunction of the related Equipment, (b) makes the User
absolutely and unconditionally liable for all payments required to be
made thereunder, (c) is a "triple-net" lease and (d) is non-cancellable;
- As of the Cut-Off Date, the Contract, when aggregated with the sum of the
Contract Principal Balances of all other Contracts relating to a single
User, shall not be greater than the product of (a) 1% and (b) the
Aggregate Contract Principal Balance at that time;
- The Contract creates a valid and enforceable security interest in favor
of the Originator in the related Equipment, if any, for Equipment with an
initial balance of more than $25,000;
- The Contract has only one set of original documentation.
- The Contract is free and clear of any adverse claims, other than the
claims arising pursuant to the transaction documents; provided, however,
that nothing in this clause shall prevent or be deemed to prohibit the
Originator from allowing any adverse claim for federal, state, municipal
or other local taxes to exist upon such Contract if such taxes shall not
at the time be due and payable or if the Originator shall concurrently be
contesting the validity thereof in good faith by appropriate proceedings
that have stayed enforcement thereof and shall have set aside on its
books adequate reserves with respect thereto;
- The Contract is in full force and effect in accordance with its terms and
contains enforceable provisions such that the right and remedies of the
holder thereof shall be adequate for realization against the Equipment,
if any, thereunder and of the benefits of any security granted
thereunder;
- The Contract does not provide for the substitution, exchange, or addition
of any other items of Equipment pursuant to such Contract which would
result in any reduction or extension of payments due thereunder;
- The Contract by its terms is due and payable on or within 84 months and
has not had its payment terms extended other than in compliance with the
credit and collection policy of Advanta Business Services;
- The Contract is in substantially the form of one of the standard form
contracts that Advanta Business Services uses or a form reviewed and
accepted by Advanta Business Services;
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- The Contract (a) does not preclude the pledge, transfer or assignment
thereof, (b) does not require the consent of the User to the pledge,
assignment or transfer thereof, and (c) does not contain a
confidentiality provision that purports to restrict the ability of the
Trustee (or any prior pledgor or owner thereof) to exercise its rights
under the transaction documents with respect thereto, including, without
limitation, its right to review the Contract;
- The Contract or interest therein was (a) originated or purchased by the
Originator in the ordinary course of its business, (b) approved and
purchased or funded in the ordinary course of the Originator's business
and (c) if purchased from a broker or vendor, has been re-underwritten by
the Originator in the ordinary course of the Originator's business and in
compliance with its underwriting policies;
- The Contract either (a) is an account receivable representing all or part
of the sales price of merchandise, insurance and/or services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940, as
amended, or (b) represents a financial asset that converts to cash within
a finite period of time within the meaning of Rule 3a-7 promulgated under
the Investment Company Act of 1940, as amended;
- The Contract does not require a balloon payment;
- The Contract relates to a piece of Equipment which is located in the
United States of America, its territories or possessions;
- As of the Cut-Off Date, the Contract, when aggregated with the sum of the
Contract Principal Balances of all Contracts acquired by the Originator
or its affiliates from the same single broker or vendor, shall not exceed
6% of the Aggregate Contract Principal Balance at that time;
- The Contract is not a consumer lease;
- The Contract is not subject to any guaranty by the Originator;
- No adverse selection was used in selecting the Contract for transfer to
the Issuers;
- The information with respect to the Contract contained in the list of
Contracts delivered to the Trustee is true and correct in all material
respects; and
- All filings necessary to evidence the conveyance or transfer of the
Contract (or interest therein) and, to the extent described in this
Prospectus, the security interest in the related Equipment, if any, to
the Issuers and to the Trustee have been made in all appropriate
jurisdictions.
The representations and warranties will survive the pledge of the Contracts
to the Trustee, for the benefit of the Noteholders.
Under the terms of the Contribution Agreement and the Indenture, the
Originator will be obligated to accept the reconveyance of any Contract and
deposit the related Prepayment Amount with the Trustee on or before the end of
the calendar month following the month of its discovery or receipt of notice of
a breach of a representation or warranty made by the Originator or the Servicer,
respectively, that materially adversely affects the Contract, which breach has
not been cured or waived in all material respects. This obligation to accept the
reconveyance of the Contract and remit the Prepayment Amount will constitute the
sole remedy against the Originator available to the Issuers, the Trustee and the
Noteholders for a breach of a representation or warranty made by the Originator
with respect to the required characteristics of the Contracts.
INDEMNIFICATION
The Indenture will provide that the Servicer will defend and indemnify the
Issuers, the Trustee and the Noteholders against any and all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel and expenses of litigation, reasonably incurred, arising out of or
resulting from (i) the use, repossession or operation by the Servicer or any
affiliate thereof of any Equipment and (ii) the failure of the Servicer to
perform its duties under the Indenture. Advanta Business Services's obligations,
as
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Servicer, to indemnify the Noteholders for its acts or omissions as Servicer
will survive the removal of the Servicer but will not apply to any acts or
omissions of a successor Servicer. The indemnification does not extend to
indirect, incidental, special or consequential damages.
THE ACCOUNTS
The Trustee is required in accordance with the Indenture and the Series
Supplement to establish and maintain three accounts (each, an "ACCOUNT"), the
Collection Account, the Residual Account and the Reserve Account. Each is to be
held by the Trustee for the benefit of the Noteholders. Each Account will be one
or more segregated trust accounts.
The Servicer is required to deposit in the Collection Account all
collections received by it with respect to the Contracts within two Business
Days, or any later date as permitted by the Rating Agencies, following the
Servicer's receipt thereof.
Servicer Advances, if any, are required to be deposited into the Collection
Account not later than the Determination Date for the related Collection Period.
The Originator or the Servicer will deposit in the Collection Account, not later
than the Determination Date, any Prepayment Amount then due and payable by it
and any Security Deposits which the Issuers have designated for deposit in the
Collection Account as a result of the User's default on the related Contract.
Furthermore, the Servicer is required to deposit Advance Payments received
by the Servicer in the Collection Account within two Business Days of when
received; provided, however, that the Advance Payment or any portion thereof
shall be treated as collections of Scheduled Payments only in the Collection
Period in which such payment is due and owing. "ADVANCE PAYMENTS" are amounts
paid by a User during a Collection Period with respect to amounts due from the
User in subsequent Collection Periods but do not include Prepayment Amounts.
The Indenture permits the Servicer to direct the investment of amounts in
the Accounts in Eligible Investments that mature not later than the Business Day
prior to the next succeeding Payment Date. Any income from the investments will
be included in Available Funds.
The Servicer may deduct from amounts otherwise payable to the Collection
Account with respect to a Collection Period an amount equal to amounts
previously deposited by the Servicer into the Collection Account but (i)
subsequently deemed uncollectible as a result of dishonor of the instrument of
payment for or on behalf of the User or (ii) later determined to have resulted
from mistaken deposits.
"ELIGIBLE INVESTMENTS" include any of the following: (i) marketable full
faith and credit obligations of the United States of America; (ii) marketable
obligations directly and fully guaranteed by the full faith and credit of the
United States of America; (iii) bankers' acceptances and certificates of deposit
and other interest-bearing obligations issued by any bank with capital, surplus
and undivided profits of at least $100,000,000 and the short-term securities of
which are rated "A-1" by Standard & Poor's Ratings Services ("S&P"), "P-1" by
Moody's Investors Service, Inc. ("MOODY'S") and "F1" by Fitch IBCA, Inc.
("FITCH") (if rated by Fitch) (iv) repurchase obligations for underlying
securities of the types described in (i), (ii) and (iii) above entered into with
a bank of the type described in (iii) above; (v) commercial paper rated at least
"A-1+" by S&P, "P-1" by Moody's and "F1" by Fitch (if rated by Fitch); (vi)
shares in money market funds which money market funds are rated at least "AAm"
or "AAm-g" by S&P, "Aa1" by Moody's and "AA" by Fitch (if rated by Fitch); and
(vii) demand deposits, time deposits or certificates of deposit (having original
maturities of no more than 365 days) of depository institutions or trust
companies incorporated under the laws of the United States or any state thereof
(or domestic branches of any foreign bank) and subject to supervision and
examination by federal or state banking or depository institution authorities;
provided that at the time the investment, or the commitment to make such
investment, is entered into, the short-term debt rating of the depository
institution or trust company shall be at least "A-1" by S&P, "P-1" by Moody's
and "F1" by Fitch (if rated by Fitch).
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ADVANCES
In the event that any User fails to remit its full Scheduled Payment on any
Contract by the Calculation Date, the Servicer may, but is not required to, make
an advance from its own funds of an amount equal to the unpaid Scheduled Payment
(a "SERVICER ADVANCE").
The Indenture provides that, in the event that the Servicer determines that
any Servicer Advances previously made are nonrecoverable ("NONRECOVERABLE
ADVANCES"), the Trustee shall draw on the Collection Account to repay the
Servicer Advances to the Servicer before the payment to Noteholders has been
made as set forth above under " -- Flow of Funds."
WITHHOLDING
The Trustee is required to comply with all applicable federal income tax
withholding requirements respecting payments of interest with respect to the
Notes. The consent of Noteholders will not be required for the withholding. In
the event that the Trustee does withhold or causes to be withheld any amount
from interest payments or advances thereof to any Noteholders pursuant to
federal income tax withholding requirements, the Trustee shall indicate the
amount withheld annually to the affected Noteholders.
REPORTS TO NOTEHOLDERS
On each Payment Date, the Trustee will forward to the Rating Agencies and,
with each payment to the Noteholders, a statement prepared by the Servicer
setting forth the following information (per $1,000 of Initial Note Principal
Amount as to (a) and (b) below):
(a) The amount of the payment allocable to the Class A-1 Principal
Payment Amount, Class A-2 Principal Payment Amount, Class A-3 Principal
Payment Amount or the Class B Principal Payment Amount, as applicable;
(b) The amount of the payment allocable to that Noteholder's portion
of Class A Note Interest or Class B Note Interest, as applicable;
(c) The aggregate amount of fees and compensation received by the
Servicer pursuant to the Indenture for the Collection Period;
(d) The Class A-1 Principal Balance, the Class A-2 Principal Balance,
the Class A-3 Principal Balance, the Class B Principal Balance, the Class
A-1 Note Factor, the Class A-2 Note Factor, the Class A-3 Note Factor, the
Class B Note Factor, the Aggregate Contract Principal Balance and the
Collateral Factor, after taking into account all distributions made on that
Payment Date;
(e) The total unreimbursed Servicer Advances with respect to the
related Collection Period;
(f) The Aggregate Contract Principal Balance for all Contracts that
became Defaulted Contracts during the related Collection Period, calculated
immediately prior to the time the Contracts became Defaulted Contracts;
(g) The amount on deposit in the Reserve Account and the Residual
Account;
(h) 31-60, 61-90 and greater than 90 days delinquencies as of the end
of the related Collection Period; and
(i) Prepayment Amounts received during the related Collection Period.
The "CLASS A-1 NOTE FACTOR" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Collection Period and
will make available on the related Determination Date representing the ratio of
(x) the Class A-1 Principal Balance which will be outstanding on the next
Payment Date (after taking into account all distributions to be made on that
Payment Date) to (y) the Class A-1 Initial Principal Balance.
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The "CLASS A-2 NOTE FACTOR" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Collection Period and
will make available on the related Determination Date representing the ratio of
(x) the Class A-2 Principal Balance which will be outstanding on the next
Payment Date (after taking into account all distributions and to be made on that
Payment Date) to (y) the Class A-2 Initial Principal Balance.
The "CLASS A-3 NOTE FACTOR" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Collection Period and
will make available on the related Determination Date representing the ratio of
(x) the Class A-3 Principal Balance which will be outstanding on the next
Payment Date (after taking into account all distributions to be made on that
Payment Date) to (y) the Class A-3 Initial Principal Balance.
The "CLASS B NOTE FACTOR" is the seven digit decimal number that the
Servicer will compute or cause to be computed for each Collection Period and
will make available on the related Determination Date representing the ratio of
(x) the Class B Principal Balance which will be outstanding on the next Payment
Date (after taking into account all distributions to be made on that Payment
Date) to (y) the Class B Initial Principal Balance.
The "COLLATERAL FACTOR" is the seven digit decimal number that the Servicer
will compute or cause to be computed for each Collection Period and will make
available on the related Determination Date representing the ratio of (x) the
Aggregate Contract Principal Balance as of the immediately preceding Calculation
Date to (y) the Initial Aggregate Contract Principal Balance.
In addition, by January 31 of each calendar year following any year during
which the Notes are outstanding, commencing January 31, 2000, the Trustee will
furnish to each Noteholder of record at any time during the preceding calendar
year, information as to the aggregate of amounts reported pursuant to items (a)
and (b) above for the preceding calendar year to enable Noteholders to prepare
their federal income tax returns.
REBATES, REFUNDS, MODIFICATIONS, PAYMENTS FROM THIRD PARTIES
The Servicer has agreed to manage, administer and service the Contracts and
to enforce and make collections on the Contracts and any insurance policies,
exercising the degree of skill and care consistent with that which the Servicer
customarily exercises with respect to similar property owned, managed or
serviced by it.
The Servicer may grant to a User any rebate, refund or adjustment that the
Servicer in good faith believes is required, because of prepayment in full of a
Contract. The Servicer may deduct the amount of the rebate, refund or adjustment
from the amount otherwise payable by the Servicer into the Collection Account;
provided, however, that the Servicer will not permit any rescission or
cancellation of any Contract which would materially impair the rights of the
Trustee or the Noteholders in the Contracts or the proceeds thereof, nor will
the prepayment price, after giving effect to the rebate, refund or adjustment
(and without any adjustment for any security deposit previously paid by the
User) be less than the Prepayment Amount.
The Servicer may waive, modify or vary any term of a Contract if the
Servicer, in its reasonable and prudent judgment, determines that it will not be
materially adverse to the Noteholders. The Servicer will be required to pursue,
in its reasonable business judgment, all of its rights and remedies to require
each User to pay all Scheduled Payments due on each Contract, as well as to
maximize other recoveries with respect thereto in the form of Residual Receipts
and Recoveries.
With respect to amounts due under a Contract, the Servicer may accept
payments from any entity on behalf of the relevant User and credit the amounts
against amounts due from the User.
As used herein:
"RESIDUAL RECEIPTS" means, generally, (1) the proceeds of a User's optional
purchase or renewal of Equipment and proceeds of the sale or re-lease of
Equipment, in each case to the extent the proceeds exceed
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any Scheduled Payments remaining unpaid and (2) the proceeds of a prepaid
Contract minus the Prepayment Amount.
"RECOVERIES" means all amounts received in respect of a Defaulted Contract,
including, without limitation, amounts received in connection with the sale or
other disposition of Equipment, the sale or other distribution of Defaulted
Contracts, insurance proceeds with respect to the related Equipment or any other
payments made by or on behalf of the related User, including any amounts paid
from a security deposit and applied by the Servicer as a Recovery and, in each
case, as reduced by (i) any unreimbursed Servicer Advances with respect to the
Contract or the Equipment and (ii) any reasonably incurred out-of-pocket
expenses incurred by the Servicer in enforcing the Contract or in liquidating
the Equipment. Recoveries are not Residual Receipts.
SERVICING COMPENSATION
On each Payment Date, for its servicing of the Contracts, the Servicer will
be entitled to receive (a) a monthly fee (the "SERVICER FEE") of the product of
(i) one-twelfth of 1% (the "SERVICER FEE RATE") and (ii) the Aggregate Contract
Principal Balance of all Contracts as of the beginning of the related Collection
Period, payable out of the Collection Account and (b) the Servicing Charges.
"SERVICING CHARGES" means (i) any late payment charges paid by a User on a
Delinquent Contract if the Servicer has made Servicer Advances on such Contract
and (ii) any other incidental charges or fees received from a User, including
insurance premium payments.
The servicing compensation will compensate the Servicer for customary
equipment contract servicing activities to be performed by the Servicer for the
Trustee for the benefit of the Noteholders, additional administrative services
performed by the Servicer on behalf of the Trustee for the benefit of the
Noteholders and expenses paid by the Servicer on behalf of the Trustee for the
benefit of the Noteholders.
The Servicer, on behalf of the Trustee for the benefit of the Noteholders,
will be responsible for the managing, servicing and administering the Contracts
and enforcing and making collections on the Contracts and any insurance policies
and for the enforcing of any security interest in any item of Equipment, all as
set forth in the Indenture. The Servicer's responsibilities will include
collecting and posting of all payments, responding to inquiries of Users,
investigating delinquencies, accounting for collections, furnishing monthly and
annual statements to the Trustee with respect to distributions, providing
appropriate federal income tax information for use in providing information to
Noteholders, collecting and remitting sales and property taxes on behalf of
taxing authorities and maintaining the perfected security interest of the
Trustee in the Equipment and the Contracts.
The Servicer is required to furnish to the Trustee, and the Trustee is
required to furnish to the Noteholders, copies of the Servicer's annual audited
and quarterly unaudited financial statements.
The Indenture will provide that the Servicer, upon request of the Trustee,
will furnish to the Trustee the underlying data necessary for performing the
Trustee's duties under the Indenture or for enforcement actions as can be
generated by the Servicer's existing data processing system.
SERVICER NOT TO RESIGN
The Indenture will provide that the Servicer may not resign from its
obligations and duties as Servicer thereunder, except upon a determination that
the Servicer's performance of its duties is no longer permissible under
applicable law; however, as described below, the Servicer may transfer its
duties, obligations, rights and privileges to a successor and the successor
shall become the Servicer. The Servicer can only be removed pursuant to an Event
of Servicer Termination as discussed below.
MERGER, CONSOLIDATION, OR ASSUMPTION OF THE OBLIGATIONS OF THE SERVICER
Any corporation (i) into which the Servicer may be merged or consolidated,
(ii) resulting from any merger or consolidation to which the Servicer shall be a
party or (iii) succeeding to the business of the Servicer, shall be the
successor to the Servicer under the Indenture and the successor in any of the
foregoing
47
<PAGE> 52
cases shall execute an agreement of assumption, in a form reasonably
satisfactory to the Trustee, agreeing to perform every obligation of the
Servicer under the Indenture and under the Series Supplement. Any corporation
succeeding to the business of the Servicer by merger, consolidation or otherwise
shall be a corporation organized and existing under the laws of the United
States or any state and shall have a tangible net worth of at least $20,000,000.
In addition to the provisions set forth in the preceding paragraph, if the
servicer is Advanta Business Services or an affiliate thereof, the Servicer may
transfer all of its duties, obligations, rights and privileges as Servicer under
the Indenture and all Supplements hereto to any affiliate of Advanta Business
Services provided that (i) the then Servicer shall give 30 days prior written
notice of the change to the Trustee and the entity assuming the Servicer
position shall execute an agreement of assumption, in a form reasonably
satisfactory to the Trustee agreeing to perform every obligation of the Servicer
under the Indenture and under the Series Supplement and (ii) the entity assuming
the servicer position shall deliver to the Trustee written evidence that the
Rating Agency Condition has been satisfied. Upon the execution and delivery to
the Trustee of the written assumption and delivery of the evidence of
satisfaction of the Rating Agency Condition, the affiliate shall become the
Servicer under the Indenture and under the Series Supplement without any further
act on the part of any of the parties thereto.
The "RATING AGENCY CONDITION" means the notification in writing by each
Rating Agency to the Servicer and the Trustee that a proposed action will not
result in such Rating Agency reducing or withdrawing its then existing rating of
the Notes of any Class with respect to which it is a Rating Agency.
EVENTS OF DEFAULT AND NOTICE THEREOF
The following events will be defined in the Indenture as "EVENTS OF
DEFAULT":
(a) default for five calendar days or more in making Interest Payments
when due and payable;
(b) the Outstanding Principal Balance of any Class of Notes is not
reduced to zero by that Class's Stated Maturity Date;
(c) default in the performance, or breach, by either Issuer of
negative covenants limiting its actions;
(d) default in the performance, or breach, of any other covenant of
either Issuer in the Indenture, and continuance of the default or breach
for a period of 30 days after the earliest of (i) any officer of an Issuer
first acquiring the knowledge thereof, (ii) the Trustee's giving written
notice thereof to the applicable Issuer or (iii) the holders of a majority
of the then Outstanding Principal Balance of the Notes giving written
notice thereof to the Issuers and the Trustee;
(e) if any representation or warranty of either Issuer made in the
Indenture or any other writing provided to the holders of the Notes proves
to be incorrect in any material respect as of the time when the same has
been made; provided, however, that the breach of any representation or
warranty made by either Issuer will be deemed to be "material" only if it
negatively affects the Noteholders, the enforceability of the Indenture or
of the Notes;
(f) voluntary or involuntary insolvency or bankruptcy events relating
to either Issuer; or
(g) if either or both of the Issuers become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
The Indenture will provide that the Trustee shall give the Noteholders
notice of all uncured defaults known to it (the term "default" to include the
events specified above without grace periods).
If an Event of Default specified in clause (f) above occurs, the unpaid
principal amount of all outstanding Notes (the "OUTSTANDING PRINCIPAL BALANCE")
shall automatically become due and payable together with all accrued and unpaid
interest thereon, and all other amounts due to Noteholders under the Indenture
shall immediately and without further act become due and payable.
48
<PAGE> 53
If any other Event of Default occurs and is continuing, then the Trustee
may or, if so directed by the holders of 66 2/3% of the then Outstanding
Principal Balance of the Notes, will declare the unpaid principal amount of all
the Notes to be due and payable immediately, together with all accrued and
unpaid interest thereon.
If the Notes have been declared due and payable, the Trustee may or, at the
written direction and discretion of the Holders of the Notes representing a
majority of the aggregate principal amount then outstanding, shall institute
proceedings to collect amounts due or foreclose on the Trust Estate or any
portion thereof, exercise remedies as a secured party, sell the Trust Estate or
any portion thereof or elect to have the Issuers maintain possession of the
Trust Estate and continue to apply collections on the Trust Estate as if there
had been no declaration of acceleration. The Trustee, however, will be
prohibited from selling the Trust Estate following an Event of Default, unless
(i) the Holders of all the outstanding Notes consent to the sale; (ii) the
proceeds of the sale distributable to Holders of the Notes are sufficient to pay
in full the principal of and the accrued interest on all the outstanding Notes
at the date of the sale; or (iii) the Trustee determines that the Trust Estate
may not continue to provide sufficient funds for the payment of interest and
principal on the Notes as they would have become due if the Notes had not been
declared due and payable and the Trustee obtains the consent of 66 2/3% of the
Outstanding Notes of each Class.
In determining such sufficiency or insufficiency with respect to clause
(ii) or (iii) in the preceding paragraph the Trustee may, but need not, obtain
and rely upon an opinion of an investment banking or accounting firm of national
reputation as to the feasibility of such proposed action and the sufficiency of
the Trust Estate for such purpose. In no event shall the Trustee be liable for
making any such determination or in relying upon any such opinion.
Subsequent to an Event of Default and following any acceleration of the
Notes pursuant to the Indenture, any moneys that may then be held or thereafter
received by the Trustee shall be applied in the following order of priority, at
the date or dates fixed by the Trustee and, in case of the distribution of the
entire amount due on account of principal or interest, upon presentation of the
Notes and surrender thereof:
First, to the payment of all fees, costs and expenses including
conversion costs due to the Trustee (including the reasonable fees and
expenses of any counsel to the Trustee);
Second, to the payment of all fees, costs, and expenses due to the
Noteholders (including the reasonable fees and expenses of any counsel to
the Noteholders);
Third, to the payment of all Servicer's Fees then due to the Servicer;
Fourth, to the payment of all accrued and unpaid interest on the
Outstanding Principal Balance of the Class A-1 Notes, Class A-2 Notes and
Class A-3 Notes pro rata to the date of payment thereof (to the extent
permitted by applicable law) interest on any overdue interest and principal
to the date of payment thereof at the Class A-1 Interest Rate, the Class
A-2 Interest Rate, and the Class A-3 Interest Rate, respectively;
Fifth, to the payment of all accrued and unpaid interest on the
Outstanding Principal Balance of the Class B Notes to the date of payment
thereof (to the extent permitted by applicable law) interest on any overdue
interest and principal to the date of payment thereof the Class B Interest
Rate;
Sixth, to the payment of the Outstanding Principal Balance of the
Class A-1 Notes to the date of payment when the balance is reduced to zero;
Seventh, to the payment of the Outstanding Principal Balance of the
Class A-2 Notes and Class A-3 Notes pro rata to the date of payment when
the balance is reduced to zero;
Eighth, to the payment of the Outstanding Principal Balance of the
Class B Notes to the date of payment when the balance is reduced to zero;
Ninth, to the payment of amounts then due to the Trustee under the
Indenture and not paid pursuant to clause First above; and
49
<PAGE> 54
Tenth, to the payment of the remainder, if any, to the Issuers or any
other person legally entitled thereto.
The Issuers will be required to furnish annually to the Trustee a statement
of officers of the Issuers to the effect that to the best of their knowledge,
the Issuers are not in default in the performance and observance of the terms of
the Indenture or, if the Issuers are in default, specifying the default.
The Indenture will provide that the holders of 66 2/3% in Outstanding
Principal Balance of the Notes (excluding any Notes held by Advanta Business
Services or any of its affiliates) will have the right to waive defaults and,
subject to limitations established in the Indenture, to direct the time, method
and place of conducting any proceeding for any remedy available to the Trustee
for exercising any trust or power conferred on the Trustee. The Indenture will
provide that in case an Event of Default shall occur (which shall not have been
cured or waived), the Trustee will be required to exercise its rights and powers
under the Indenture and to use the degree of care and skill in its exercise of
its rights that a prudent man would exercise or use in the conduct of his own
affairs. Subject to those provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
of the Noteholders unless they shall have offered to the Trustee reasonable
security or indemnity.
AMENDMENT OF INDENTURE
Supplements to or amendments of the Indenture may be executed without the
consent of the Holders of the Notes to (i) authorize the issuance of one or more
series of Notes (if the Rating Agency Condition is satisfied), (ii) evidence the
succession, in compliance with the terms of the Indenture, of another
corporation to any Issuer and the assumption by the successor of the Issuer's
covenants, (iii) add covenants for the benefit of the Holders or to surrender
any right conferred upon the Issuers, (iv) permit the issuance of notes in
bearer form, (v) modify the restrictions and procedures for transfers of the
Notes to reflect changes in law or practice; (vi) provide for acceptance of
appointment by a successor Trustee or to provide for more than one Trustee,
(vii) modify provisions necessary to qualify, requalify or continue the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended; (viii) cure any ambiguity, correct or supplement any provision which is
inconsistent with another provision; or (ix) make any other provisions with
respect to matters or questions arising under the Indenture which shall not
adversely affect the interests of the Holders of the Notes in any material
respect.
Except as described in the preceding paragraph, the rights and obligations
of the Issuers and the rights of the Noteholders under the Indenture may not be
modified by the Issuers without (i) the consent of the holders of not less than
66 2/3% in Outstanding Principal Balance of the Notes (excluding any Notes held
by Advanta Business Services or any of its affiliates) and (ii) satisfaction of
the Rating Agency Condition with respect to such modification; but no
modification may be made which would (a) extend the fixed maturity of any Note,
or reduce the principal amount thereof, or reduce the rate or extend the time of
payment of principal or interest thereon, without the consent of the Holder of
each Note so affected or (b) reduce the above-stated percentage of Notes
required to consent to amendments, without the consent of the Holders of all
Notes then outstanding.
EVENTS OF SERVICER TERMINATION
The following events and conditions are defined in the Indenture as "EVENTS
OF SERVICER TERMINATION":
(a) failure on the part of the Servicer to remit to the Trustee within
five calendar days following the receipt thereof any monies received by the
Servicer required to be remitted to the Trustee under the Indenture;
(b) failure on the part of the Servicer to perform or observe any
other term, covenant or agreement in the Indenture or in any related
agreement with the result that the interests of the Noteholders or of the
Trustee have been materially and adversely affected, and the failure has
been unremedied for 30 calendar days after receipt by the Servicer of a
written notice from the Trustee;
50
<PAGE> 55
(c) if any representation or warranty of the Servicer made in the
Indenture or any related agreement shall prove to be incorrect in any
material respect as of the time made; provided, however, that the breach of
any representation or warranty made by the Servicer will be deemed to be
"material" only if it affects the Noteholders, the enforceability of the
Indenture or of the Notes; and provided further that the material breach of
any representation or warranty made by Advanta Business Services in the
Contribution Agreement with respect to any of the Contracts or the
Equipment subject thereto will not constitute an Event of Servicer
Termination if Advanta Business Services or a successor thereto repurchases
the Contract and Equipment in accordance with the Contribution Agreement to
the extent provided therein; and
(d) events of voluntary or involuntary insolvency or bankruptcy
relating to the Servicer.
SERVICER TERMINATION
So long as an Event of Servicer Termination under the Indenture is
continuing, the Trustee shall, upon the instructions of the holders of 66 2/3%
in Outstanding Principal Balance of the Notes (excluding any Notes held by the
Servicer or any affiliate of the Servicer), by notice in writing to the Servicer
terminate all of the rights and obligations of the Servicer (except the
Servicer's obligations that shall survive such termination) under the Indenture.
Upon the receipt by the Servicer of the written notice, all authority and power
of the Servicer under the Indenture to take any action with respect to any
Contract or Equipment will cease and the same will pass to and be vested in the
Trustee (or other successor Servicer) pursuant to and under the Indenture.
PREPAYMENT AND YIELD CONSIDERATIONS
The rate of principal payments on the Notes will be directly related to the
rate of principal payments on the underlying Contracts. If purchased at a price
other than par, the yield to maturity will also be affected by the rate of
principal payments. The principal payments on the Contracts may be in the form
of scheduled principal payments or liquidations due to default, casualty and the
like. Any of these payments will result in distributions to Noteholders of
amounts which would otherwise have been distributed over the remaining term of
the Contracts. In general, the rate of payments may be influenced by a number of
other factors, including general economic conditions. The rate of payment of
principal may also be affected by any removal of the Contracts from the pool and
the deposit of the related amount (which is at least equal to the Prepayment
Amount) into the Collection Account.
The leases do not allow prepayment at the option of the User. Under the
Indenture, the Servicer may allow prepayments of leases; provided that no
prepayment of a Contract that is a lease will be allowed in an amount less than
the Prepayment Amount.
The effective yield to Noteholders will depend upon, among other things,
the price at which the Notes are purchased, and the amount of and rate at which
principal, including both scheduled and nonscheduled payments thereof, is paid
to the Noteholders.
The following chart sets forth the percentage of the Initial Principal
Balance of the Class A-1, Class A-2, Class A-3 and Class B Notes which would be
outstanding on the Payment Dates set forth below assuming a CPR of 0%, 6%, 12%
and 18%, respectively, and were calculated using the Statistical Discount Rate
7.18%. Furthermore, the charts were calculated assuming no losses related to the
Contracts and that the Residual Receipts equal the aggregate Booked Residual
Value in each Collection Period. This information is hypothetical and is set
forth for illustrative purposes only.
This information is based upon assumptions which may or may not be
accurate. Actual payment experience may vary significantly from the following
tables.
The Conditional Payment Rate ("CPR") assumes that a fraction of the
Aggregate Contract Principal Balance is prepaid on each Calculation Date, which
implies that each Contract is equally likely to prepay. This fraction, expressed
as a percentage, is annualized to arrive at the CPR for the Contract pool. The
CPR
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<PAGE> 56
equals the monthly prepayments divided by the previous month's outstanding
discounted present value of the Contracts minus the payment of all Scheduled
Payments on the Contracts during that Collection Period. The CPR further assumes
that all Contracts are the same size and amortize at the same rate and that each
Contract will be either paid as scheduled or prepaid in full. The amounts set
forth below are based upon the timely receipt of Scheduled Payments as of the
Statistical Calculation Date, assumes that the Issuers exercise their options to
redeem the Notes when the Aggregate Contract Principal Balance amortizes to less
than 10% of the Initial Aggregate Contract Principal Balance and assumes the
Closing Date is August 17, 1999 and the first Payment Date is September 15,
1999. In addition, it is assumed, for the purposes of these charts only, that
the Issuers issue the Notes in the following amounts and at the following
interest rates:
<TABLE>
<CAPTION>
ASSUMED ASSUMED
CLASS INITIAL PRINCIPAL AMOUNT INTEREST RATE
----- ------------------------ -------------
<S> <C> <C>
A-1................................................ $51,460,585 5.57%
A-2................................................ $38,232,647 6.39%
A-3................................................ $10,213,977 6.66%
B.................................................. $11,720,956 6.89%
</TABLE>
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<PAGE> 57
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-1 NOTES BALANCE OF THE CLASS A-2 NOTES
------------------------------------- -------------------------------------
CPR CPR
------------------------------------- -------------------------------------
PAYMENT DATE 0% 6% 12% 18% 0% 6% 12% 18%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.............. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
September 15, 1999........ 89.57 88.51 87.38 86.19 100.00 100.00 100.00 100.00
October 15, 1999.......... 79.32 77.30 75.18 72.93 100.00 100.00 100.00 100.00
November 15, 1999......... 69.26 66.40 63.40 60.25 100.00 100.00 100.00 100.00
December 15, 1999......... 59.52 55.92 52.16 48.23 100.00 100.00 100.00 100.00
January 15, 2000.......... 50.01 45.76 41.35 36.76 100.00 100.00 100.00 100.00
February 15, 2000......... 40.69 35.89 30.93 25.80 100.00 100.00 100.00 100.00
March 15, 2000............ 31.69 26.42 21.01 15.45 100.00 100.00 100.00 100.00
April 15, 2000............ 22.99 17.34 11.56 5.66 100.00 100.00 100.00 100.00
May 15, 2000.............. 14.72 8.75 2.68 0.00 100.00 100.00 100.00 96.22
June 15, 2000............. 6.91 0.69 0.00 0.00 100.00 100.00 93.93 87.03
July 15, 2000............. 0.00 0.00 0.00 0.00 99.34 92.39 85.40 78.37
August 15, 2000........... 0.00 0.00 0.00 0.00 91.43 84.34 77.26 70.17
September 15, 2000........ 0.00 0.00 0.00 0.00 83.77 76.61 69.49 62.40
October 15, 2000.......... 0.00 0.00 0.00 0.00 76.41 69.23 62.12 55.09
November 15, 2000......... 0.00 0.00 0.00 0.00 69.42 62.27 55.22 48.30
December 15, 2000......... 0.00 0.00 0.00 0.00 62.74 55.66 48.72 41.94
January 15, 2001 0.00 0.00 0.00 0.00 56.32 49.35 42.57 35.97
February 15, 2001......... 0.00 0.00 0.00 0.00 50.21 43.39 36.79 30.40
March 15, 2001............ 0.00 0.00 0.00 0.00 44.43 37.79 31.40 25.25
April 15, 2001............ 0.00 0.00 0.00 0.00 38.89 32.46 26.30 20.41
May 15, 2001.............. 0.00 0.00 0.00 0.00 33.69 27.49 21.58 15.97
June 15, 2001............. 0.00 0.00 0.00 0.00 28.89 22.93 17.27 11.93
July 15, 2001............. 0.00 0.00 0.00 0.00 24.39 18.68 13.29 8.22
August 15, 2001........... 0.00 0.00 0.00 0.00 20.27 14.80 9.67 4.88
September 15, 2001........ 0.00 0.00 0.00 0.00 16.55 11.31 6.43 1.90
October 15, 2001.......... 0.00 0.00 0.00 0.00 13.20 8.19 3.54 0.00
November 15, 2001......... 0.00 0.00 0.00 0.00 10.19 5.40 0.97 0.00
December 15, 2001......... 0.00 0.00 0.00 0.00 7.36 2.78 0.00 0.00
January 15, 2002.......... 0.00 0.00 0.00 0.00 4.67 0.31 0.00 0.00
February 15, 2002......... 0.00 0.00 0.00 0.00 2.13 0.00 0.00 0.00
March 15, 2002............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
April 15, 2002............ 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
May 15, 2002.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 15, 2002............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1)
to Call (in years)...... 0.47 0.43 0.40 0.37 1.61 1.51 1.41 1.32
Weighted Average Life(1)
to Maturity (in
years).................. 0.47 0.43 0.40 0.37 1.61 1.51 1.41 1.32
</TABLE>
- ---------------
(1) The weighted average life of a Class A-1 Note or Class A-2 Note is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such Class of Notes by the number of
years from the Closing Date to the relevant Payment Date, (b) adding the
results and (c) dividing the sum by the initial principal amount of the
applicable Class.
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<PAGE> 58
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-3 NOTES BALANCE OF THE CLASS B NOTES
------------------------------------- -------------------------------------
CPR CPR
------------------------------------- -------------------------------------
PAYMENT DATE 0% 6% 12% 18% 0% 6% 12% 18%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.............. 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
September 15, 1999........ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
October 15, 1999.......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
November 15, 1999......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
December 15, 1999......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
January 15, 2000.......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
February 15, 2000......... 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
March 15, 2000............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
April 15, 2000............ 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
May 15, 2000.............. 100.00 100.00 100.00 100.00 100.00 100.00 100.00 97.02
June 15, 2000............. 100.00 100.00 100.00 100.00 100.00 100.00 95.21 89.77
July 15, 2000............. 100.00 100.00 100.00 100.00 99.48 93.99 88.48 82.93
August 15, 2000........... 100.00 100.00 100.00 100.00 93.24 87.64 82.05 76.46
September 15, 2000........ 100.00 100.00 100.00 100.00 87.20 81.54 75.92 70.33
October 15, 2000.......... 100.00 100.00 100.00 100.00 81.38 75.71 70.11 64.56
November 15, 2000......... 100.00 100.00 100.00 100.00 75.87 70.22 64.66 59.20
December 15, 2000......... 100.00 100.00 100.00 100.00 70.60 65.01 59.53 54.18
January 15, 2001.......... 100.00 100.00 100.00 100.00 65.53 60.03 54.68 49.47
February 15, 2001......... 100.00 100.00 100.00 100.00 60.71 55.33 50.11 45.08
March 15, 2001............ 100.00 100.00 100.00 100.00 56.15 50.91 45.86 41.01
April 15, 2001............ 100.00 100.00 100.00 100.00 51.77 46.70 41.84 37.19
May 15, 2001.............. 100.00 100.00 100.00 100.00 47.67 42.78 38.12 33.69
June 15, 2001............. 100.00 100.00 100.00 100.00 43.88 39.18 34.72 30.50
July 15, 2001............. 100.00 100.00 100.00 100.00 40.33 35.82 31.57 27.57
August 15, 2001........... 100.00 100.00 100.00 100.00 37.08 32.77 28.72 24.93
September 15, 2001........ 100.00 100.00 100.00 100.00 34.14 30.01 26.16 22.58
October 15, 2001.......... 100.00 100.00 100.00 97.19 31.50 27.55 23.88 20.49
November 15, 2001......... 100.00 100.00 100.00 88.40 29.13 25.34 21.85 18.64
December 15, 2001......... 100.00 100.00 94.66 0.00 26.89 23.28 19.96 0.00
January 15, 2002.......... 100.00 100.00 0.00 0.00 24.77 21.33 0.00 0.00
February 15, 2002......... 100.00 92.49 0.00 0.00 22.76 19.50 0.00 0.00
March 15, 2002............ 98.96 0.00 0.00 0.00 20.86 0.00 0.00 0.00
April 15, 2002............ 90.58 0.00 0.00 0.00 19.10 0.00 0.00 0.00
May 15, 2002.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 15, 2002............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1)
to Call (in years)...... 2.74 2.57 2.41 2.32 1.84 1.73 1.62 1.53
Weighted Average Life(1)
to Maturity (in
years).................. 3.13 3.00 2.86 2.71 2.04 1.95 1.85 1.76
</TABLE>
- ---------------
(1) The weighted average life of a Class A-3 Note or a Class B Note is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such Class of Notes by the number of
years from the Closing Date to the relevant Payment Date, (b) adding the
results and (c) dividing the sum by the initial principal amount of the
applicable Class.
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<PAGE> 59
AGGREGATE MONTHLY SCHEDULED PAYMENTS AND BOOKED RESIDUAL VALUES
The following table sets forth the Scheduled Payments and the scheduled
Booked Residual Value of the Contracts. For the purposes of this table we have
assumed there are no delinquencies, losses or prepayments on the Contracts. In
addition, we have assumed that an amount equal to the Booked Residual Value of a
Contract is received from the disposition of the related Equipment in the
Collection Period immediately following the Collection Period in which the last
Scheduled Payment on the Contract is due. The information set forth below is not
a prediction of the actual payments that will be received. The information
regarding delinquencies and defaults set forth under the caption "Servicing
Portfolio Delinquency and Default Information" in this Prospectus, as well as
the information under "Risk Factors" should be reviewed together with the
information set forth below.
<TABLE>
<CAPTION>
MONTH AGGREGATE SCHEDULED PAYMENTS AGGREGATE BOOKED RESIDUAL VALUES
- ----- ---------------------------- --------------------------------
<S> <C> <C>
August 1999............................... 5,949,253.63 99,395.73
September 1999............................ 5,852,281.52 329,233.00
October 1999.............................. 5,723,207.52 351,100.28
November 1999............................. 5,530,260.33 307,158.22
December 1999............................. 5,390,905.33 306,929.98
January 2000.............................. 5,262,277.04 452,884.01
February 2000............................. 5,071,912.39 494,458.18
March 2000................................ 4,894,107.77 625,182.09
April 2000................................ 4,659,951.59 680,269.92
May 2000.................................. 4,394,336.95 417,960.30
June 2000................................. 4,225,390.22 240,655.46
July 2000................................. 4,090,837.55 286,079.16
August 2000............................... 3,953,999.32 369,016.76
September 2000............................ 3,796,326.88 388,335.31
October 2000.............................. 3,599,431.04 348,357.12
November 2000............................. 3,437,931.82 384,691.19
December 2000............................. 3,295,228.33 392,793.26
January 2001.............................. 3,134,328.09 531,583.86
February 2001............................. 2,959,641.44 327,197.53
March 2001................................ 2,834,271.89 463,823.19
April 2001................................ 2,652,405.30 552,282.04
May 2001.................................. 2,452,154.62 401,110.82
June 2001................................. 2,295,117.78 419,119.96
July 2001................................. 2,102,737.48 536,384.85
August 2001............................... 1,905,632.25 609,961.33
September 2001............................ 1,713,604.79 587,012.94
October 2001.............................. 1,542,994.59 321,507.28
November 2001............................. 1,451,565.29 239,693.25
December 2001............................. 1,378,561.46 186,157.75
January 2002.............................. 1,296,613.23 187,649.03
February 2002............................. 1,226,895.54 285,920.87
March 2002................................ 1,140,842.20 307,388.57
April 2002................................ 1,043,500.06 234,606.69
May 2002.................................. 974,637.37 87,955.64
June 2002................................. 936,376.55 93,540.13
July 2002................................. 892,327.41 126,957.31
August 2002............................... 845,426.62 93,471.28
</TABLE>
55
<PAGE> 60
<TABLE>
<CAPTION>
MONTH AGGREGATE SCHEDULED PAYMENTS AGGREGATE BOOKED RESIDUAL VALUES
- ----- ---------------------------- --------------------------------
<S> <C> <C>
September 2002............................ 811,049.06 85,254.51
October 2002.............................. 766,346.22 43,790.16
November 2002............................. 742,670.42 42,654.35
December 2002............................. 713,581.55 34,456.39
January 2003.............................. 695,811.96 25,159.73
February 2003............................. 685,020.87 35,851.96
March 2003................................ 660,917.00 99,765.87
April 2003................................ 606,860.98 253,066.29
May 2003.................................. 507,854.12 227,007.20
June 2003................................. 425,080.03 277,116.56
July 2003................................. 319,733.68 301,727.80
August 2003............................... 205,855.71 308,442.56
September 2003............................ 110,641.22 229,725.84
October 2003.............................. 36,003.93 16,105.49
November 2003............................. 25,824.20 34,002.76
December 2003............................. 13,501.39 20,322.45
January 2004.............................. 8,118.11 4,389.08
February 2004............................. 6,497.74 6,957.44
March 2004................................ 5,188.19 2.00
April 2004................................ 4,968.56 6,079.11
May 2004.................................. 3,341.29 --
June 2004................................. 3,259.02 --
July 2004................................. 2,881.02 --
August 2004............................... 2,121.02 2.00
September 2004............................ 470.00 --
October 2004.............................. 295.00 --
November 2004............................. 295.00 --
December 2004............................. 295.00 --
January 2005.............................. 295.00 --
February 2005............................. 295.00 --
March 2005................................ 295.00 --
April 2005................................ -- --
</TABLE>
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<PAGE> 61
LEGAL MATTERS AFFECTING THE CONTRACTS
GENERAL
The Contracts that are leases are "triple-net" leases, requiring the Users
to pay all taxes, maintenance and insurance associated with the Equipment, and
cannot be canceled by the Users.
The Contracts which are leases are "hell or high water" leases, under which
the obligations of the User are absolute and unconditional, regardless of any
defense, setoff or abatement which the User may have against Advanta Business
Services, the Servicer, the Issuers, or any other person or entity whatsoever.
Events of default under the Contracts are generally the result of failure
to pay amounts when due, failure to observe other covenants in the Contract,
misrepresentations by, or the insolvency, bankruptcy or appointment of a trustee
or receiver for the User under a Contract. The remedies of the Originator (and
the Issuers as assignee) following a notice and cure period are generally to
seek to enforce the performance by the User of the terms and covenants of the
Contract (including the User's obligation to make scheduled payments) or recover
damages for the breach thereof, to accelerate the balance of the remaining
scheduled payments paid to terminate the rights of the User under the Contract.
Although the Contracts permit the Originator to repossess and dispose of the
related Equipment in the event of a lease default, and to credit the proceeds
against the User's liabilities thereunder, the remedies may be limited where the
User thereunder is subject to bankruptcy, or other insolvency proceedings.
UCC AND BANKRUPTCY CONSIDERATIONS
All Contracts that are leases are "chattel paper" which creates a security
interest in the related item of Equipment with respect to the Contract. A
security interest in personal property is generally not a perfected security
interest unless a UCC financing statement has been filed in the appropriate
filing office with respect to the security interest. The Originator has filed
UCC financing statements in its favor against Users in respect of Equipment with
an original Equipment cost in excess of $25,000. Financing statements in favor
of the Originator with respect to approximately 36.45% of the Statistical
Aggregate Contract Principal Balance have been so filed. Neither the Issuers nor
Advanta Business Services expect to take action to perfect the interest of the
Originator in any Equipment to the extent the original Equipment cost of the
related Equipment is less than or equal to $25,000. As a result, the Originator
generally does not have a perfected security interest in Equipment with an
original Equipment cost of less than or equal to $25,000. To the extent UCC
financing statements evidencing the Originator's security interest in the
Equipment have not been filed against the User (i.e., with respect to those
Users relating to Equipment with an original cost of less than $25,000) no
security interests in the Equipment will be perfected in favor of the
Originator, the Issuers or the Trustee. Consequently, another party (such as a
creditor of the User) may acquire rights in the Originator's interest in the
Equipment superior to those of the Issuer or the Trustee. The lack of a
perfected security interest in the Equipment will result in claims against the
Users being unsecured and may adversely affect the ability of the Servicer to
realize on the Equipment.
For Contracts relating to items of Equipment with original Equipment costs
in excess of $25,000, the Originator will represent and warrant that a UCC
financing statement in its favor has been filed in the appropriate filing
office, with the result that the Originator has obtained a perfected security
interest in the Equipment. Because of the administrative burden and expense
involved, no UCC financing statements will be individually assigned by the
Originator to either the Issuers or the Trustee. Pursuant to the Contribution
Agreement, the Originator will sell and assign its interest in the Scheduled
Payments under the Contracts and its security interests in the Equipment
securing the Contracts to Advanta Leasing Receivables IX and, pursuant to the
Indenture, Advanta Leasing Receivables IX will assign its interest in the
Scheduled Payments under the Contracts and its security interests in the
Equipment to the Trustee. However, because of the administrative burden and
expense, none of the Originator, the Servicer, the Issuers or the Trustee will
amend or file any UCC financing statements to identify the Trustee as the new
secured party on the financing statement relating to the Equipment.
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<PAGE> 62
In most states, an assignment of a security interest in equipment relating
to a financing lease is an effective conveyance of a security interest without
amendment of any UCC financing statement relating to such Equipment, and the
assignee succeeds thereby to the assignor's rights as secured party. Such an
assignment will be made under the Contribution Agreement. By not identifying the
Trustee as the secured party on the financing statement, the security interest
of the Trustee in the Equipment could be defeated through fraud or negligence or
inadvertance by the Originator. In the absence of error, fraud or forgery by the
related User or administrative error by state or local agencies, the proper
initial filing of the financing statement relating to such Equipment will be
sufficient to protect the Trustee against the rights of subsequent purchasers of
such Equipment or subsequent lenders who take a security interest in the
Equipment. For Equipment as to which the original secured party failed to obtain
and assign to the Originator a perfected security interest (whether because the
Equipment has an initial cost which of $25,000 or less or for any other
reasons), the security interest of the Originator will be subordinated to, among
others, subsequent purchasers of the equipment and holders of perfected security
interests. Such a failure, however, with respect to any Equipment with an
initial cost in excess of $25,000 would constitute a breach of the warranties of
the Originator under the Contribution Agreement and would create an obligation
of the Issuers to remove the related Contract from the Trust Estate and of the
Originator to repurchase such Contract from the Issuers unless the breach is
cured. The Issuers will assign their rights pursuant to the Contribution
Agreement to the Trustee.
To the extent any of the Contracts are determined to be "true leases" (not
financing leases) title to the Residual Interests in the Equipment (including
the Residual Receipts thereon) will be held by the Originator. The Originator
will assign such interest to Advanta Leasing Receivables VIII. Advanta Leasing
Receivables VIII will grant a security interest in any such Equipment (including
the Residual Receipts thereon) to the Trustee. Under the Contribution Agreement,
the Originator has represented that the transfer of its interest in the Residual
Interest in the Equipment (including the Residual Receipts thereon) is an
absolute sale. In the event such transfer is recharacterized as a pledge, a
bankruptcy of the Originator may result in delays in realization on the
Equipment. As security for its obligations under the Contribution Agreement, the
Originator has pledged its Residual Interest (including the Residual Receipts
thereon) to Advanta Leasing Receivables VIII. To perfect the security interest
granted by Advanta Business Services and Advanta Leasing Receivables VIII, UCC
financing statements showing the Originator as debtor and Advanta Leasing
Receivables VIII as secured party and Advanta Leasing Receivables VIII as debtor
and the Trustee as secured party will be filed in certain states. The
jurisdictions will be selected so that filings are made to cover the
Originator's and Advanta Leasing Receivables VIII's interest, if any, in the
Equipment relating to Contracts which in the aggregate represent approximately
85% of the Statistical Aggregate Contract Principal Balance. Financing
statements will not be filed in all jurisdictions and, therefore, to the extent
Advanta Business Services or Advanta Leasing Receivables VIII has an interest in
Equipment not covered by one of such statements, their creditors may gain a
superior interest therein.
For some contracts, Advanta Business Services has acquired and,
accordingly, transferred to the Issuers, only a contractual right to certain
Scheduled Payments arising under the Contracts and the collateral therefor. The
originator of such Contracts has retained rights to the Equipment at the end of
the lease term and Residual Receipts. Thus, if the originator of such Contracts
were to become a debtor in a bankruptcy case, the timing or amount of Scheduled
Payments transferred to Advanta Business Services (and thus to the Issuers and
the Trustee) could be adversely affected. For example, if the Contracts in which
the Issuers only have a right to periodic payments are determined to be "true
leases" (not financing leases), under the federal bankruptcy code (the
"BANKRUPTCY CODE"), the bankruptcy trustee of the originator of such Contracts
(including the originator itself as a debtor-in-possession) may be authorized to
reject such Contracts. Rejection of a Contract is treated as a breach of such
Contract. Delays in and possible reductions of the amount of Scheduled Payments
owed by the Users might result. Additionally, the originator of such Contracts
may be permitted under the Bankruptcy Code, in certain circumstances, to dispose
of all of the rights under the Contracts (including the right to Scheduled
Payments transferred to Advanta Business Services). In such event, the proceeds
of the disposition of such Contracts paid to the Issuers (and therefore the
Trustee) may be less than the amount of the Scheduled Payments owed by the
Users.
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<PAGE> 63
Furthermore, the Bankruptcy Code provides that the retention of bare legal
title to a property interest, such as a lien on personal property, for servicing
purposes, does not, in and of itself, vest beneficial ownership of the property
interest in the legal title holder. The likely legal result of the foregoing, in
light of the transfer of the Contracts and the Equipment to the Issuers, is to
transfer to the Issuers the benefits of all perfected security interests in
those items of Equipment in which the Originator itself had a perfected security
interest (i.e., with respect to items of Equipment with an original Equipment
cost in excess of $25,000). Pursuant to the Indenture, the Issuers will pledge
all of their respective right, title and interest in and to the Trust Estate
(including security interests in the Equipment) to the Trustee for the benefit
of the Noteholders.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary describes generally the material United States
federal income tax consequences of an investment in the Notes. The following
summary has been prepared and reviewed by Orrick, Herrington & Sutcliffe LLP as
special tax counsel to the Issuers ("SPECIAL TAX COUNSEL"). The summary is based
on the Internal Revenue Code of 1986, as amended (the "CODE") as of the date
hereof, and existing final, temporary and proposed Treasury regulations, revenue
rulings and judicial decisions, all of which are subject to prospective and
retroactive changes. The summary is addressed only to original purchasers of the
Notes, deals only with Notes held as capital assets within the meaning of
Section 1221 of the Code and, except as specifically set forth below, does not
address tax consequences of holding Notes that may be relevant to investors in
light of their own investment circumstances or their special tax situations,
such as certain financial institutions, tax-exempt organizations, life insurance
companies, dealers in securities, non-U.S. persons, or investors holding the
Notes as part of a conversion transaction, as part of a hedge or hedging
transaction, or as a position in a straddle for tax purposes. Further, this
discussion does not address alternative minimum tax consequences or any tax
consequences to holders of interests in a Noteholder. Special Tax Counsel is of
the opinion that the following summary of federal income tax consequences is
correct in all material respects. An opinion of Special Tax Counsel, however, is
not binding on the Internal Revenue Service ("IRS") or the courts, and no ruling
on any of the issues discussed below will be sought from the IRS. Moreover,
there are no authorities on similar transactions involving interests issued by
an entity with terms similar to those of the Notes described herein.
Accordingly, persons considering the purchase of Notes should consult their own
tax advisors with regard to the United States federal income tax consequences of
an investment in the Notes and the application of United States federal income
tax laws, as well as the laws of any state, local or foreign taxing
jurisdictions, to their particular situations.
CONSEQUENCES TO HOLDERS OF THE OFFERED NOTES
Treatment of the Notes as Debt. Special Tax Counsel is of the opinion
that, although no transaction closely comparable to that contemplated herein has
been the subject of any Treasury regulation, revenue ruling or judicial decision
and hence the matter cannot be free from doubt, the Notes will be characterized
as debt for United States federal income tax purposes. Additionally, the Issuers
will agree by entering into the Indenture, and the Noteholders will agree by
their purchase and holding of Notes, to treat the Notes as debt for United
States federal income tax purposes.
If, contrary to the opinion of Special Tax Counsel, the IRS successfully
asserted that a class of Notes did not represent debt for United States federal
income tax purposes, those Notes might be treated as equity interests in an
Issuer or some other entity for such purposes. If so treated, investors could be
treated for such purposes either as partners in a partnership or, alternatively,
as shareholders in a taxable corporation. Treatment of a Noteholder as a partner
could have adverse tax consequences to certain holders; for example, income to
foreign persons generally would be subject to United States tax and United
States tax return filing and withholding requirements, and individual holders
might be subject to certain limitations on their ability to deduct their share
of partnership expenses. If the Notes instead were treated as corporate stock,
the taxable corporation would not be able to reduce its taxable income by
deductions for interest expense on the Notes
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<PAGE> 64
recharacterized as equity, and any increase in the corporate tax imposed with
respect to such corporation could materially reduce cash available to make
payments on the Notes; further, Noteholders might not be entitled to any
dividends received deduction in respect of payments of interest on Notes treated
as dividends. Prospective investors should consult with their own tax advisors
with regard to the consequences of each such possible alternative
characterization to them in their particular circumstances; the following
discussion assumes that the characterization of the Notes as debt is correct.
Interest and Original Issue Discount. In general, stated interest on a
Note will be includible in gross income as it accrues or is received in
accordance with a Noteholder's usual method of tax accounting. If a Class of
Notes is issued with original issue discount ("OID"), the provisions of Sections
1271 through 1273 and 1275 of the Code will apply to those Notes. Under those
provisions, a Holder of such a Note (including a cash basis holder) generally
would be required to include the OID on a Note in income for federal income tax
purposes on a constant yield basis, resulting in the inclusion of OID in income
in advance of the receipt of cash attributable to that income. In general, a
Note will be treated as having OID to the extent that its "stated redemption
price" exceeds its "issue price," if such excess equals or exceeds 0.25 percent
multiplied by the weighted average life of the Note (determined by taking into
account the number of complete years following issuance until payment is made
for each partial principal payment). Under Section 1272(a)(6) of the Code,
special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the Notes is
unclear, but the application of Section 1272(a)(6) could affect the rate of
accrual of OID and could have other consequences to Holders of the Notes.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on a Note is "unconditionally payable" and hence
that all of such interest should be included in the Note's stated redemption
price at maturity. If sustained, such treatment should not significantly affect
tax liabilities for most Holders of the Notes, but prospective Noteholders
should consult their own tax advisors concerning the impact to them in their
particular circumstances. The Issuers intend to take the position that interest
on the Notes constitutes "qualified stated interest" and that the above
consequences do not apply.
The Class A-1 Notes may be subject to certain additional rules applicable
to "short-term obligations" if they are treated as having a maturity date of not
more than one year from the date of issuance; for this purpose, such maturity
date generally would be the last possible date that the obligation could be
outstanding by its terms, without regard to "remote or incidental" contingencies
(including defaults). In general, an individual or other cash method holder of a
short-term obligation is not required to accrue OID for federal income tax
purposes unless it elects to do so. Noteholders who report income for federal
income tax purposes on the accrual method of accounting and certain other
holders are required to include OID on short-term obligations on a straight-line
basis, unless an election is made to accrue the OID according to a constant
yield basis. In the case of a holder who is not required and does not elect to
include OID in income currently, any gain realized on the sale, exchange or
retirement of a short-term obligation will be ordinary income to the extent of
the OID accrued on a straight-line basis (or, if elected, according to a
constant interest method based on daily compounding) through the date of sale,
exchange or retirement. In addition, such non-electing holders who are not
subject to the current inclusion requirement described in this paragraph will be
required to defer deductions for any interest paid on indebtedness incurred or
continued to purchase or carry such short-term obligations in an amount not
exceeding the deferred interest income, until such deferred interest income is
realized. For purposes of determining the amount of OID subject to these rules,
all interest payments on a short-term obligation, including stated interest, are
included in the short-term obligation's stated redemption price at maturity.
Market Discount. A Holder of a Note who purchases an interest in a Note at
a discount that exceeds any OID not previously includible in income may be
subject to the "market discount" rules of Sections 1276 through 1278 of the
Code. These rules provide, in part, that gain on the sale or other disposition
of a Note and partial principal payments on a Note (in each case, other than a
"short-term obligation") are treated as ordinary income to the extent of accrued
market discount. The market discount rules also provide for deferral of interest
deductions with respect to debt incurred to purchase or carry a Note that has
market discount.
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<PAGE> 65
Market Premium. A Holder of a Note who purchases an interest in a Note at
a premium may elect to amortize the premium against interest income over the
remaining term of the Note in accordance with the provisions of Section 171 of
the Code.
Disposition of the Notes. Upon the sale, exchange, or retirement of a
Note, the Holder of the Note generally will recognize taxable gain or loss in an
amount equal to the difference between the amount realized on the sale (other
than amounts attributable to accrued interest) and the Holder's adjusted tax
basis in the Note. The Holder's adjusted tax basis in the Note generally will
equal the cost of the Note to such Holder, increased by any market or original
issue discount previously included in income by such Holder with respect to the
Note, and decreased by the amount of any bond premium previously amortized and
any payments of principal or OID previously received by such Holder with respect
to such Note. Subject to the discussion of "short-term obligations" above, any
such gain or loss generally will be capital gain or loss, except to the extent
of accrued market discount not previously included in income, and will be
long-term capital gain or loss if at the time of sale the Note has been held for
more than one year.
Foreign Holders. Under United States federal income tax law now in effect,
payments of interest by the Issuers to a Holder of a Note who, as to the United
States, is a nonresident alien individual or a foreign corporation (a "foreign
person") generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, provided
the interest is not effectively connected with the conduct of a trade or
business within the United States by the foreign person and the foreign person
(i) is not for United States federal income tax purposes (a) actually or
constructively a "10 percent shareholder" of an Issuer, (b) a "controlled
foreign corporation" with respect to which an Issuer is a "related person"
within the meaning of the Code, or (c) a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business, and
(ii) provides the person who is otherwise required to withhold United States tax
with respect to the Notes with an appropriate statement (on IRS Form W-8 or a
substitute form), signed under penalties of perjury, certifying that the
beneficial owner of the Note is a foreign person and providing the foreign
person's name and address. If a Note is held through a securities clearing
organization or certain other financial institutions (as is expected to be the
case unless Definitive Notes are issued), the organization or institution may
provide the relevant signed statement generally to the withholding agent; in
that case, however, the signed statement generally must be accompanied by an IRS
Form W-8 or substitute form provided by the foreign person that owns the Note.
If such interest is not portfolio interest, then it will be subject to United
States federal income and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable tax treaty or such interest is effectively
connected with the conduct of a trade or business within the United States and,
in either case, the appropriate statement has been provided. The U.S. Treasury
Department recently issued final Treasury regulations which will revise some of
the foregoing procedures whereby a foreign person may establish an exemption
from withholding generally beginning January 1, 2001; foreign persons should
consult their tax advisors concerning the impact to them, if any, of such
revised procedures.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States federal income tax and withholding tax, provided that (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, such individual is not present in the United States for 183 days or more
in the taxable year.
Backup Withholding. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a Note, may be
subject to "backup withholding" tax under Section 3406 of the Code at a rate of
31% if a recipient of such payments fails to furnish to the payor certain
identifying information. Any amounts deducted and withheld would be allowed as a
credit against such recipient's United States federal income tax, provided
appropriate proof is provided under rules established by the IRS. Furthermore,
certain penalties may be imposed by the IRS on a recipient of payments that is
required to supply information but that does not do so in the proper manner.
Backup withholding will not apply with respect to payments made to certain
exempt recipients, such as corporations and financial institutions. Holders of
the Notes should consult their tax advisors regarding their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
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<PAGE> 66
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY, MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR TAX SITUATION, AND DOES NOT PURPORT TO ADDRESS THE ISSUES DESCRIBED
WITH THE DEGREE OF SPECIFICITY THAT WOULD BE PROVIDED BY A TAXPAYER'S OWN TAX
ADVISOR. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL TAX
LAWS.
STATE TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential state and local tax consequences of holding the Notes. However,
purchasers of Notes should be aware that if some of the Notes were classified as
interests in a partnership rather than as debt for applicable state and local
tax purposes, certain states and localities might assert that the partnership is
doing business therein and subject the affected Holders to taxation as a result
of holding the affected Notes. In addition, the Issuers, as Nevada corporations,
are not subject to income or franchise taxes imposed by the state of Nevada, but
the Issuers could be taxable in other states and localities by reason of their
activities; if so, state and local taxes could reduce amounts available for
distribution to Holders of the Offered Notes. ACCORDINGLY, PURCHASERS OF NOTES
SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE STATE AND LOCAL TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF ANY NOTES.
LEGAL INVESTMENT
The Class A-1 Notes will be an "eligible security" within the meaning of
Rule 2a-7 promulgated under the Investment Company Act of 1940, as amended.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and Section 4975 of the Code impose certain requirements on employee benefit
plans and certain other plans and arrangements, including individual retirement
accounts and annuities, Keogh plans and certain collective investment funds or
insurance company general or separate accounts in which such plans, accounts or
arrangements are invested, that are subject to the fiduciary responsibility
provisions of ERISA and/or Section 4975 of the Code (collectively, "PLANS"), and
on persons who are fiduciaries with respect to Plans, in connection with the
investment of "plan assets" of any Plan ("PLAN ASSETS"). ERISA generally imposes
on Plan fiduciaries certain general fiduciary requirements, including those of
investment prudence and diversification and the requirement that a Plan's
investments be made in accordance with the documents governing the Plan.
ERISA and Section 4975 of the Code prohibit a broad range of transactions
involving Plan Assets and persons ("parties in interest" under ERISA and
"disqualified persons" under the Code, collectively, "PARTIES IN INTEREST") who
have certain specified relationships to a Plan or its Plan Assets, unless a
statutory or administrative exemption is available. Parties in Interest that
participate in a prohibited transaction may be subject to a penalty imposed
under ERISA and/or an excise tax imposed pursuant to Section 4975 of the Code,
unless a statutory or administrative exemption is available. These prohibited
transactions generally are set forth in Section 406 of ERISA and Section 4975 of
the Code.
Subject to the considerations described below, the Notes are eligible for
purchase with Plan Assets of any Plan.
Any Plan fiduciary or other Plan investor considering whether to purchase
the Notes with Plan Assets of any Plan should determine whether such purchase is
consistent with its fiduciary duties and whether such purchase would constitute
or result in a non-exempt prohibited transaction under ERISA and/or Section 4975
of the Code because any of the Originator, the Issuers, the Servicer, the
Trustee or any other party may be Parties in Interest with respect to the
investing Plan and may be deemed to be benefiting from the issuance of the
Notes. If the Originator, any Issuer or the Servicer is a Party in Interest with
respect to the prospective
62
<PAGE> 67
Plan investor, any Plan fiduciary or other Plan investor considering whether to
purchase or hold the Notes should consult with its counsel regarding the
availability of exemptive relief under U.S. Department of Labor ("DOL")
Prohibited Transaction Class Exemption ("PTCE") 96-23 (relating to transactions
determined by "in-house asset managers"), 95-60 (relating to transactions
involving insurance company general accounts), 91-38 (relating to transactions
involving bank collective investment funds), 90-1 (relating to transactions
involving insurance company pooled separate accounts) or 84-14 (relating to
transactions determined by independent "qualified professional asset managers")
or any other prohibited transaction class exemption issued by the DOL. A
purchaser of the Notes should be aware, however, that even if the conditions
specified in one or more of the above-referenced class exemptions are met, the
scope of the exemptive relief provided by the exemption might not cover all acts
which might be construed as prohibited transactions. In such case, an individual
prohibited transaction exemption must be requested and obtained from the DOL
pursuant to Section 408(a) of ERISA in order to effect any such transaction.
In addition, under DOL Regulation Section 2510.3-101 (the "PLAN ASSET
REGULATION"), the purchase with Plan Assets of equity interests in the Trust
Estate could, in certain circumstances, cause the Contracts and other property
and rights included in the Trust Estate to be deemed Plan Assets of the
investing Plan which, in turn, would subject the Issuers and the Trust Estate to
the fiduciary responsibility provisions of ERISA and the prohibited transaction
provisions of ERISA and Section 4975 of the Code. Nevertheless, because the
Notes (a) are expected to be treated as indebtedness under local law and will,
in the opinion of Special Tax Counsel, be treated as debt, rather than equity,
for federal tax purposes (see "Federal Income Tax Consequences -- Consequences
to Holders of the Notes" herein), and (b) should not be deemed to have any
"substantial equity features," purchases of the Notes with Plan Assets should
not be treated as equity investments and, therefore, the Contracts and other
assets included in the Trust Estate should not be deemed to be Plan Assets of
the investing Plans. Those conclusions are based, in part, upon the traditional
debt features of the Notes, including the reasonable expectation of purchasers
of the Notes that the Notes will be repaid when due, as well as the absence of
conversion rights, warrants and other typical equity features.
The Notes may not be purchased or held by any Plan, or any person investing
Plan Assets of any Plan, if any of the Originator, the Issuers, the Servicer,
the Trustee or any of their respective affiliates (a) has investment or
administrative discretion with respect to the Plan Assets used to effect such
purchase; (b) has authority or responsibility to give, or regularly gives,
investment advice with respect to such Plan Assets, for a fee and pursuant to an
agreement or understanding that such advice (1) will serve as a primary basis
for investment decisions with respect to such Plan Assets, and (2) will be based
on the particular investment needs of such Plan; or (c) unless PTCE 95-60, 91-38
or 90-1 is applicable, is an employer maintaining or contributing to such Plan.
Each purchaser or holder of the Notes or any interest therein will be deemed to
have represented by its purchase and holding thereof that it is not subject to
the foregoing limitation.
Any Plan fiduciary or other Plan investor considering whether to purchase
any Notes on behalf of or with Plan Assets of any Plan should consult with its
counsel and refer to this Prospectus for guidance regarding the ERISA
considerations applicable to the Notes offered hereby.
Certain employee benefit plans, such as governmental plans (as defined in
Section 3(32) of ERISA) and church plans (as defined in Section 3(33) of ERISA)
with respect to which the election provided by Section 410(d) of the Code has
not been made, are not subject to the requirements of ERISA or Section 4975 of
the Code. Accordingly, assets of such plans may be invested in the Notes without
regard to the ERISA considerations described herein, subject to the provisions
of other applicable federal and state law. However, any such plan that is
qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code
is subject to the prohibited transaction rules set forth in Section 503 of the
Code.
63
<PAGE> 68
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement (the "UNDERWRITING AGREEMENT") for the sale of the Offered Notes,
Advanta Business Services and the Issuers have agreed to sell and the
underwriters named below (the "UNDERWRITERS") have agreed to purchase the
Offered Notes as set forth below:
<TABLE>
<CAPTION>
UNDERWRITERS OF THE PRINCIPAL AMOUNT OF THE
CLASS A-1 NOTES CLASS A-1 NOTES
- ------------------- -----------------------
<S> <C>
First Union Capital Markets Corp. .......................... $
Barclays Capital Inc. ...................................... $
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITERS OF THE PRINCIPAL AMOUNT OF THE
CLASS A-2 NOTES CLASS A-2 NOTES
- ------------------- -----------------------
<S> <C>
First Union Capital Markets Corp. .......................... $
Barclays Capital Inc. ...................................... $
</TABLE>
<TABLE>
<CAPTION>
UNDERWRITERS OF THE PRINCIPAL AMOUNT OF THE
CLASS A-3 NOTES CLASS A-3 NOTES
- ------------------- -----------------------
<S> <C>
First Union Capital Markets Corp. .......................... $
Barclays Capital Inc. ...................................... $
</TABLE>
The Issuers have been advised by First Union Capital Markets Corp., as
representative of the Underwriters (the "REPRESENTATIVE"), that the Underwriters
propose initially to offer the Offered Notes to the public at the respective
public offering prices set forth on the cover page of this Prospectus, and to
certain dealers at such price, less a concession not in excess of % per
Class A-1 Note, % per Class A-2 Note and % per Class A-3 Note. The
Underwriters may allow and such dealers may reallow to other dealers a discount
not in excess of % per Class A-1 Note, % per Class A-2 Note and %
per Class A-3 Note.
<TABLE>
<CAPTION>
UNDERWRITERS'
DISCOUNTS AMOUNT PER
CLASS AND COMMISSIONS $1,000 OF PRINCIPAL TOTAL AMOUNT
----- ---------------------- ------------------- ------------
<S> <C> <C> <C>
A-1 % $ $
A-2 % $ $
A-3 % $ $
----- ---------- ----------
Total
===== ========== ==========
</TABLE>
Additional offering expenses are estimated to be $ .
Each Underwriter will represent and agree that:
(a) it has not offered or sold, and, prior to the expiry of six months
from the Closing Date, will not offer or sell, any Offered Notes to persons
in the United Kingdom, except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for purposes of their business, or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(b) 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 Offered Notes in, from or otherwise involving the United
Kingdom;
(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 if that person is of
a kind described either in Section 76(2) of
64
<PAGE> 69
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 II(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The Originator has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act. The Issuers have
been advised by the Representative that the Underwriters presently intend to
make a market in the Offered Notes, as permitted by applicable laws and
regulations. The Underwriters are not obligated, however, to make a market in
the Offered Notes and any such market making may be discontinued at any time at
the sole discretion of the Underwriters. Accordingly, no assurance can be given
as to the liquidity of, or trading markets for, the Offered Notes.
In connection with the offering of the Offered Notes, the Underwriters and
selling group members and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the Offered
Notes. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such person may bid
for or purchase the Offered Notes for the purpose of stabilizing its market
price.
RATINGS OF THE NOTES
It is a condition to the issuance of the Notes that the Class A-1 Notes be
rated at least "P-1," the Class A-2 Notes be rated at least "Aaa," the Class A-3
Notes be rated at least "Aaa" and the Class B Notes be rated at least "A1" by
Moody's and the Class A-1 Notes be rated at least "F1+/AAA," the Class A-2 Notes
be rated at least "AAA," the Class A-3 Notes be rated at least "AAA" and the
Class B Notes be rated at least "A+" by Fitch, respectively (each, a "RATING
AGENCY" and, together, the "RATING AGENCIES").
Each rating will reflect only the views of the related Rating Agency and
will be based primarily on the amount of subordination, the availability of
funds on deposit in the Reserve Account and the Residual Account and the Rating
Agency's opinion of the credit quality of the Contracts and the other Pledged
Assets included in the Trust Estate. The ratings are not a recommendation to
purchase, hold or sell the related Notes, inasmuch as ratings do not comment as
to market price or suitability for a particular investor. There is no assurance
that any rating will continue for any period of time or that it will not be
lowered or withdrawn entirely by the related Rating Agency if, in its judgment,
circumstances so warrant. A revision or withdrawal of a rating may have an
adverse affect on the market price of the Notes. The rating of the Notes
addresses the likelihood of the timely payment of interest and the ultimate
payment of principal on the Notes by each Class's Stated Maturity Date. The
rating does not address the rate of prepayments that may be experienced on the
Contracts and, therefore, does not address the effect of the rate of prepayments
on the return of principal to the Noteholders. See "Risk Factors -- Limited
Nature of Credit Ratings Assigned to the Notes."
EXPERTS
The balance sheets of Advanta Leasing Receivables Corp. VIII and Advanta
Leasing Receivables Corp. IX as of May 13, 1999, included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
LEGAL MATTERS
Legal matters relating to the validity of the issuance of the Notes will be
passed upon for the Issuers by Orrick, Herrington & Sutcliffe LLP, Washington,
D.C. Legal matters related to Nevada law will be passed upon for the Issuers by
Woodburn & Wedge, Reno, Nevada. Legal matters will be passed upon for the
Underwriters by Moore & Van Allen, PLLC, Charlotte, North Carolina.
65
<PAGE> 70
REPORTS TO NOTEHOLDERS
The Servicer will prepare monthly and annual reports that will contain
information about the Notes. The financial information contained in the reports
will be prepared in accordance with generally accepted accounting principles.
Unless and until Definitive Notes are issued, the reports will be sent to Cede,
the nominee of DTC, Cedelbank and Euroclear, as the case may be, and the
registered holder of the Notes. No reports will be sent to you.
WHERE YOU CAN FIND MORE INFORMATION
We filed a registration statement relating to the Offered Notes with the
SEC. This prospectus is part of the registration statement, but the registration
statement includes additional information.
The Servicer will file with the SEC all required annual, monthly and
special SEC reports and other information about the Notes.
You may read and copy any reports, statements or other information we file
at the SEC's public reference room in Washington, D.C. You can request copies of
these documents, upon payment of a duplicating fee, by writing to the SEC.
Please call the SEC at (800) SEC-0330 for further information on the operation
of the public reference rooms. Our SEC filings also are available to the public
on the SEC Internet Site (http://www.sec.gov).
66
<PAGE> 71
INDEX OF TERMS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Account............................. 44
Additional Principal................ 34
Advance Payments.................... 44
Advanta............................. 22
Advanta Business Services........... 13
Advanta Leasing Receivables VIII.... 13
Advanta Leasing Receivables IX...... 13
Aggregate Contract Principal
Balance........................... 18
Applicable Discount Rate............ 25
Available Funds..................... 38
Available Reserve Amount............ 41
Bankruptcy Code..................... 58
Beneficial Owners................... 32
Booked Residual Value............... 40
Business Day........................ 32
Calculation Date.................... 34
Cede................................ 35
Cedelbank........................... 37
Cedelbank Customers................. 37
Class............................... 13
Class A Notes....................... 13
Class A Noteholders................. 38
Class A Percentage.................. 34
Class A Principal Balance........... 34
Class A Principal Payment Amount.... 33
Class A Stated Maturity Date........ 32
Class A Target Investor Principal
Amount............................ 34
Class A-1 Initial Principal
Balance........................... 34
Class A-1 Interest Rate............. 33
Class A-1 Notes..................... 13
Class A-1 Note Factor............... 45
Class A-1 Note Interest............. 33
Class A-1 Principal Balance......... 34
Class A-1 Stated Maturity Date...... 32
Class A-2 Initial Principal
Balance........................... 34
Class A-2 Interest Rate............. 33
Class A-2 Notes..................... 13
Class A-2 Note Factor............... 46
Class A-2 Note Interest............. 33
Class A-2 Principal Balance......... 34
Class A-2 Stated Maturity Date...... 32
Class A-3 Initial Principal
Balance........................... 34
Class A-3 Interest Rate............. 33
Class A-3 Notes..................... 13
Class A-3 Note Factor............... 46
Class A-3 Note Interest............. 33
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Class A-3 Principal Balance......... 34
Class A-3 Stated Maturity Date...... 32
Class B Floor....................... 34
Class B Initial Principal Balance... 34
Class B Interest Rate............... 33
Class B Note Factor................. 46
Class B Note Interest............... 33
Class B Noteholders................. 38
Class B Notes....................... 13
Class B Percentage.................. 34
Class B Principal Balance........... 34
Class B Principal Payment Amount.... 34
Class B Special Redemption.......... 39
Class B Stated Maturity Date........ 32
Class B Target Investor Principal
Amount............................ 34
Closing Date........................ 13
Code................................ 59
Collateral Factor................... 46
Collection Account.................. 38
Collection Period................... 32
Complaint........................... 23
Contract Files...................... 16
Contract Principal Balance.......... 18
Contracts........................... 16
Contribution Agreement.............. 13
Cooperative......................... 37
CPR................................. 25, 51
Cumulative Loss Amount.............. 34
Cut-Off Date........................ 16, 25
Defaulted Contract.................. 40
Definitive Notes.................... 35
Delinquent Contract................. 40
Depositaries........................ 35
Determination Date.................. 32
DOL................................. 63
DTC................................. 35
Eligible Contract................... 41
Eligible Investments................ 44
Equipment........................... 16
ERISA............................... 62
Euroclear........................... 37
Euroclear Operator.................. 37
Euroclear Participants.............. 37
Euroclear System.................... 37
Events of Default................... 48
Events of Servicer Termination...... 50
</TABLE>
67
<PAGE> 72
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Excess Amount....................... 18
FFIEC............................... 22
Fitch............................... 44
Fleet............................... 23
Fleet Transaction................... 23
Holders............................. 32
Indenture........................... 13
Indirect Participants............... 35
Initial Aggregate Contract Principal
Balance........................... 25
Interest Accrual Period............. 32
Interest Payments................... 32
IRS................................. 59
Issuer.............................. 13
Issuers............................. 13
Issuers' Interest................... 39
IT.................................. 22
Master Agreement.................... 13
Monthly Principal Amount............ 33
Moody's............................. 44
Nonrecoverable Advances............. 45
Notes............................... 13
Noteholders......................... 32
Offered Notes....................... 13
Offset Amount....................... 41
OID................................. 60
Originator.......................... 13
Outstanding Principal Balance....... 34, 48
Participants........................ 35
Parties in Interest................. 62
Payment Date........................ 32
Plan Asset Regulation............... 63
Plan Assets......................... 62
Plans............................... 62
Pledged Assets...................... 16
Prepayment Amount................... 18
Project Office...................... 22
Prospectus.......................... 13
PTCE................................ 63
</TABLE>
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Purchase Option Payments............ 17
Rating Agencies..................... 65
Rating Agency....................... 65
Rating Agency Condition............. 48
Record Date......................... 32
Recoveries.......................... 47
Representative...................... 64
Required Reserve Amount............. 41
Reserve Account..................... 41
Reserve Account Initial Deposit..... 15, 41
Residual Account.................... 40
Residual Event...................... 40
Residual Interest................... 13
Residual Receipts................... 46
S&P................................. 44
Scheduled Payments.................. 18
SEC................................. 15
Securities Act...................... 15
Security Deposit.................... 41
Series Supplement................... 13
Servicer............................ 14
Servicer Advance.................... 45
Servicer Fee........................ 47
Servicer Fee Rate................... 47
Servicing Charges................... 47
Special Tax Counsel................. 59
Stated Maturity Date................ 32
Statistical Aggregate Contract
Principal Balance................. 25
Statistical Calculation Date........ 25
Statistical Discount Rate........... 25
Terms and Conditions................ 38
Trust Estate........................ 17
Trustee............................. 13
UCC................................. 17
Underwriters........................ 64
Underwriting Agreement.............. 64
User................................ 17
Year 2000 Issue..................... 22
</TABLE>
68
<PAGE> 73
APPENDICES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
A Global Clearance, Settlement and Tax Documentation A-1
Procedures................................................
B Report of Independent Accountants for Advanta Leasing B-1
Receivables Corp. VIII....................................
C Financial Statements of Advanta Leasing Receivables Corp. C-1
VIII......................................................
D Notes to Advanta Leasing Receivables Corp. VIII Financial D-1
Statements................................................
E Report of Independent Accountants for Advanta Leasing E-1
Receivables Corp. IX......................................
F Financial Statements of Advanta Leasing Receivables Corp. F-1
IX........................................................
G Notes to Advanta Leasing Receivables Corp. IX Financial G-1
Statements................................................
</TABLE>
69
<PAGE> 74
APPENDIX A
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the globally offered Equipment Receivables
Asset-Backed Notes, Series 1999-1 (the "Global Securities") will be available
only in book-entry form. Investors in the Global Securities may hold such Global
Securities through any of The Depository Trust Company ("DTC"), Cedelbank or
Euroclear. The Global Securities will be tradeable as home market instruments in
both the European and U.S. domestic markets. Initial settlement and all
secondary trades will settle in same-day funds.
Secondary market trading between investors holding Global Securities
through Cedelbank and Euroclear will be conducted in the ordinary way in
accordance with their normal rules and operating procedures and in accordance
with conventional eurobond practice (i.e., seven calendar day settlement).
Secondary market trading between investors holding Global Securities
through DTC will be conducted according to the rules and procedures applicable
to U.S. corporate debt obligations.
Secondary cross-market trading between Cedelbank or Euroclear and DTC
Participants holding Certificates will be effected on a delivery-against-payment
basis through the respective Depositaries of Cedelbank and Euroclear (in such
capacity) and as DTC Participants.
Non-U.S. holders (as described below) of Global Securities will be subject
to U.S. withholding taxes unless such holders meet specific requirements and
deliver appropriate U.S. tax documents to the securities clearing organizations
or their participants.
INITIAL SETTLEMENT
All Global Securities will be held in book-entry form by DTC in the name of
Cede & Co. as nominee of DTC. Investors' interests in the Global Securities will
be represented through financial institutions acting on their behalf as direct
and indirect Participants in DTC. As a result, Cedelbank and Euroclear will hold
positions on behalf of their participants through their respective Depositaries,
which in turn will hold such positions in accounts as DTC Participants.
Investors electing to hold their Global Securities through DTC (other than
through accounts at Cedelbank or Euroclear) will follow the settlement practices
applicable to U.S. corporate debt obligations. Investor securities custody
accounts will be credited with their holdings against payment in same-day funds
on the settlement date.
Investors electing to hold their Global Securities through Cedelbank or
Euroclear accounts will follow the settlement procedures applicable to
conventional eurobonds in registered form. Global Securities will be credited to
the securities custody accounts on the business day following the settlement
date against payment for value on the settlement date.
SECONDARY MARKET TRADING
Because the purchaser determines the place of delivery, it is important to
establish at the time of the trade where both the purchaser's and seller's
accounts are located to ensure that settlement can be made on the desired value
date.
Trading between DTC Participants. Secondary market trading between DTC
Participants (other than Citibank, N.A. ("Citibank") and Morgan Guaranty Trust
Company of New York ("Morgan") as depositories for Cedelbank and Euroclear,
respectively) will be settled using the procedures applicable to U.S. corporate
debt obligations in same-day funds.
Trading between Cedelbank Customers and/or Euroclear
Participants. Secondary market trading between Cedelbank Customers and/or
Euroclear Participants will be settled using the procedures applicable to
conventional eurobonds in same-day funds.
A-1
<PAGE> 75
Trading between DTC seller and Cedelbank or Euroclear purchaser. When
Global Securities are to be transferred from the account of a DTC Participant
(other than Citibank and Morgan as depositories for Cedelbank and Euroclear,
respectively) to the account of a Cedelbank Customer or a Euroclear Participant,
the purchaser will send instructions to Cedelbank or Euroclear, as the case may
be, before settlement date 12:30. Cedelbank or Euroclear, as the case may be,
will instruct Citibank or Morgan respectively, to receive the Global Securities
against payment. Payment will then be made by Citibank or Morgan, as the case
may be, to the DTC Participant's account against delivery of the Global
Securities. After settlement has been completed, the Global Securities will be
credited to the respective clearing system and by the clearing system, in
accordance with its usual procedures, to the Cedelbank Customer's or Euroclear
Participant's account. Credit for the Global Securities will appear the next day
(European time) and cash debit will be back-valued to, and the interest on the
Global Securities will accrue from, the value date (which would be the preceding
day when settlement occurred in New York). If settlement is not completed on the
intended value date (i.e., the trade fails), the Cedelbank or Euroclear cash
debit will be valued instead as of the actual settlement date.
Cedelbank Customers and Euroclear Participants will need to make available
to the respective clearing systems the funds necessary to process same-day funds
settlement. The most direct means of doing so is to pre-position funds for
settlement, either from cash on hand or existing lines of credit, as they would
for any settlement occurring within Cedelbank or Euroclear. Under this approach,
they may take on credit exposure to Cedelbank or Euroclear until the Global
Securities are credited to their accounts one day later.
As an alternative, if Cedelbank or Euroclear has extended a line of credit
to them, Cedelbank Customers or Euroclear Participants can elect not to
pre-position funds and allow that credit line to be drawn upon the finance
settlement. Under this procedure, Cedelbank Customers or Euroclear Participants
purchasing Global Securities would incur overdraft charges for one day, assuming
they cleared the overdraft when the Global Securities were credited to their
accounts. However, interest on the Global Securities would accrue from the value
date. Therefore, in many cases the investment income on the Global Securities
earned during that one-day period may substantially reduce or offset the amount
of such overdraft charges, although this result will depend on each Cedelbank
Customer's or Euroclear Participant's particular cost of funds.
Since the settlement is taking place during New York business hours, DTC
Participants can employ their usual procedures for sending Global Securities to
Citibank or Morgan for the benefit of Cedelbank Customers or Euroclear
Participants. The sale proceeds will be available to the DTC seller on the
settlement date. Thus, to the DTC Participant a cross-market transaction will
settle no differently from a trade between two DTC Participants.
Trading between Cedelbank or Euroclear seller and DTC purchaser. Due to
time zone differences in their favor, Cedelbank Customers and Euroclear
Participants may employ their customary procedures for transactions in which
Global Securities are to be transferred by the respective clearing system,
through Citibank or Morgan, to another DTC Participant. The seller will send
instructions to Cedelbank or Euroclear, as the case may be, before settlement
date 12:30. In these cases, Cedelbank or Euroclear will instruct Citibank or
Morgan, as appropriate, to credit the Global Securities to the DTC Participant's
account against payment. The payment will then be reflected in the account of
the Cedelbank Customer or Euroclear Participant the following business day, and
receipt of the cash proceeds in the Cedelbank Customer's or Euroclear
Participant's account would be back-valued to the value date (which would be the
preceding day, when settlement occurred in New York). If the Cedelbank Customer
or Euroclear Participant has a line of credit with its respective clearing
system and elects to draw on such line of credit in anticipation of receipt of
the sale proceeds in its account, the back-valuation may substantially reduce or
offset any overdraft charges incurred over that one-day period. If settlement is
not completed on the intended value date (i.e., the trade fails), receipt of the
cash proceeds in the Cedelbank Customer's or Euroclear Participant's account
would instead be valued as of the actual settlement date.
U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of Global Securities holding securities through
Cedelbank or Euroclear (or through DTC if the holder has an address outside the
U.S.) will be subject to the 30% U.S. withholding tax that
A-2
<PAGE> 76
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless, under currently applicable law,
(i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (Form W-8). Beneficial owners of
Certificates that are non-U.S. Persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (Certificate of Foreign
Status). If the information shown on Form W-8 changes, a new Form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (Form
4224). A non-U.S. Person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing Form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(Form 1001). Non-U.S. Persons that are Certificate Owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing Form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files Form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (Form W-9). U.S. Persons can obtain a complete
exemption from the withholding tax by filing Form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The Certificate Owner of a
Global Security or, in the case of a Form 1001 or a Form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and Form 1001 are effective for three calendar
years and Form 4224 is effective for one calendar year.
The term "U.S. Person" means (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of the
United States or any political subdivision thereof or (iii) an estate or trust
the income of which is includible in gross income for United States tax
purposes, regardless of its source. This summary does not deal with all aspects
of U.S. Federal income tax withholding that may be relevant to foreign holders
of the Global Securities. Investors are advised to consult their own tax
advisors for specific tax advice concerning their holding and disposing of the
Global Securities. Further, the U.S. Treasury Department has recently finalized
new regulations that will revise some aspects of the current system for
withholding on amounts paid to foreign persons. Under these regulations,
interest or OID paid to a nonresident alien would continue to be exempt from
U.S. withholding taxes (including backup withholding) provided that the holder
complies with the new certification procedures.
A-3
<PAGE> 77
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Advanta Leasing Receivables Corp. VIII:
We have audited the accompanying balance sheet of Advanta Leasing
Receivables Corp. VIII (a Nevada corporation and wholly owned subsidiary of
Advanta Business Services Corp.) as of May 13, 1999. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Advanta Leasing Receivables Corp.
VIII as of May 13, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
May 13, 1999
B-1
<PAGE> 78
ADVANTA LEASING RECEIVABLES CORP. VIII
BALANCE SHEET -- AS OF MAY 13, 1999
<TABLE>
<S> <C>
ASSET
CASH........................................................ $1,000
======
SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY:
Common stock (authorized, 1,000 shares, $.01 par value,
issued and outstanding, 1,000 shares).................. $ 10
Additional paid-in capital................................ 990
------
Total liabilities and shareholder's equity........ $1,000
======
</TABLE>
The accompanying notes are an integral part of this statement.
C-1
<PAGE> 79
ADVANTA LEASING RECEIVABLES CORP. VIII
NOTES TO FINANCIAL STATEMENT
MAY 13, 1999
1. NATURE OF OPERATIONS:
Advanta Leasing Receivables Corp. VIII (the "Company"), a wholly owned
subsidiary of Advanta Business Services Corp. ("ABSC"), was incorporated in the
state of Nevada on May 5, 1999. The Company has been inactive since that date.
The Company was organized to engage exclusively in the following business
and financial activities: to acquire equipment described in certain equipment
leases and to purchase equipment leases and lease receivables (collectively
lease receivables) from ABSC and any of its affiliates; to issue and sell notes
collateralized by any or all of its assets pursuant to one or more indentures
between the Company and an indenture trustee; and to engage in any lawful act or
activity and to exercise any power that is incidental and is necessary or
convenient to the foregoing and permitted under Nevada law.
2. CAPITAL CONTRIBUTION:
ABSC purchased 1,000 shares of the common stock of the Company for $1,000
on May 13, 1999.
D-1
<PAGE> 80
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Advanta Leasing Receivables Corp. IX:
We have audited the accompanying balance sheet of Advanta Leasing
Receivables Corp. IX (a Nevada corporation and wholly owned subsidiary of
Advanta Business Services Corp.) as of May 13, 1999. This financial statement is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Advanta Leasing Receivables Corp.
IX as of May 13, 1999, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Philadelphia, Pa.,
May 13, 1999
E-1
<PAGE> 81
ADVANTA LEASING RECEIVABLES CORP. IX
BALANCE SHEET -- AS OF MAY 13, 1999
<TABLE>
<S> <C>
ASSET
CASH........................................................ $1,000
======
SHAREHOLDER'S EQUITY
SHAREHOLDER'S EQUITY:
Common stock (authorized, 1,000 shares, $.01 par value,
issued and outstanding, 1,000 shares).................. $ 10
Additional paid-in capital................................ 990
------
Total liabilities and shareholder's equity........ $1,000
======
</TABLE>
The accompanying notes are an integral part of this statement.
F-1
<PAGE> 82
ADVANTA LEASING RECEIVABLES CORP. IX
NOTES TO FINANCIAL STATEMENT
MAY 13, 1999
1. NATURE OF OPERATIONS:
Advanta Leasing Receivables Corp. IX (the "Company"), a wholly owned
subsidiary of Advanta Business Services Corp. ("ABSC"), was incorporated in the
state of Nevada on May 5, 1999. The Company has been inactive since that date.
The Company was organized to engage exclusively in the following business
and financial activities: to acquire equipment described in certain equipment
leases and to purchase equipment leases and lease receivables (collectively
lease receivables) from ABSC and any of its affiliates; to issue and sell notes
collateralized by any or all of its assets pursuant to one or more indentures
between the Company and an indenture trustee; and to engage in any lawful act or
activity and to exercise any power that is incidental and is necessary or
convenient to the foregoing and permitted under Nevada law.
2. CAPITAL CONTRIBUTION:
ABSC purchased 1,000 shares of the common stock of the Company for $1,000
on May 13, 1999.
G-1
<PAGE> 83
ADVANTA LEASING RECEIVABLES CORP. VIII
ADVANTA LEASING RECEIVABLES CORP. IX
ISSUERS
ADVANTA BUSINESS SERVICES CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 1999-1
$51,460,585(1) [ %] Class A-1 Equipment Receivables Asset-Backed Notes
$38,232,647(1) [ %] Class A-2 Equipment Receivables Asset-Backed Notes
$10,213,977(1) [ %] Class A-3 Equipment Receivables Asset-Backed Notes
(1)Approximate initial principal amounts
------------------------
PROSPECTUS
------------------------
FIRST UNION CAPITAL MARKETS CORP. BARCLAYS CAPITAL
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information.
We are not offering the Class A notes in any state where the offer is not
permitted.
Dealers will deliver a prospectus when acting as underwriters of the Class
A notes and with respect to their unsold allotments or subscriptions. In
addition, all dealers selling the Class A notes will deliver a prospectus until
, 1999.
<PAGE> 84
PART II
ITEM 13. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Statement Fee.................................. $ 28,356**
Printing and Engraving Expenses............................. 40,000*
Trustee's Fees and Expenses................................. 15,000*
Legal Fees and Expenses..................................... 200,000*
Blue Sky Fees and Expenses.................................. 10,000*
Accountants' Fees and Expenses.............................. 80,000*
Rating Agency Fees.......................................... 65,000*
Miscellaneous Fees and Expenses............................. 10,000*
--------
Total............................................. $448,356*
========
</TABLE>
- ---------------
* Estimate
** Actual
ITEM 14. Indemnification of Directors and Officers.
Indemnification. Under the laws which govern the organization of the
registrants, the registrants have the power and in some instances may be
required to provide an agent, including an officer or director, who was or is a
party or is threatened to be made a party to certain proceedings, with
indemnification against certain expenses, judgments, fines, settlements and
other amounts under certain circumstances.
Article VII of the By-laws of Advanta Business Services Corp. provides that
all officers and directors of the corporation shall be indemnified by the
corporation from and against all expenses, liabilities or other matters arising
out of their status as an officer or director for their acts, omissions or
services rendered in such capacities.
Article XI of the By-laws of Advanta Leasing Receivables Corp. VIII
provided that the corporation shall indemnify, in the manner and to the full
extent permitted by law, any person who was or is a party to, or is threatened
to be made a party to, any action, suit or proceeding, by reason of the fact
that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent or another corporation, partnership, joint
venture, trust or other enterprise. To the full extent permitted by law, the
indemnification shall include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement.
Article XI of the By-laws of Advanta Leasing Receivables Corp. IX provided
that the corporation shall indemnify, in the manner and to the full extent
permitted by law, any person who was or is a party to, or is threatened to be
made a party to, any action, suit or proceeding, by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture, trust or
other enterprise. To the full extent permitted by law, the indemnification shall
include expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that Advanta Business Services Corp. will
indemnify and reimburse the underwriter(s) and each controlling person of the
underwriter(s) with respect to certain expenses and liabilities, including
liabilities under the Securities Act of 1933 or other federal or state
regulations or under the common law, which arise out of or are based on certain
material misstatements or omissions in the Registration Statement or the
Prospectus. In addition, the Underwriting Agreement provides that the
underwriter(s) will similarly indemnify and reimburse Advanta Business Services
Corp., Advanta Leasing Receivables Corp. VIII and Advanta Leasing Receivables
Corp. IX with respect to certain material misstatements or omissions in the
Registration Statement which are
II-1
<PAGE> 85
based on certain written information furnished by the underwriter(s) for use in
the Registration Statement or the Prospectus.
Insurance. As permitted under the respective laws which govern the
organization of Advanta Business Services Corp., Advanta Leasing Receivables
Corp. VIII and Advanta Leasing Receivables Corp. IX, the by-laws of each such
corporation permit the board of directors to purchase and maintain insurance on
behalf of the registrant's agents, including its officers and directors, against
any liability asserted against them in such capacity or arising out of such
agents' status as such, whether or not such registrant would have the power to
indemnify them against such liability under applicable law.
ITEM 15. Recent Sales of Unregistered Securities.
None.
ITEM 16. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes
3.1.1 Certificate of Incorporation of Advanta Business Services
Corp.*
3.1.2 Articles of Incorporation of Advanta Leasing Receivables
Corp. VIII*
3.1.3 Articles of Incorporation of Advanta Leasing Receivables
Corp. IX*
3.2.1 By-Laws of Advanta Business Services Corp.*
3.2.2 By-Laws of Advanta Leasing Receivables Corp. VIII*
3.2.3 By-Laws of Advanta Leasing Receivables Corp. IX*
4.1 Form of Master Facility Agreement
4.2 Form of Series Supplement to Master Facility Agreement
4.3 Form of Master Contribution and Sale Agreement
4.4 Form of Supplement to Master Contribution and Sale Agreement
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to validity*
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters*
23.1 Consent of Orrick, Herrington & Sutcliffe LLP*
23.2 Consent of Orrick, Herrington & Sutcliffe LLP*
23.3 Consent of Arthur Andersen LLP*
24.1 Powers of Attorney for Advanta Business Services Corp.*
24.2 Powers of Attorney for Advanta Leasing Receivables Corp.
VIII*
24.3 Powers of Attorney for Advanta Leasing Receivables Corp. IX*
25.1 Statement of Eligibility of Trustee (Form T-1)*
</TABLE>
- ---------------
* Previously filed
ITEM 17. Undertakings.
Undertaking in respect of indemnification. Each of the undersigned,
Advanta Business Services Corp., Advanta Leasing Receivables Corp. VIII and
Advanta Leasing Receivables Corp. IX (collectively, the "Registrants"), hereby
undertakes that, insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing provisions, or
otherwise, the Registrants have been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted
II-2
<PAGE> 86
by such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by them is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
The Registrants hereby undertake:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of a Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrants 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.
(2) 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 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.
The Registrants, hereby undertake that, for purposes of determining any
liability under the Securities Act of 1933, each filing of its respective 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 the time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 87
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Advanta Business Services Corp., a Registrant, has duly caused this Amendment
No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Voorhees, State of New
Jersey, on August 12, 1999.
ADVANTA BUSINESS SERVICES CORP.,
as Registrant
By: /s/ JOHN PARIS
------------------------------------
Name: John Paris
Title: Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on August 12,
1999 below by the following persons in the capacities with respect to Advanta
Business Services Corp. indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ DENNIS ALTER* Director
- -----------------------------------------------------
Dennis Alter
/s/ GEORGE DEEHAN* President and Chief Executive Officer, Advanta
- ----------------------------------------------------- Leasing Services (principal executive
George Deehan officer)
/s/ JOHN PARIS* Senior Vice President and Chief Financial
- ----------------------------------------------------- Officer (principal financial officer and
John Paris principal accounting officer)
</TABLE>
* Note: A Power of Attorney appointing John Paris, Cole Silver and Mark D.
Shapiro, or any of them acting singly, to execute the Registration Statement
and any amendments thereto on behalf of the above-named individuals previously
was filed with the Securities and Exchange Commission.
II-4
<PAGE> 88
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Advanta Leasing Receivables Corp. VIII, a Registrant, has duly caused this
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Voorhees, State of New
Jersey, on August 12, 1999.
ADVANTA LEASING RECEIVABLES CORP. VIII
By: /s/ JOHN PARIS
------------------------------------
Name: John Paris
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on August 12,
1999 by the following persons in the capacities with respect to Advanta Leasing
Receivables Corp. VIII indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ GEORGE DEEHAN* Director
- -----------------------------------------------------
George Deehan
/s/ JOHN PARIS* President and Director (principal executive
- ----------------------------------------------------- officer)
John Paris
/s/ MICHAEL COCO* Chief Financial Officer and Director
- ----------------------------------------------------- (principal financial officer and principal
Michael Coco accounting officer)
/s/ COLE SILVER* Secretary and Director
- -----------------------------------------------------
Cole Silver
/s/ JANICE C. GEORGE* Assistant Secretary and Director
- -----------------------------------------------------
Janice C. George
/s/ FRANCIS B. JACOBS, II* Director
- -----------------------------------------------------
Francis B. Jacobs, II
</TABLE>
*Note: A Power of Attorney appointing John Paris, Cole Silver and Mark D.
Shapiro, or any of them acting singly, to execute the Registration Statement and
any amendments thereto on behalf of the above-named individuals previously was
filed with the Securities and Exchange Commission.
II-5
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Advanta Leasing Receivables Corp. IX, a Registrant, certifies that it has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Voorhees,
State of New Jersey, on August 12, 1999.
ADVANTA LEASING RECEIVABLES CORP. IX
By: /s/ JOHN PARIS
------------------------------------
Name: John Paris
Title: President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on August 12,
1999 by the following persons in the capacities with respect to Advanta Leasing
Receivables Corp. IX indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ GEORGE DEEHAN* Director
- -----------------------------------------------------
George Deehan
/s/ JOHN PARIS* President and Director
- ----------------------------------------------------- (principal executive officer)
John Paris
/s/ MICHAEL COCO* Chief Financial Officer and Director
- ----------------------------------------------------- (principal financial officer and principal
Michael Coco accounting officer)
/s/ COLE SILVER* Secretary and Director
- -----------------------------------------------------
Cole Silver
/s/ JANICE C. GEORGE* Assistant Secretary and Director
- -----------------------------------------------------
Janice C. George
/s/ FRANCIS B. JACOBS, II* Director
- -----------------------------------------------------
Francis B. Jacobs, II
</TABLE>
*Note: A Power of Attorney appointing John Paris, Cole Silver and Mark D.
Shapiro, or any of them acting singly, to execute the Registration Statement and
any amendments thereto on behalf of the above-named individuals previously was
filed with the Securities and Exchange Commission.
II-6
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes
3.1.1 Certificate of Incorporation of Advanta Business Services
Corp. (incorporated herein by reference to Exhibit 3.1 to
Registration Statement on Form S-3 No. 333-38575 filed
October 23, 1997)*
3.1.2 Articles of Incorporation of Advanta Leasing Receivables
Corp. VIII*
3.1.3 Articles of Incorporation of Advanta Leasing Receivables
Corp. IX*
3.2.1 By-Laws of Advanta Business Services Corp. (incorporated
herein by reference to Exhibit 3.1 to Registration Statement
on Form S-3 No. 333-38575 filed October 23, 1997)*
3.2.2 By-Laws of Advanta Leasing Receivables Corp. VIII*
3.2.3 By-Laws of Advanta Leasing Receivables Corp. IX*
4.1 Form of Master Facility Agreement
4.2 Form of Series Supplement to Master Facility Agreement
4.3 Form of Master Contribution and Sale Agreement
4.4 Form of Supplement to Master Contribution and Sale Agreement
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to legality*
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters*
23.1 Consent of Orrick, Herrington & Sutcliffe LLP with respect
to legality (included in Exhibit 5.1)*
23.2 Consent of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters (included in Exhibit 8.1)*
23.3 Consent of Arthur Andersen LLP*
24.1 Powers of Attorney for Advanta Business Services Corp.
24.2 Powers of Attorney for Advanta Leasing Receivables Corp.
VIII
24.3 Powers of Attorney for Advanta Leasing Receivables Corp. IX
25.1 Statement of Eligibility of Trustee (Form T-1)*
</TABLE>
*Previously filed
II-7
<PAGE> 1
Exhibit 1.1
$________________________
(Approximate)
Advanta Leasing Receivables Corp. VIII
Advanta Leasing Receivables Corp. IX
(ISSUERS)
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 1999-1
UNDERWRITING AGREEMENT
August ___, 1999
First Union Capital Markets Corp.
301 South College Street, TW-9
Charlotte, North Carolina 28288-0610
Ladies and Gentlemen:
Advanta Leasing Receivables Corp. VIII ("ALRC VIII") and Advanta
Leasing Receivables Corp. IX ("ALRC IX" and, together with ALRC VIII, the
"Series Obligors") propose to issue the Equipment Receivables Asset-Backed
Notes, Series 1999-1, consisting of (i) Class A-1, Class A-2 and Class A-3 (the
"Class A Notes" or the "Offered Notes") and (ii) Class B (the "Class B Notes"
and, together with the Class A Notes, the "Notes"). The Notes are to be issued
pursuant to Advanta Business Receivables Master Facility Agreement, dated as of
August ___, 1999 (the "Master Agreement"), among the Series Obligors, as
issuers, Advanta Business Services Corp. ("ABS"), as servicer (in such capacity,
the "Servicer"), and Bankers Trust Company, as trustee (the "Trustee"), and the
Series 1999-1 Supplement thereto, dated as of August _____, 1999 (the "Series
1999-1 Supplement" and, together with the Master Agreement, the "Indenture"),
also among the Series Obligors, the Servicer, and the Trustee. Any capitalized
terms used herein but not defined shall have the meaning set forth in the
Indenture.
The Offered Notes are being purchased pursuant to this agreement (the
"Underwriting Agreement") by First Union Capital Markets Corp. ("the
Underwriter") in the amount set forth on Schedule A. The offered Notes are more
fully described in the Registration Statement (defined below) that the Series
Obligors have furnished to the Underwriter.
Simultaneously with the execution of the Indenture, the Series Obligors
will enter into a master contribution and sale agreement (the "Master
Contribution and Sale Agreement") with American Business Services Corp. (in such
capacity, the "Seller"), and the Series 1999-1 Contribution Agreement, dated as
of August ____, 1999, among the Seller and the Series Obligors, pursuant to
which the Seller will transfer to the Series Obligors all of its right, title
and interest in and to the Pledged Property as of the Cut-Off Date.
<PAGE> 2
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE SERIES OBLIGORS. The
Series Obligors and ABS, jointly and severally, represent and warrant to the
Underwriter that:
(a) The Series Obligors both have all requisite corporate power,
authority and legal right to own their property and conduct their business as
such properties are presently owned and such business is presently conducted,
and to execute, deliver and perform their obligations under this Underwriting
Agreement, the Notes, and each of the Master Agreement, the Series 1999-1
Supplement, the Master Contribution and Sale Agreement, and the Series 1999-1
Contribution Agreement Supplement (collectively, the "Transaction Agreements").
(b) The execution and delivery of the Underwriting Agreement, the Notes
and each of the Transaction Agreements, the incurrence of the obligations herein
and therein set forth and the consummation of the transactions contemplated
hereunder and thereunder have been duly authorized by the board of directors of
both of the Series Obligors and all other necessary action has been taken.
(c) The Underwriting Agreement has been duly authorized and validly
executed and delivered by both of the Series Obligors.
(d) Each of the Transaction Agreements will be executed and delivered
by both of the Series Obligors on or before the Closing Date, and when executed
and delivered by the other parties thereto, will constitute a valid and binding
agreement of both of the Series Obligors, enforceable against both of the Series
Obligors in accordance with their terms, except to the extent that (i) the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, receivership or other similar laws now or hereafter
in effect affecting the enforcement of creditors' or other obligees' rights in
general, (ii) the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding therefor may be brought and (iii)
certain remedial provisions of the Indenture may be unenforceable in whole or in
part under the Uniform Commercial Code (the "UCC"), but the inclusion of such
provisions does not render the other provisions of the Indenture invalid and,
notwithstanding that such provisions may be unenforceable in whole or in part,
the Trustee, on behalf of the Noteholders, will be able to enforce the remedies
of a secured party under the UCC.
(e) The Notes will be issued pursuant to the terms of the Indenture
and, when executed by the Series Obligors and authenticated by the Trustee in
accordance with the Indenture and, with respect to the Offered Notes only,
delivered pursuant to the Underwriting Agreement, will be validly issued and
outstanding and entitled to the benefits of the Indenture. The Offered Notes
will be in all material respects in the form contemplated by the Indenture and
will conform to the description thereof contained in the Prospectus (as defined
herein) and Registration Statement (as defined herein), each as amended or
supplemented.
2
<PAGE> 3
(f) The Series Obligors are not in violation of any requirement of law
or in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, deed of
trust, lease or other instrument to which it is a party or by which it is bound
or to which any of its property is subject, which violations or defaults
separately or in the aggregate would have a material adverse effect on the
Series Obligors.
(g) Neither the issuance and sale of the Offered Notes, nor the
execution and delivery by the Series Obligors of the Underwriting Agreement, the
Notes or the Transaction Agreements, nor the incurrence by the Series Obligors
of the obligations herein and therein set forth, nor the consummation of the
transactions contemplated hereunder or thereunder, nor the fulfillment of the
terms hereof or thereof does or will (i) violate any requirement of law
presently in effect, applicable to it or its properties or by which it or its
properties are or may be bound or affected, (ii) conflict with, or result in a
breach of, or constitute a default under, any indenture, contract, agreement,
deed, lease, mortgage or instrument to which it is a party or by which it or its
properties are bound, or (iii) result in the creation or imposition of any Lien
(as defined herein) upon any of its property or assets, except for those
encumbrances created under the Indenture.
(h) All consents, approvals, authorizations, orders, filings,
registrations or qualifications of or with any court or any other governmental
agency, board, commission, authority, official or body required in connection
with the execution and delivery by the Series Obligors of the Underwriting
Agreement, the Notes or the Transaction Agreements, or to the consummation of
the transactions contemplated hereunder and thereunder, or to the fulfillment of
the terms hereof and thereof have been or will have been obtained on or before
the Closing Date.
(i) All actions required to be taken by the Series Obligors as a
condition to the offer and sale of the Offered Notes as described herein or the
consummation of any of the transactions described in the Prospectus, the
Registration Statement and the Transaction Agreements have been or, prior to the
Closing Date, will be taken.
(j) The representations and warranties made by the Series Obligors in
the Transaction Agreements and made in any Officer's Certificate of the Series
Obligors delivered pursuant to the Transaction Agreements will be true and
correct at the time made and on and as of the Closing Date as if set forth
herein.
(k) The Series Obligors agree that they have not granted, assigned,
pledged or transferred and shall not grant, assign, pledge or transfer to any
Person a security interest in, or any other right, title or interest in, the
Pledged Property except as provided in the Indenture, and agrees to take all
action required by the Indenture in order to maintain the security interest in
the Pledged Property granted pursuant to the Indenture.
(l) The Series Obligors possess all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
them and as described in the Prospectus, and the Series Obligors have not
received notice of any proceedings relating to the revocation or modification of
any such license, certificate, authority or permit that if decided adversely to
the
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<PAGE> 4
Series Obligors would, singly or in the aggregate, materially and adversely
affect the conduct of their business, operations or financial condition.
(m) There are no actions, proceedings or investigations pending before
or, to the knowledge of the Series Obligors, threatened by any court,
administrative agency or other tribunal to which the Series Obligors are a party
or of which any of their properties are the subject (i) that if determined
adversely to the Series Obligors would have a material adverse effect on the
business or financial condition of the Series Obligors, (ii) asserting the
invalidity of this Underwriting Agreement, the Notes or any Transaction
Agreement, (iii) seeking to prevent the issuance of the Notes or the
consummation by the Series Obligors of any of the transactions contemplated by,
any Transaction Agreement or this Underwriting Agreement, as the case may be, or
(iv) that might materially and adversely affect the performance by the Series
Obligors under, or the validity or enforceability of, any Transaction Agreement,
this Underwriting Agreement or the Notes.
(n) The Series Obligors have prepared and filed with the United States
Securities and Exchange Commission (the "Commission") in accordance with the
provisions of the Securities Act of 1933, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Securities Act"), a
registration statement on Form S-1 (registration number 333-________), including
a form of prospectus, relating to the Offered Notes. The registration statement,
and any post-effective amendment thereto, each in the form heretofore delivered
to you and, excluding exhibits thereto, have been declared effective by the
Commission. As used in this Underwriting Agreement, "Effective Time" means the
date and the time as of which such registration statement, or the most recent
post-effective amendment thereto, if any, was declared effective by the
Commission and "Effective Date" means the date of the Effective Time. The Series
Obligors have furnished to the Underwriter copies of one or more preliminary
prospectuses (each, a "Preliminary Prospectus") relating to the Offered Notes.
Except where the context otherwise requires, the registration statement, as
amended at the Effective Time, including all documents filed as a part thereof,
and including any information contained in a prospectus subsequently filed with
the Commission pursuant to Rule 424(b) under the Act and deemed to be part of
the registration statement as of the Effective Time pursuant to Rule 430A under
the Securities Act, is herein called the "Registration Statement", and the
prospectus, in the form filed by the Series Obligors with the Commission
pursuant to Rule 424(b) under the Securities Act or, if no such filing is
required, the form of final prospectus included in the Registration Statement at
the time it became effective, is hereinafter called the "Prospectus". There are
no contracts or documents of the Series Obligors that are required to be filed
as exhibits to the Registration Statement pursuant to the Securities Act or the
Rules and Regulations that have not been so filed or incorporated by reference
therein on or prior to the Closing Date (defined below). The conditions for use
of Form S-1, as set forth in the General Instructions thereto, have been
satisfied.
[TO THE EXTENT THAT THE UNDERWRITER (A) HAS PROVIDED TO THE SERIES
OBLIGORS COLLATERAL TERM SHEETS (DEFINED BELOW) THAT THE UNDERWRITER HAS
PROVIDED TO A PROSPECTIVE INVESTOR, THE SERIES OBLIGORS HAS FILED SUCH
COLLATERAL TERM SHEETS AS AN EXHIBIT TO A REPORT ON FORM 8-K WITHIN TWO BUSINESS
DAYS OF ITS RECEIPT THEREOF, OR (B) HAVE PROVIDED TO THE
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<PAGE> 5
SERIES OBLIGORS STRUCTURAL TERM SHEETS OR COMPUTATIONAL MATERIALS (EACH AS
DEFINED BELOW) THAT THE UNDERWRITER HAS PROVIDED TO A PROSPECTIVE INVESTOR, THE
SERIES OBLIGORS WILL FILE OR CAUSE TO BE FILED WITH THE COMMISSION A REPORT ON
FORM 8-K CONTAINING SUCH STRUCTURAL TERM SHEETS AND COMPUTATIONAL MATERIAL AS
SOON AS REASONABLY PRACTICABLE AFTER THE DATE OF THIS AGREEMENT, BUT IN ANY
EVENT NOT LATER THAN THE DATE ON WHICH THE PROSPECTUS IS FILED WITH THE
COMMISSION PURSUANT TO RULE 424 OF THE RULES AND REGULATIONS.]
(o) The Registration Statement relating to the Offered Notes has been
filed with the Commission and such Registration Statement has become effective.
No stop order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or, to the
knowledge of the Series Obligors or ABS, threatened by the Commission.
(p) The Registration Statement conforms, and any amendments or
supplements thereto and the Prospectus will conform, in all material respects to
the requirements of the Securities Act and the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"), and does not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto, as of the applicable filing date as to the Prospectus and any amendment
or supplement thereto, and as of the Closing Date, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein no misleading; provided,
however, that this representation and warranty shall not apply to (i) that part
of the Registration Statement that shall constitute the Statement of Eligibility
and Qualification (Form T-1) of the Trustee under the Trust Indenture Act or
(ii) any Underwriter Information (as defined in Section 8(d) hereof) contained
therein. The Indenture conforms in all respects to the requirements of the Trust
Indenture Act and the rules and regulations of the Commission thereunder.
(q) [The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Securities Act or
the Securities Exchange Act of 1934 (the "Exchange Act"), as applicable, and the
rules and regulations of the Commission thereunder, and none of such documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and any further documents so filed and incorporated by reference
in the Prospectus, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and the
rules and regulations of the Commission thereunder, and will not contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.]
(r) Since the respective dates as of which information is given in the
Prospectus, there has not been any material adverse change in the general
affairs, management, financial
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<PAGE> 6
condition, or results of operations of the Series Obligor, otherwise than as set
forth or contemplated in the Prospectus as supplemented or amended as of the
Closing Date.
(s) ABS has been duly incorporated and is validly existing as
corporation in good standing under the law of its jurisdictions of
incorporation, is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which its ownership or lease of
property or the conduct of its businesses requires such qualification, and has
all power and authority necessary to own or hold properties and to conduct the
businesses in which engaged, except where the failure to so qualify or have such
power or authority could not have, individually or in the aggregate, a material
adverse effect on the condition (financial or otherwise), results of operations,
business or prospects of ABS taken as a whole, and to execute, deliver and
perform its obligations under the Underwriting Agreement, the Notes, and the
Transaction Agreements.
(t) All the outstanding shares of capital stock of the Series Obligors
have been duly authorized and validly issued, are fully paid and nonassessable
and, except to the extent set forth in the Registration Statement, are owned by
ABS directly or indirectly through one or more wholly-owned subsidiaries, free
and clear of any claim, lien, encumbrance, security interest, restriction upon
voting or transfer or any other claim of any third party.
(u) (i) the Indenture, when duly executed by the Series Obligors, ABS
and the Trustee and delivered by such parties, will constitute a valid and
binding agreement of the Series Obligors, ABS and the Trustee, enforceable
against them in accordance with its terms; (ii) the Notes, when duly executed,
authenticated, issued and delivered as provided in the Indenture, will be duly
and validly issued and outstanding and will constitute valid and binding
obligations of the Series Obligors; and (iii) Transaction Agreements and the
Offered Notes conform to the descriptions thereof contained in the Prospectus.
(v) The execution, delivery and performance of this Underwriting
Agreement, the Transaction Agreements to which ABS is a party and the issuance
and sale of the Notes, the consummation of the transactions contemplated hereby
and thereby will not conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which ABS is bound or to which any of the property or assets of ABS is subject,
nor will such actions result in any violation of the provisions of the charter
or by-laws of ABS or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over ABS or any of its
properties or assets; and except for the registration of the Notes under the
Securities Act, the qualification of the Indenture under the Trust Indenture
Act, such consents, approvals, authorizations, registrations or qualifications
as may be required under the Exchange Act and applicable state securities laws
in connection with the purchase and distribution of the Offered Notes by the
Underwriter and the filing of any financing statements required to perfect the
Series Trust Estate's interest in the Pledged Property, no consent, approval,
authorization or order of, or filing or registration with, any such court or
governmental agency or body is required for the execution, delivery and
performance of this Underwriting Agreement or the Transaction
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<PAGE> 7
Agreements, the issuance and sale of the Notes and the consummation of the
transactions contemplated hereby and thereby.
(w) There are no contracts or other documents that are required to be
described in the Prospectus or filed as exhibits to the Registration Statement
by the Securities Act and that have not been so described or filed.
(x) There are no legal or governmental proceedings pending to which ABS
is a party or of which any property or assets of ABS is the subject that,
individually or in the aggregate, if determined adversely to ABS, are reasonably
likely to have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of ABS' knowledge, no
such proceedings are threatened or contemplated by governmental authorities or
threatened by others.
(y) ABS (i) is not in violation of its charter or by-laws, (ii) is not
in default in any material respect, and no event has occurred that, with notice
or lapse of time or both, would constitute such a default, in the due
performance or observance of any term, covenant or condition contained in any
material indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which it is a party or by which it is bound or to which any of
its property or assets is subject or (iii) is not in violation in any respect of
any law, ordinance, governmental rule, regulation or court decree to which it or
its property or assets may be subject, except any violation or default that
could not have a material adverse effect on the condition (financial or
otherwise), results of operations, business or prospects of ABS.
(z) Arthur Anderson LLP are independent public accountants with respect
to the Series Obligor as required by the Securities Act.
(aa) The Series Obligors possess all material licenses, certificates,
authorities or permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the business now conducted by
them and as described in the Prospectus, and the Series Obligors have not
received notice of any proceedings relating to the revocation or modification of
any such license, certificate, authority or permit that if decided adversely to
the Series Obligors would, singly or in the aggregate, materially and adversely
affect the conduct of their business, operations or financial condition.
(bb) At the time of execution and delivery of the Indenture, the Series
Obligors will: (i) have good title to the interest in the Pledged Property
conveyed by ABS, free and clear of any lien, mortgage, pledge, charge,
encumbrance, adverse claim or other security interest (collectively, "Liens");
(ii) not have assigned to any person (other than the Trustee) any of its right,
title or interest in the Pledged Property, or the Transaction Agreements; and
(iii) have the power and authority to pledge its interest in the Pledged
Property to the Trustee and to sell the Offered Notes to the Underwriter. Upon
execution and delivery of the Indenture by the Trustee and any related
instruments of transfer or assignment by the Series Obligors (except as
permitted in the Indenture), the Trustee will have acquired beneficial ownership
of all of the Series Obligors right, title and interest in and to the Pledged
Property. Upon delivery to the
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<PAGE> 8
Underwriter of the Offered Notes, the Underwriter will have good title to
the Offered Notes free of any Liens.
(cc) As of the Cut-Off Date, the Pledged Property will meet the
eligibility criteria described in the Prospectus and will conform to the
descriptions thereof contained in the Prospectus.
(dd) Any taxes, fees and other governmental charges in connection with
the execution, delivery and issuance of this Underwriting Agreement, the
Transaction Agreements and the Notes have been paid or will be paid at or prior
to the Closing Date.
(ee) This Underwriting Agreement has been duly authorized, executed and
delivered by each of the Series Obligors and ABS.
(ff) At the Closing Date, each of the representations and warranties of
the Series Obligors and ABS set forth in the Transaction Agreements will be true
and correct in all material respects.
(gg) All ABS-Provided Information was true and correct in all material
respects as of the date it was provided to the Underwriter. The term
"ABS-Provided Information" means the information contained on any computer tape
furnished to the Underwriter or provided by other written means by the Series
Obligors or ABS concerning the assets comprising the Series Trust Estate; and
(hh) Neither the Series Trust Estate nor the Series Obligors are
required to be registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), and the rules and regulations of the Commission thereunder.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF ABS. ABS represents and
warrants to the Underwriter that:
(a) The execution and delivery of the Underwriting Agreement, the Notes
and each of the Transaction Agreements, the incurrence of the obligations herein
and therein set forth and the consummation of the transactions contemplated
hereunder and thereunder have been duly authorized by the board of directors of
ABS and all other necessary action has been taken.
(b) The Underwriting Agreement has been duly authorized and validly
executed and delivered by ABS.
(c) Each of the Transaction Agreements will be executed and delivered
by ABS on or before the Closing Date, and when executed and delivered by the
other parties thereto, will constitute a valid and binding agreement of ABS,
enforceable against ABS in accordance with their terms, except to the extent
that (i) the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, receivership or other similar laws now
or hereafter in effect affecting the enforcement of creditors' or other
obligees' rights in general, (ii)
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<PAGE> 9
the remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought and (iii) certain remedial
provisions of the Indenture may be unenforceable in whole or in part under the
UCC, but the inclusion of such provisions does not render the other provisions
of the Indenture invalid and, notwithstanding that such provisions may be
unenforceable in whole or in part, the Trustee, on behalf of the Noteholders,
will be able to enforce the remedies of a secured party under the UCC.
(d) The representations and warranties made by ABS in the Transaction
Agreements and made in any Officer's Certificate of ABS delivered pursuant to
the Transaction Agreements will be true and correct at the time made and on and
as of the Closing Date as if set forth herein.
(e) ABS possesses all material licenses, certificates, authorities or
permits issued by the appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct the business now conducted by it and as described
in the Prospectus, and has not received notice of any proceedings relating to
the revocation or modification of any such license, certificate, authority or
permit that if decided adversely to ABS would, singly or in the aggregate,
materially and adversely affect the conduct of their business, operations or
financial condition.
SECTION 3. PURCHASE AND SALE. Subject to the terms and conditions and
in reliance upon the covenants, representations and warranties herein set forth,
the Series Obligors agree to sell to the Underwriter, and the Underwriter agrees
to purchase from the Series Obligor, the principal amount of Notes set forth
Schedule A hereto. The purchase price for the Notes shall be as set forth in
Schedule A hereto. [THE NOTES WILL SETTLE WITHOUT ACCRUED INTEREST.]
SECTION 4. DELIVERY AND PAYMENT. The Series Obligors will deliver the
Offered Notes to the Underwriter against payment of the purchase price in
[IMMEDIATELY AVAILABLE FUNDS], drawn to the order of the Series Obligors, at the
office of Orrick, Herrington & Sutcliffe LLP, [666 Fifth Avenue, New York, New
York 10103] at 10:00 a.m., New York City time, on ______ ____ 1999, or at such
other time not later than seven (7) full business days thereafter as the
Underwriter and the Series Obligors determine, such time being herein referred
to as the "Closing Date." Each of the Offered Notes to be so delivered shall be
represented by one or more definitive Offered Notes registered in the name of
Cede & Co., as nominee for The Depository Trust Company. The Series Obligors
shall make such definitive Offered Notes representing the Offered Notes
available for inspection by the Underwriter at the office at which the Offered
Notes are to be delivered no later than five hours before the close of business
in New York City on the business day prior to the Closing Date.
SECTION 5. COVENANTS OF THE SERIES OBLIGOR. The Series Obligors and
ABS, jointly and severally, covenant and agree with the Underwriter as follows:
(a) The Series Obligors will prepare the Prospectus in a form approved
by the Underwriter and will file such Prospectus pursuant to Rule 424(b) under
the Securities Act not later than the Commission's close of business on the
second business day following the
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<PAGE> 10
execution and delivery of this Underwriting Agreement or, if applicable, such
earlier time as may be required by Rule 430A(a)(3) under the Securities Act.
(b) During the period that a prospectus relating to the Offered Notes
is required to be delivered under the Securities Act in connection with sales of
such Notes (such period being hereinafter sometimes referred to as the
"prospectus delivery period"), before filing any amendment or supplement to the
Registration Statement or the Prospectus, the Series Obligors will furnish to
the Underwriter a copy of the proposed amendment or supplement for review and
will not file any such proposed amendment or supplement to which the Underwriter
reasonably objects.
(c) During the prospectus delivery period, the Series Obligors will
advise the Underwriter promptly after they receive notice thereof, (i) when any
amendment to the Registration Statement shall have become effective; (ii) of any
request by the Commission for any amendment or supplement to the Registration
Statement or the Prospectus or for any additional information; (iii) of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation or threatening of any proceeding for
that purpose, (iv) of the issuance by the Commission of any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or the
initiation or threatening of any proceedings for that purpose and (v) of any
notification with respect to any suspension of the qualification of the Offered
Notes for offer and sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and will use its best efforts to prevent the
issuance of any such stop order or suspension and, if any is issued, will
promptly use its best efforts to obtain the withdrawal thereof.
(d) If, at any time during the prospectus delivery period, any event
occurs as a result of which the Prospectus as then supplemented would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, or if it shall be necessary to amend
or supplement the Prospectus to comply with the Securities Act, the Series
Obligors will promptly prepare and file with the Commission an amendment or a
supplement that will correct such statement or omission or effect such
compliance.
(e) The Series Obligors will endeavor to qualify the Offered Notes for
offer and sale under the securities or Blue Sky laws of such jurisdictions as
the Underwriter shall reasonably request and will continue such qualification in
effect so long as reasonably required for distribution of the Notes; provided,
however, that the Underwriter shall not be obligated to qualify to do business
in any jurisdiction in which it is not currently so qualified; and provided,
further, that the Series Obligors shall not be required to file a general
consent to service of process in any jurisdiction.
(f) The Series Obligors will furnish to the Underwriter, without
charge, two copies of the Registration Statement (including exhibits thereto),
one of which will be signed and, during the prospectus delivery period, as many
copies of any Preliminary Prospectus and the Prospectus and any supplement
thereto as the Underwriter may reasonably request.
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<PAGE> 11
(g) For a period from the date of this Underwriting Agreement until the
retirement of the Offered Notes, or until such time as the Underwriter shall
cease to maintain a secondary market in the Offered Notes, whichever first
occurs, the Series Obligors will deliver to the Underwriter (i) the annual
statements of compliance, (ii) the annual independent certified public
accountants' reports furnished to the Trustee, (iii) all documents required to
be distributed to the Noteholders, (iv) all documents filed with the Commission
pursuant to the Exchange Act or any order of the Commission thereunder, in each
case as provided to the Trustee or filed with the Commission, as soon as such
statements and reports are furnished to the Trustee or filed or as soon
thereafter as practicable, (v) any order of the Commission under the Securities
Act or the Exchange Act in regard to the Series Obligors or to ABS, or pursuant
to a "no action" letter obtained from the staff of the commission by the Series
Obligors or ABS and affecting the Series Obligors or ABS and (vi) from time to
time, such other information concerning the Series obligors as the Underwriter
may reasonably request.
(h) To the extent, if any, that the rating provided with respect to the
Offered Notes by the rating agency or agencies that initially rate the Offered
Notes is conditional upon the furnishing of documents or the taking of any other
actions by the Series Obligors, the Series Obligors shall furnish such documents
and take any such other actions.
(i) The Series Obligors will cause the Trustee to make generally
available to Noteholders and to the Underwriter as soon as practicable an
earnings statement covering a period of at least twelve months beginning with
the first fiscal quarter occurring after the Effective Date of the Registration
Statement, which shall satisfy the provisions of Section 11(a) of the Securities
Act and Rule 158 of the Commission promulgated thereunder.
(j) For a period of 90 days from the date hereof, the Series Obligors
will not offer for sale, sell, contract to sell or otherwise dispose of,
directly or indirectly, or file a registration statement for, or announce any
offering of, any securities collateralized by, or evidencing an ownership
interest in, any asset-backed securities of the Series Obligors (other than the
Offered Notes purchased hereunder) without the prior written consent of the
Underwriter.
(k) The Underwriter shall have received evidence satisfactory to it
that the Class A-1 Notes shall be rated "P-1" by Moody's and "F1+/AAA" by Fitch,
the Class A-2 Notes shall be rated no lower than "Aaa" by Moody's and "AAA" by
Fitch, and the Class A-3 Notes shall be rated no lower than "Aaa" by Moody's and
"AAA" by Fitch.
SECTION 6. CONDITIONS TO THE UNDERWRITER'S OBLIGATIONS. The obligations
of the Underwriter hereunder are subject to the accuracy, when made and on the
Closing Date, of the representations and warranties of the Series Obligors and
ABS contained herein, to the accuracy of the statements of the Series Obligors
and ABS made in any certificates pursuant to the provisions hereof, to the
performance by the Series Obligors and ABS of their respective obligations
hereunder and to each of the following additional terms and conditions:
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<PAGE> 12
(a) The Prospectus shall have been filed with the Commission pursuant
to Rule 424 in the manner and within the applicable time period prescribed for
such filing by the rules and regulations of the Commission under the Securities
Act and in accordance with Section 5(a) of this Underwriting Agreement, and the
Underwriter shall have received confirmation of the effectiveness of the
Registration Statement; and, prior to the Closing Date, no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceedings for such purpose shall have been initiated or
threatened by the Commission; and all requests for additional information from
the Commission with respect to the Registration Statement shall have been
complied with to the reasonable satisfaction of the Underwriter.
(b) (i) All corporate proceedings and other legal matters incident to
the authorization, form and validity of this Underwriting Agreement, the
Transaction Agreements, the Offered Notes, the Registration Statement, the
Preliminary Prospectus and the Prospectus, and all other legal matters relating
to such agreements and the transactions contemplated hereby and thereby shall be
reasonably satisfactory in all material respects to counsel for the Underwriter,
and the Series Obligors shall have furnished to such counsel all documents and
information that they may reasonably request to enable them to pass upon such
matters and (ii) prior to or contemporaneously with the purchase of Offered
Notes hereunder, all transactions contemplated to be consummated under such
Transaction Agreements on the Closing Date (including, without limitation, the
issuance and placement of any subordinated, privately-placed securities) shall
have been so consummated to the reasonable satisfaction of the Underwriter.
(c) Orrick, Herrington & Sutcliffe LLP shall have furnished to the
Underwriter their written opinion, as counsel to the Series Obligors and ABS,
addressed to the Underwriter and dated the Closing Date, in form and substance
reasonably satisfactory to the Rating Agencies (all of whom shall be entitled to
rely on such opinion as if an addressee) Underwriter to the effect that:
(i) This Underwriting Agreement and each of the Transaction
Agreements, assuming the due authorization, execution and delivery of
such agreements by the other parties thereto, constitute the legal,
valid and binding agreements of the Series Obligors and ABS, as
applicable, enforceable against the Series Obligors and ABS, as
applicable, in accordance with their terms, subject as to
enforceability to (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (B) the qualification that the remedy of
specific performance and injunctive and other forms of equitable relief
may be subject to equitable defenses and to the discretion, with
respect to such remedies, of the court before which any proceedings
with respect thereto may be brought, and (C) with respect to rights of
indemnity under this Underwriting Agreement and each of the Transaction
Agreements, limitations of public policy under applicable securities
laws.
(ii) The conditions to the use by the Series Obligors of a
registration statement on Form S-1 under the Securities Act, as set
forth in the General Instructions to Form S-1, have been satisfied with
respect to the Registration Statement and the Prospectus.
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<PAGE> 13
(iii) The Registration Statement and any amendments thereto
have become effective under the Securities Act; to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and not withdrawn and no
proceedings for that purpose have been instituted or threatened and not
terminated; and the Registration Statement, the Prospectus and each
amendment or supplement thereto, as of their respective effective or
issue dates (other than the financial and statistical information
contained therein, as to which such counsel need express no opinion),
complied as to form in all material respects with the applicable
requirements of the Securities Act.
(iv) To the best of such counsel's knowledge, there are no
material contracts, indentures or other documents of a character
required to be described or referred to in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration
Statement other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto.
(v) The statements in the Prospectus under the headings
"Prospectus Summary Federal Income Tax Status" and "--ERISA
Considerations" and "Legal Matters," "ERISA Considerations," "Federal
Income Tax Consequences," and "State Tax Consequences" to the extent
that they constitute matters of federal law or legal conclusions with
respect thereto, have been reviewed by such counsel and are correct in
all material respects with respects to those consequences or aspects
that are discussed.
(vi) The Indenture and the Offered Notes conform in all
material respects to the description thereof contained in the
Prospectus.
(vii) Neither the Series Obligors nor the Series Trust Estate
are an "investment company" or under the control of an "investment
company" as such terms are defined in the 1940 Act.
(viii) ABS is validly and in good standing existing as a
Delaware corporation.
(ix) ABS has full corporate power and authority to enter into
and fulfill its obligations under the Underwriting Agreement and the
Transaction Agreements and to transfer the Pledged Property to the
Series Obligors as contemplated in the Contribution Agreement.
(x) The Underwriting Agreement and the Transaction Agreements
have been duly authorized, executed and delivered by ABS.
(xi) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
having jurisdiction over ABS is required for the consummation by ABS of
the transactions contemplated by the
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Transaction Agreements, except such consents, approvals,
authorizations, registrations and qualifications as have been obtained.
(xii) The Series Obligors have been incorporated and are
existing as corporations in good standing under the laws of their
jurisdiction of incorporation, is qualified to do business and is in
good standing, and has all power and authority necessary to own or hold
their own properties and to conduct the business in which they are
engaged and to enter into and perform its obligations under this
Underwriting Agreement, and the Transaction Agreements, and to cause
the Notes to be issued.
(xiii) This Underwriting Agreement, and the Transaction
Agreements have been duly authorized, executed and delivered by the
Series Obligors.
(xiv) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body of
the United States is required for the issuance of the Notes, and the
sale of the Offered Notes to the Underwriter, or the consummation by
the Series Obligors of the other transactions contemplated by this
Underwriting Agreement, the Transaction Agreements, except such
consents, approvals, authorizations, registrations or qualifications as
may be required under the Securities Act or state securities or Blue
Sky laws in connection with the purchase and distribution of the
Offered Notes by the Underwriter or as have been previously obtained.
(xv) The direction by the Series Obligors to the
Trustee to authenticate and deliver the Notes has been duly authorized
by the Series Obligors and, assuming that the Trustee has been duly
authorized to do so, when executed, authenticated and delivered by the
Trustee against payment of the agreed upon consideration therefor in
accordance with the Indenture, the Notes will be validly issued and
outstanding and will be entitled to the benefits of the Indenture.
Such counsel shall also have furnished to the Underwriter a written
statement addressed to the Underwriters and dated the Closing Date, in form and
substance satisfactory to the Underwriter to the effect that no facts have come
to the attention of such counsel which lead them to believe that: (A) the
Registration Statement (other than (1) the documents incorporated therein by
reference [(INCLUDING, WITHOUT LIMITATION, ANY STRUCTURAL TERM SHEETS,
COLLATERAL TERM SHEETS AND COMPUTATIONAL MATERIALS)] and (2) the financial and
statistical information contained therein, as to which no opinion shall be given
at the time it became effective, or at the date of such opinion) contained or
contains an untrue statement of a material fact or omitted or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and (B) the Prospectus (other than (1) the information
incorporated therein by reference [(INCLUDING, WITHOUT, LIMITATION, ANY
STRUCTURAL TERM SHEETS, COLLATERAL TERM SHEETS AND COMPUTATIONAL MATERIALS)] and
(2) the financial, statistical and numerical information contained therein, as
to which no opinion shall be expressed) contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
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<PAGE> 15
(d) ABS shall have furnished to the Underwriter a written opinion of
counsel to ABS (who may be an employee of ABS or of an affiliate of ABS
addressed to the Underwriter and dated the Closing Date, in form and substance
satisfactory to the Underwriter, to the effect that:
(i) The execution, delivery and performance of the Indenture
and the Contribution Agreement by ABS and the consummation of the
transactions contemplated thereby do not and will not conflict with or
result in a material breach or violation of any of the terms or
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel and to which ABS is a party or by
which ABS is bound or to which any of the property or assets of ABS or
any of its subsidiaries is subject, nor will such actions result in any
violation of the provisions of the articles of incorporation or bylaws
of ABS or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over ABS or any of its
properties or assets.
(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which ABS is a
party or of which any of its properties is the subject: (A) that if
determined adversely to ABS would have a material adverse effect on the
business, results of operations or financial condition of ABS; (B)
asserting the invalidity of the Indenture, the Contribution Agreement
or the Notes; (C) seeking to prevent the issuance of the Notes or the
consummation by ABS of any of the transactions contemplated by the
Indenture or the Contribution Agreement; or (D) that might materially
and adversely affect the performance by ABS of its obligations under,
or the validity or enforceability of, the Indenture, the Contribution
Agreement or the Notes.
(e) Counsel for the Series Obligor (who may be an employee of Series
Obligor or an affiliate of Series Obligor) shall have furnished to the
Underwriter its written opinion, addressed to the Underwriter and dated the
Closing Date, in form and substance satisfactory to the Underwriter, to the
effect that:
(i) The execution, delivery and performance of this
Underwriting Agreement, the Indenture and the Contribution Agreement by
the Series Obligors, the consummation of the transactions contemplated
hereby and thereby, and the issuance and delivery of the Notes do not
and will not conflict with or result in a material breach or violation
of any of the terms or provisions of, or constitute a default under,
any material indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Series Obligors are parties
or by which the Series Obligors are bound or to which any of the
property or assets of the Series Obligors or any of their subsidiaries
is subject, nor will such actions result in any violation of the
provisions of the articles of incorporation or bylaws of the Series
Obligors or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over the Series
Obligors or any of their properties or assets.
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(ii) There are no actions, proceedings or investigations
pending before or, to the best knowledge of such counsel, threatened by
any court, administrative agency or other tribunal to which the Series
Obligors are a party or of which any of its properties is the subject:
(A) that if determined adversely to the Series Obligors would have a
material adverse effect on the business, results of operations or
financial condition of the Series Obligors; (B) asserting the
invalidity of the Indenture, the Contribution Agreement or the Notes;
(C) seeking to prevent the issuance of the Notes or the consummation by
the Series Obligors of any of the transactions contemplated by the
Indenture, the Contribution Agreement, or this Underwriting Agreement,
as the case may be; or (D) which might materially and adversely affect
the performance by the Series Obligors of its obligations under, or the
validity or enforceability of, the Indenture, the Contribution
Agreement, this Underwriting Agreement or the Notes.
(f) Orrick, Herrington & Sutcliffe LLP shall have furnished to the
Underwriter their written opinion(s), as counsel to the Series Obligors and ABS,
addressed to the Underwriter and dated the Closing Date, in form and substance
reasonably satisfactory to the Underwriter, with respect to the (i)
characterization of the transfer of the Pledged Property by the Sellers to the
Series Obligors pursuant to the Contribution Agreement as a sale and the
non-consolidation of the Series Obligors and ABS, (ii) the characterization of
the tax treatment of the Notes, (iii) the perfection of the security interests,
as contemplated in the Prospectus and the Transaction Agreements, and (iv)
[other opinions that will be required are currently being discussed].
(g) The Underwriter shall have received from Moore & Van Allen, PLLC,
counsel for the Underwriter, such opinion or opinions, dated the Closing Date,
with respect to such matters as the Underwriters may require, and the Series
Obligors shall have furnished to such counsel such documents as they reasonably
request for enabling them to pass upon such matters.
(h) The Underwriter shall have received the favorable opinion of
counsel to the Trustee, dated the Closing Date, addressed to the Underwriter and
in form and scope satisfactory to counsel to the Underwriter, which may include,
among other items, opinions to the effect that:
(i) The Trustee is _______ and has been duly incorporated and
is validly existing as a banking corporation in good standing under the
laws of the State of New York.
(ii) The Trustee has duly authorized, executed and delivered
each of the Transaction Agreements to which the Trustee is a party,
which constitute the legal, valid and binding agreement of the Trustee,
enforceable against the Trustee in accordance with their terms,
subject, as to enforcement of remedies, to (A) applicable bankruptcy,
insolvency, reorganization, and other similar laws affecting the rights
of creditors generally, and (B) to general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(iii) The execution and delivery by the Trustee of Indenture
and the performance by the Trustee of its obligations thereunder do not
conflict with or result in a
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<PAGE> 17
violation of the certificate of incorporation or bylaws of the Trustee
or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Trustee or any
of its properties or assets.
(iv) The Trustee has full power and authority to execute and
deliver the Indenture and to perform its obligations thereunder.
(v) There are no actions, proceedings or investigations
pending or threatened against or affecting the Trustee before or by any
court, arbitrator, administrative agency or other governmental
authority that, if decided adversely to the Trustee, would materially
and adversely affect the ability of the Trustee to carry out the
transactions contemplated in the Indenture.
(vi) No consent, approval or authorization of, or
registration, declaration or filing with, any court or governmental
agency or body of the United States of America or any state thereof is
required for the execution, delivery or performance by the Trustee of
the Indenture.
(i) Each of the Series Obligors and ABS shall have furnished to the
Underwriter a certificate, dated the Closing Date, of any of its Chairman of the
Board, President or Vice President and its chief financial officer stating that
(i) such officers have carefully examined the Registration Statement and the
Prospectus, (ii) the Prospectus does not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading (provided that each of
the Series Obligors and ABS may exclude the Underwriter's Information (as
defined in Section 8(d) herein) from such representation), (iii) the
representations and warranties of ABS or the Series Obligors, as the case may
be, contained in this Underwriting Agreement and the Transaction Agreements are
true and correct in all material respects on and as of the Closing Date, (iv)
ABS or the Series Obligors, as the case may be, have complied in all material
respects with all agreements and satisfied in all material respects all
conditions on its part to be performed or satisfied hereunder and under such
agreements at or prior to the Closing Date, (v) no stop order suspending the
effectiveness of the Registration Statement has been issued and is outstanding
and no proceedings for that purpose have been instituted and not terminated or,
to the best of his or her knowledge, are contemplated by the Commission, and
(vi) since the date of its most recent financial statements, there has been no
material adverse change in the financial position or results of operations of
ABS or the Series Obligors, as applicable, or any development including a
prospective change, in or affecting the condition (financial or otherwise),
results of operations or business of ABS or the Series Obligors except as set
forth in or contemplated by the Registration Statement and the Prospectus.
(j) The Trustee shall have furnished to the Underwriter a certificate
of the Trustee, signed by one or more duly authorized officers of the Trustee,
dated the Closing Date, as to the due authorization, execution and delivery of
the Indenture by the Trustee and the acceptance by the Trustee of the Series
Trust Estate and such other matters as the Underwriter shall reasonably request.
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(k) Subsequent to the date of this Underwriting Agreement, there shall
not have occurred (i) any change, or any development involving a prospective
change, in or affecting particularly the business or properties of the Series
Obligors or ABS that materially impairs the investment quality of the Notes;
(ii) trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the over-the-counter market shall have been suspended
or limited, or minimum prices shall have been established on either of such
exchanges or such market by the Commission, by such exchange or by any other
regulatory body or governmental authority having jurisdiction, or trading in
securities of the Series Obligors or ABS on any exchange or in the
over-the-counter market shall have been suspended; (iii) a general moratorium on
commercial banking activities shall have been declared by Federal or New York
State authorities; or (iv) an outbreak or escalation of hostilities or a
declaration by the United States of a national emergency or war or such a
material adverse change in general economic, political or financial conditions
(or the effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of the Underwriter,
impracticable or inadvisable to proceed with the public offering or the delivery
of the Notes on the terms and in the manner contemplated in the Prospectus.
(l) With respect to the letter of Arthur Andersen LLP, delivered to the
Underwriter concurrently with the execution of this Agreement (the "initial
letter"), the Series Obligors shall have furnished to the Underwriter a letter
(the "bring-down letter") of such accountants, addressed to the Underwriter and
dated the Closing Date (i) confirming that they are independent public
accountants within the meaning of the Securities Act and are in compliance with
the applicable requirements relating to the qualifications of accountants under
Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of
the bring-down letter (or with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of such bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters covered by
its initial letter and (iii) confirming in all material respects the conclusions
and findings set forth in its initial letter.
(m) The Underwriter shall receive evidence satisfactory to it that, on
or before the Closing Date, UCC-l financing statements have been or are being
filed in each office in each jurisdiction in which such financing statements are
required to perfect the first priority security interests created (i) by the
Contribution Agreement reflecting the interest of the Series Obligors in the
Pledged Property and the proceeds thereof and (ii) by the Indenture, reflecting
the interest of the Trustee in the Pledged Property and the proceeds thereof as
described in the Prospectus.
(n) Subsequent to the execution and delivery of this Underwriting
Agreement, (i) no downgrade, withdrawal or qualification shall have occurred
with respect to the rating accorded the Offered Notes or any of the Series
Obligors' other debt securities by any "nationally recognized statistical rating
organization", as that term is defined by the Commission for purposes of Rule
436(g)(2) of the Securities Act and (ii) no such organization shall have
publicly announced that it has under surveillance or review (other than an
announcement with positive
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implications of a possible upgrading), its rating of the Offered Notes or any of
ABS' or the Series Obligors' other debt securities.
If any condition specified in this Section 7 shall not have been
fulfilled when and as required to be fulfilled, this Underwriting Agreement may
be terminated by the Underwriter by notice to the Series Obligors at any time at
or prior to the Closing Date, and such termination shall be without liability of
any party to any other party except as provided in Section 10.
All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Underwriter.
SECTION 7. PAYMENT AND EXPENSES. If (i) the Series Obligors shall fail
to tender the Notes for delivery to the Underwriter for any reason permitted
under this Underwriting Agreement or (ii) the Underwriter shall decline to
purchase the Notes for any reason permitted under this Underwriting Agreement,
the Series Obligors shall reimburse the Underwriter for the fees and expenses of
its counsel and for such other out-of-pocket expenses as shall have been
reasonably incurred by them in connection with this Underwriting Agreement and
the proposed purchase of the Offered Notes, and upon demand the Series Obligors
shall pay the full amount thereof to the Underwriter.
SECTION 8. INDEMNIFICATION. (a) ABS and the Series Obligors shall,
jointly and severally, indemnify and hold harmless the Underwriter and each
person, if any, who controls the Underwriter within the meaning of Section 15 of
the Securities Act against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Underwriter may become
subject, under the Securities Act or otherwise, insofar as such loss, claim,
damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof or
supplement thereto, or in any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse the Underwriter
for any legal or other expenses reasonably incurred by the Underwriter in
connection with investigating or preparing to defend or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action as such expenses are incurred; provided however that
neither ABS nor the Series Obligors shall be liable in any such case to the
extent that any such loss, claim, damage, liability or action arises out of or
is based upon an untrue statement or alleged untrue statement in or omission or
alleged omission from any Registration Statement as originally filed or in any
amendment thereof or supplement thereto, or in any Preliminary Prospectus or the
Prospectus or in any amendment thereof or supplement thereto in reliance upon
and in conformity with the Underwriter's Information (as defined in Section 8(d)
herein).
(b) The Underwriter shall indemnify and hold harmless the Series
Obligors, against any loss, claim, damage or liability, joint or several, or any
action in respect thereof, to which the Series Obligors may become subject,
under the Securities Act or otherwise, insofar as such loss,
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<PAGE> 20
claim, damage, liability or action arises out of or is based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement as originally filed or in any amendment thereof or
supplement thereto, or in any Preliminary Prospectus or the Prospectus or in any
amendment thereof or supplement thereto or (ii) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with the Underwriter's
Information (as defined in Section 8(d) herein), and shall reimburse the Series
Obligors for any legal or other expenses reasonably incurred by the Series
Obligors directly in connection with investigating or preparing to defend or
defending against or appearing as third party witness in connection with any
such loss, claim, damage or liability (or any action in respect thereof) as such
expenses are incurred.
(c) Promptly after receipt by any indemnified party under this Section
8 of notice of any claim or the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8, except to the extent it has
been materially prejudiced by such failure; and, provided further, that the
failure to notify any indemnifying party shall not relieve it from any liability
which it may have to any indemnified party otherwise than under this Section 8.
If any such claim or action shall be brought against an indemnified
party, and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
wishes, jointly with any other similarly notified indemnifying party, to assume
the defense thereof with counsel reasonably satisfactory to the indemnified
party. After notice from the indemnifying party to the indemnified party of its
election to assume the defense of such claim or action, the indemnifying party
shall not be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in connection
with the defense thereof other than reasonable costs of investigation.
Any indemnified party shall have the right to employ separate counsel
in any such action and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such indemnified party
unless: (i) the employment thereof has been specifically authorized by the
indemnifying party in writing; (ii) such indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party and in the reasonable judgment of such counsel it is
advisable for such indemnified party to employ separate counsel; or (iii) the
indemnifying party has failed to assume the defense of such action and employ
counsel reasonably satisfactory to the indemnified party, in which case, if such
indemnified party notifies the indemnifying party in writing that it elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such action
on behalf of such indemnified party, it being understood, however, the
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indemnifying party shall not, in connection with any one such action or separate
but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to local counsel) at any time for all such indemnified parties, which
firm shall be designated in writing by the Underwriter, if the indemnified
parties under this Section 8 consist of the Underwriter or any of its directors
and controlling persons, or by the Series Obligors, if the indemnified parties
under this Section 8 consist of the Series Obligors or any of the Series
Obligors' directors, officers or controlling persons.
Each indemnified party, as a condition of the indemnity agreements
contained in Section 8(a) and (b), shall use its best efforts to cooperate
with the indemnifying party in the defense of any such action or claim. No
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment for the plaintiff in any such action, the indemnifying party agrees
to indemnify and hold harmless any indemnified party from and against any loss
or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected, without its
written consent if (A) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (B) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement.
(d) The Underwriter confirms that the information (such information,
the "Underwriter's Information") set forth in the [FIRST AND THIRD PARAGRAPHS
UNDER THE CAPTION "PLAN OF DISTRIBUTION"] in the Prospectus is correct and
constitutes the only information furnished in writing to the Series Obligors and
ABS by or on behalf of the Underwriter specifically for inclusion in the
Registration Statement and the Prospectus.
(e) The obligations of ABS, the Series Obligors and the Underwriter in
this Section 8 are in addition to any other liability which ABS, the Series
Obligors or the Underwriter, as the case may be, may otherwise have.
SECTION 9. CONTRIBUTION. If the indemnification provided for in this
Section 9 is unavailable or insufficient to hold harmless an indemnified party
under Section 8(a) or (b), then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such loss, claim, damage or liability, or
any action in respect thereof, (i) in such proportion as shall be appropriate to
reflect the relative benefits received by ABS and the Series Obligors on the one
hand and the Underwriter on the other from the offering of the Offered Notes or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
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ABS and the Series Obligors on the one hand and the Underwriter on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or any action in respect thereof, as well as any other
relevant equitable considerations. The relative benefits received by ABS and the
Series Obligors on the one hand and the Underwriter on the other with respect to
such offering shall be deemed to be in the same proportion as the total net
proceeds from the offering of the Offered Notes purchased hereunder (before
deducting expenses) received by the Series Obligors bear to the total
underwriting discounts and commissions received by the Underwriter with respect
to the Offered Notes purchased hereunder, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by ABS or the Series Obligors on the one hand or
the Underwriter on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. ABS, the Series Obligors and the Underwriter agree
that it would not be just and equitable if contributions pursuant to this
Section 9 were to be determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to herein. The amount paid or payable by an indemnified party as a
result of the loss, claim, damage or liability referred to above in this Section
9 shall be deemed to include for purposes of this Section 9, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such claim or any action. Notwithstanding the
provisions of this Section 9, the Underwriter shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Offered Notes underwritten by it and distributed to the public were offered
to the public less the amount of any damages that the Underwriter has otherwise
paid or become liable to pay by reason of any untrue or alleged untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
SECTION 10. TERMINATION OF AGREEMENT. The Underwriter may terminate
this Underwriting Agreement immediately upon notice to the Series Obligor, at
any time at or prior to the Closing Date if any of the events or conditions
described in Section 5(k) of this Underwriting Agreement shall occur and be
continuing. In the event of any such termination, the covenants set forth in
Section 5, the provisions of Section 7, the indemnity agreement set forth in
Section 8 and the provisions of Sections 9 and 11 shall remain in effect.
SECTION 11. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Underwriting
Agreement shall inure to the benefit of and be binding upon the Underwriter, the
Series Obligors, ABS, and their respective successors. Nothing expressed or
mentioned in this Underwriting Agreement is intended or shall be construed to
give any person, firm or corporation, other than the Underwriter, the Series
Obligors and ABS and their respective successors and the controlling persons and
officers and directors, and their heirs and legal assigns, any legal or
equitable right, remedy or claim under or in respect of this Underwriting
Agreement or any provision contained herein.
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SECTION 12. EXPENSES. The Series Obligors and ABS, jointly and
severally, agrees with the Underwriter to pay (i) the costs incident to the
authorization, issuance, sale, preparation and delivery of the Offered Notes and
any taxes payable in that connection; (ii) the costs incident to the
preparation, printing and filing under the Securities Act of the Registration
Statement and any amendments and exhibits thereto; (iii) the costs of
distributing the Registration Statement as originally filed and each amendment
thereto and any post-effective amendments thereof (including, in each case,
exhibits), any Preliminary Prospectus and the Prospectus, all as provided in
this Agreement; (iv) the costs of reproducing and distributing this Agreement
and any other underwriting and selling group documents by mail, telex or other
means of communications; (v) the fees and expenses of qualifying the Notes under
the securities laws of the several jurisdictions as provided in Section 5(e) and
of preparing, printing and distributing Blue Sky Memoranda and Legal Investment
Surveys (including the related reasonable and documented fees and expenses of
counsel to the Underwriter); (vi) any fees charged by rating agencies for rating
the Offered Notes; (vii) all fees and expenses of the Trustee and its counsel;
(viii) all fees and expenses of the Underwriter and its counsel; (ix) any
transfer taxes payable in connection with its sale of the Offered Notes pursuant
to this Underwriting Agreement; and (x) all other costs and expenses incident to
the performance of the obligations of the Series Obligors and ABS under this
Agreement.
SECTION 13. SURVIVAL. The respective indemnities, rights of
contribution, representations, warranties and agreements of the Series Obligors,
ABS and the Underwriter contained in this Underwriting Agreement or made by or
on their behalf, respectively, pursuant to this Underwriting Agreement, shall
survive the delivery of and payment for the Offered Notes and shall remain in
full force and effect, regardless of any termination or cancellation of this
Underwriting Agreement or any investigation made by or on behalf of any of them
or any person controlling any of them.
SECTION 14. NOTICES. All communication hereunder shall be in writing
and, (i) if sent to the Underwriter will be mailed, delivered or telecopied and
confirmed to them at First Union Capital Markets Corp., Asset Securitization
Division, 301 South College Street, TW-9, Charlotte, North Carolina, 28288-0610,
Telecopy Number: (704) 374-3254; if sent to the Series Obligors, will be mailed,
delivered or telecopied and confirmed to them at the address of the Series
Obligors set forth in the Registration Statement, Attention: ;
and (iii) if sent to ABS, will be mailed, delivered or telecopied and confirmed
to them at the address of ABS set forth in the Registration Statement,
Attention: . Any such statements, requests, notices or agreements shall take
effect at the time of receipt thereof. The Series Obligors and ABS shall be
entitled to act and rely upon any request, consent, notice or agreement given or
made on behalf of the Underwriter.
SECTION 15. GOVERNING LAW. THIS UNDERWRITING AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
23
<PAGE> 24
SECTION 16. COUNTERPARTS. This Underwriting Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original,
but all such counterparts shall, together constitute one and the same
instrument.
SECTION 17. HEADINGS. The headings herein are inserted for convenience
of reference only and are not intended to be part of, or to affect the meaning
or interpretation of, this Underwriting Agreement.
SECTION 18. EFFECTIVENESS. This Underwriting Agreement shall become
effective upon execution and delivery.
24
<PAGE> 25
If you are in agreement with the foregoing, please sign the counterpart
hereof and return it to the Series Obligors, whereupon this letter and your
acceptance shall become a binding agreement among the Series Obligors, ABS and
the Underwriter.
Very truly yours,
ADVANTA LEASING RECEIVABLES
CORP. VIII
By:
Name:
Title:
ADVANTA LEASING RECEIVABLES
CORP. IX
By:
Name:
Title:
ADVANTA BUSINESS SERVICES CORP.
By:
Name:
Title:
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date hereof.
FIRST UNION CAPITAL MARKETS CORP.,
as Underwriter
By:
Name:
Title:
25
<PAGE> 26
SCHEDULE A
<TABLE>
<S> <C>
Date of Underwriting Agreement: August ____, 1999
Underwriter: First Union Capital Markets Corp.
Underwriter Address: First Union Capital Markets Corp.
One First Union Center, TW-9
301 South College Street
Charlotte, NC 28288-0610
Title, Purchase Price and Description of Notes:
Class A-1 Notes
Title: $___________ _____% Class A-1 Equipment Receivables Asset
Backed Notes, Series 1999-1
Price to public: $___________
Purchase price: $___________
Underwriting discount: $___________
Distribution Dates: The 15th calendar day of each month (if such day is not a
Business Day, then next succeeding Business Day), commencing
September 15, 1999
Maturity: __________ 15, _____ Distribution Date
Redemption provisions: Notes remaining outstanding may be redeemed in whole, but
not in part, on any Distribution Date at the
Series Obligor's option if the Aggregate
Contract Principal Balance at such time is less than 10% of
the initial Aggregate Contract Principal Balance
as of the [Cutoff] Date.
Class A-2 Notes
Title: $_____________ _____% Class A-2 Equipment Receivables
Asset Backed Notes, Series 1999-1
Price to public: $____________
Purchase price: $____________
Underwriting discount: $____________
Distribution Dates: The 15th calendar day of each month (if such day is not a
Business Day, then next succeeding Business Day), commencing
September 15, 1999
Maturity: _______ 15, _____ Distribution Date
Redemption provisions: Notes remaining outstanding may be
redeemed in whole, but not in part,
on any Distribution Date at
the Series Obligor's option
if the Aggregate
</TABLE>
26
<PAGE> 27
<TABLE>
<S> <C>
Contract Principal Balance at such
time is less than 10% of
the initial Aggregate
Contract Principal Balance
as of the [Cutoff] Date.
Class A-3 Notes
Title: $____________ _____% Class A-3 Equipment Receivables Asset
Backed Notes, Series 1999-1
Price to public: $___________
Purchase price: $___________
Underwriting discount: $___________
Distribution Dates: The 15th calendar day of each month (if such day is not a
Business Day, then next succeeding Business Day), commencing
September 15, 1999
Maturity: ________ 15, _____ Distribution Date
Redemption provisions: Notes remaining
outstanding may be redeemed
in whole, but not in part,
on any Distribution Date at
the Series Obligor's option
if the Aggregate Contract
Principal Balance at such
time is less than 10% of
the initial Aggregate
Contract Principal Balance
as of the [Cutoff] Date.
Closing Date, Time and Location:
Date: ________________________
Time: ________________________
Location: ________________________
</TABLE>
27
<PAGE> 1
Exhibit 4.1
OH&S DRAFT
8/10/99
================================================================================
MASTER FACILITY AGREEMENT
by and among
ADVANTA BUSINESS SERVICES CORP.,
as the Servicer,
ADVANTA LEASING RECEIVABLES CORP. VIII,
and
ADVANTA LEASING RECEIVABLES CORP. IX,
as the Obligors
And
Bankers Trust Company,
as Trustee
Dated as of August __, 1999
================================================================================
<PAGE> 2
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS
<S> <C>
Section 1.01. Definitions................................................................................. 2
Section 1.02. Acts of Holders............................................................................. 18
Section 1.03. Notice to Holders: Waiver................................................................... 19
Section 1.04. Alternate Payment and Notice Provisions..................................................... 20
Section 1.05. Conflict with Trust Indenture Act........................................................... 20
Section 1.06. Effect of Headings and Table of Contents.................................................... 20
Section 1.07. Successors and Assigns...................................................................... 20
Section 1.08. Benefits of Master Agreement................................................................ 20
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations, Warranties and Covenants of Obligors....................................... 21
Section 2.02. Representations, Warranties and Covenants of Servicer....................................... 23
ARTICLE III
PLEDGING THE TRUST ESTATE
Section 3.01. Series Trust Estates........................................................................ 25
Section 3.02. Preservation of Series Collateral........................................................... 26
Section 3.03. Waiver of Stay or Extension Laws; Marshalling of Assets..................................... 26
Section 3.04. Noninterference, Etc........................................................................ 26
Section 3.05. Obligor Changes............................................................................. 26
Section 3.06. Limited Recourse to Obligors................................................................ 27
Section 3.07. Authorization of Actions to be Taken by the Trustee......................................... 27
Section 3.08. Termination of Security Interests........................................................... 27
Section 3.09. Filing; Maintenance of Contract Files....................................................... 28
Section 3.10. Costs and Expenses.......................................................................... 28
ARTICLE IV
NOTE FORMS
Section 4.01. Forms Generally............................................................................. 28
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
Section 4.02. Form of Trustee's Certificate of Authentication............................................. 29
Section 4.03. Securities Legend........................................................................... 29
ARTICLE V
THE NOTES
Section 5.01. Amount Limited; Issuable in Series.......................................................... 30
Section 5.02. Execution, Authentication, Delivery and Dating.............................................. 30
Section 5.03. Temporary Notes............................................................................. 31
Section 5.04. Registration, Registration of Transfer and Exchange, Transfer Restrictions.................. 31
Section 5.05. Mutilated, Destroyed, Lost and Stolen Notes................................................. 33
Section 5.06. Final Distribution.......................................................................... 33
Section 5.07. Persons Deemed Owners....................................................................... 35
Section 5.08. Cancellation................................................................................ 35
Section 5.09. Book-Entry Notes............................................................................ 35
Section 5.10. Notices to Clearing Agency.................................................................. 36
Section 5.11. Definitive Notes............................................................................ 36
ARTICLE VI
ADMINISTRATION AND SERVICING OF THE CONTRACTS AND EQUIPMENT
Section 6.01. Appointment of Servicer: Responsibilities of Servicer....................................... 37
Section 6.02. Standard of Care............................................................................ 39
Section 6.03. Credit and Collection Policy................................................................ 39
Section 6.04. Maintenance of Interest in the Trust Estate................................................. 39
Section 6.05. Servicing Compensation; Payment of Certain Expenses by Servicer............................. 39
Section 6.06. Servicer's Certificate...................................................................... 40
Section 6.07. Annual Statement as to Compliance........................................................... 40
Section 6.08. Financial Statements and Independent Accountant's Servicing Certificate Review.............. 40
Section 6.09. Access to Certain Documentation and Information Regarding the Pledged Property.............. 41
Section 6.10. Other Necessary Data........................................................................ 42
Section 6.11. Release of Contracts........................................................................ 42
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 6.12. Removal Related to Upgrades or Trade-Ins.................................................... 43
Section 6.13. Notification to Noteholders of Defaults and Events of Default............................... 43
Section 6.14. Security Deposits........................................................................... 43
Section 6.15. Removal of Nonconforming Pledged Property................................................... 44
ARTICLE VII
ACCOUNTS
Section 7.01. Establishment of Series Accounts........................................................... 44
Section 7.02. Investment of Funds in the Series Accounts.................................................. 45
Section 8.01. Liability of Servicer; Indemnities.......................................................... 45
Section 8.02. Merger, Consolidation, or Assumption of the Obligations of Servicer......................... 46
Section 8.03. Limitation on Liability of Servicer and Others.............................................. 46
Section 8.04. Servicer Not to Resign...................................................................... 47
Section 8.05. Reserved.................................................................................... 47
Section 8.06. Indemnities of the Obligors................................................................. 47
Section 8.07. Limitation on Liability of the Obligors..................................................... 48
ARTICLE IX
SERVICER TERMINATION
Section 9.01. Events of Servicer Termination.............................................................. 48
Section 9.02. Trustee to Act; Appointment of Successor.................................................... 49
Section 9.03. Notification to Noteholders................................................................. 51
Section 9.04. Waiver of Past Events of Servicer Termination............................................... 51
Section 9.05. Effects of Termination of Servicer.......................................................... 51
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.01. Events of Default........................................................................... 52
Section 10.02. Collection of Indebtedness and Suits for Enforcement by Trustee: Authority
of Controlling Party........................................................................ 52
Section 10.03. Limitation on Suits......................................................................... 54
Section 10.04. Unconditional Right of Holders to Receive Principal and Interest............................ 55
</TABLE>
iii
<PAGE> 5
<TABLE>
<S> <C>
Section 10.05. Restoration of Rights and Remedies.......................................................... 55
Section 10.06. Rights and Remedies Cumulative.............................................................. 55
Section 10.07. Delay or Omission Not Waiver................................................................ 55
Section 10.08. Control by Holders.......................................................................... 56
Section 10.09. Waiver of Past Defaults..................................................................... 56
Section 10.10. Undertaking for Costs....................................................................... 56
Section 10.11. Action on Notes............................................................................. 57
ARTICLE XI
THE TRUSTEE
Section 11.01. Certain Duties and Responsibilities......................................................... 57
Section 11.02. Notice of Defaults.......................................................................... 59
Section 11.03. Certain Rights of Trustee................................................................... 59
Section 11.04. Not Responsible for Recitals or Issuance of Notes........................................... 60
Section 11.05. May Hold Notes.............................................................................. 60
Section 11.06. Compensation and Indemnity.................................................................. 60
Section 11.07. Disqualification; Conflicting Interests..................................................... 61
Section 11.08. Corporate Trustee Required; Eligibility..................................................... 61
Section 11.09. Resignation and Removal, Appointment of Successor........................................... 61
Section 11.10. Acceptance of Appointment by Successor...................................................... 62
Section 11.11. Merger, Conversion, Consolidation or Succession to Business................................. 63
Section 11.12. Preferential Collection of Claims Against Obligors.......................................... 63
Section 11.13. Appointment of Authenticating Agent......................................................... 63
Section 11.14. Paying Agent................................................................................ 65
Section 11.15. Appointment of Co-Trustee or Separate Trustee............................................... 66
ARTICLE XII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND OBLIGORS
Section 12.01. Obligors to Furnish Trustee Names and Addresses of Holders.................................. 67
Section 12.02. Preservation of Information; Communications to Holders...................................... 68
Section 12.03. Reports by Trustee.......................................................................... 68
Section 12.04. Reports by Obligors......................................................................... 68
</TABLE>
iv
<PAGE> 6
<TABLE>
ARTICLE XIII
MASTER AGREEMENT SUPPLEMENTS
<S> <C>
Section 13.01. Supplements Affecting All Series, or the Master Agreement Generally......................... 69
Section 13.02. Supplements Authorizing a Series of Notes................................................... 72
Section 13.03. Execution of Master Agreement Supplements................................................... 73
Section 13.04. Effect of Master Agreement Supplements...................................................... 73
Section 13.05. Reference in Notes to Master Agreement Supplements.......................................... 73
ARTICLE XIV
COVENANTS
Section 14.01. Payment of Principal and Interest........................................................... 73
Section 14.02. Maintenance of Non-U.S. Office or Agency.................................................... 73
Section 14.03. Consolidation, Merger, Sale of Assets....................................................... 74
Section 14.04. Negative Covenants.......................................................................... 75
Section 14.05. Performance of Obligations: Servicing of each Series Trust Estate........................... 76
Section 14.06. Money for Note Payments to Be Held in Trust................................................. 77
Section 14.07. Corporate Existence; Separate Corporate Existence........................................... 78
Section 14.08. Payment of Taxes and Other Claims........................................................... 80
Section 14.09. Amendment of Organizational Documents....................................................... 80
Section 14.10. Rule 144A Information....................................................................... 81
Section 14.11. Further Instruments and Acts................................................................ 81
Section 14.12. Compliance with Laws........................................................................ 81
Section 14.13. Income Tax Characterization................................................................. 81
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.01. Counterparts................................................................................ 81
Section 15.02. Governing Law............................................................................... 81
Section 15.03. Notices..................................................................................... 82
Section 15.04. Severability of Provisions.................................................................. 82
Section 15.05. Binding Effect.............................................................................. 82
</TABLE>
v
<PAGE> 7
<TABLE>
<S> <C>
Section 15.06. Exhibits.................................................................................... 82
Section 15.07. Calculations................................................................................ 82
Section 15.08. Further Assurances.......................................................................... 83
Section 15.09. Nonpetition Covenant........................................................................ 83
</TABLE>
vi
<PAGE> 8
This MASTER FACILITY AGREEMENT, dated as of August __, 1999, by and
among Advanta Business Services Corp., a Delaware corporation, as Servicer,
Advanta Leasing Receivables Corp. VIII, a Nevada corporation, and Advanta
Leasing Receivables Corp. IX, a Nevada corporation, as the Obligors and Bankers
Trust Company, a New York banking corporation, as Trustee.
WITNESSETH:
In consideration of the mutual agreements herein contained and of other
good and valuable consideration the receipt and adequacy of which are hereby
acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Master Agreement, the
following words and phrases shall have the following meanings:
(i) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(ii) all other terms used herein which are defined in the
Trust Indenture Act (as hereinafter defined), either directly or by
reference therein, have the meanings assigned to them therein;
(iii) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted at the date of
such computation; and
(iv) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Master Agreement as a whole and
not to any particular Article, Section or other subdivision, "or" is
not exclusive and "including" means including without limitations
Act. When used with respect to any Holder, has the meaning specified in
Section 1.02.
Actuarial Method. The method of allocating a Scheduled Payment with
respect to any Contract between principal and interest, pursuant to which the
portion of such payment that is allocated to interest is the product of (a) the
Payment Interval Adjusted Applicable Discount Rate with respect to such Contract
multiplied by (b) the applicable Contract Principal Balance (before giving
effect to such principal payment).
2
<PAGE> 9
Advance Payment. With respect to any Contract, any Scheduled Payment or
a portion thereof made by or on behalf of a User which does not become due until
a subsequent Collection Period. Advance Payments shall be applied as
"Collections" with respect to the Collection Period(s) to which such Advance
Payment relates.
Adverse Claim. A lien, security interest, charge or encumbrance, or
other right or claim in, of or on any Person's assets or properties in favor of
any other Person.
Affiliate. With respect to any Person, any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such specified Person. For the purposes of this definition, "control," when
used with respect to any specified Person, means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
Applicable Discount Rate. With respect to any Contract has the meaning
set forth in the related Series Supplement.
Authenticating Agent. Any Person authorized by the Trustee to act on
behalf of the Trustee to authenticate Notes.
Authorized Officer. With respect to any Obligor, any president, senior
vice president, vice president, treasurer or the chief financial officer of such
Obligor.
Bearer Notes. Has the meaning specified in Section 4.01.
Book-Entry Notes. Notes registered in the name of a Clearing Agency, or
its nominee as described in Section 5.09.
Booked Residual Value. With respect to any Contract on any date of
determination, the residual value of the Equipment subject to such Contract, as
reflected in the Servicer's servicing system.
Broker. The Person (including any broker, vendor or other Person, but
excluding the Originator) that originally leases an item of Equipment to a User
pursuant to a Contract between the Originator and the User of such Equipment, or
any Person from whom the Originator purchased a Contract in respect of which the
Originator is not a party.
Broker Agreement. Any agreement between the Originator and a Broker
pursuant to which the Originator has acquired Contracts.
Business Day. Any day other than a Saturday, a Sunday or a day on which
banking institutions in New York, New York, Philadelphia, Pennsylvania,
Voorhees, New Jersey or Reno, Nevada are authorized or obligated by law,
executive order or governmental decree to be closed.
3
<PAGE> 10
Calculation Date. The last day of a Collection Period. Amounts
calculated from Calculation Date balances shall be calculated from such balances
as of the close of business on the Calculation Date.
Cedelbank. Cedelbank, societe anonyme, incorporated under the laws of
Luxembourg.
Class. With respect to any Series, any one of the classes of such Notes
as designated in the Series Supplement for such Series.
Clearing Agency. The Depository Trust Company, or any other
organization registered as a "clearing agency" pursuant to Section 17A of the
Securities Exchange Act of 1934, as amended.
Clearing Agency Participant. A broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book entry transfers and pledges of securities deposited with the Clearing
Agency.
Closing Date. August __, 1999.
Code. The Internal Revenue Code of 1986, as amended from time to time,
and Treasury Regulations promulgated thereunder.
Collection Period. With respect to any Payment Date, the immediately
preceding calendar month; provided that if, with respect to any Series, the
Cut-Off Date applicable thereto is a day other than the first day of a calendar
month, then the initial Collection Period with respect to such Series shall be
the period commencing on such Cut-Off Date and ending, at the end of the
calendar month in which such Cut-Off Date occurs.
Collections. With respect to a Series and any Collection Period, all
collections and proceeds of the Contracts and the Related Security, including
without limitation, Scheduled Payments, Prepayments, Offset Amounts, Residual
Receipts and any other Recoveries, Prepayment Amounts, Investment Earnings, and
Insurance Proceeds received by the Servicer, the Trustee or the Obligors, in
each case, during such Collection Period; provided that "Collections" shall not
include (i) Advance Payments until (and then only to the extent that) such
amounts are required to be deposited in the applicable Series Account for
distribution to the related Noteholders in accordance with Section 7.02, and
(ii) Servicing Charges; and provided further that any amounts paid under any
Series Support in reduction of the principal amount of any Note, any interest
thereon or any other amount in connection therewith shall not constitute
Collections.
Commission. The Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934, as amended,
or, if at anytime after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties at such time.
4
<PAGE> 11
Computer Tape. Collectively, the computer tapes generated by the
Originator which provide information relating to the Contracts and which were,
or will be, used by the Originator in selecting the Contracts sold to the
Obligors pursuant to the Master Sale Agreement and Sale Agreement Supplement.
Contract Balance Remaining. With respect to any Contract, as of any
date, the aggregate (undiscounted) amount of all unpaid Scheduled Payments due
under such Contract.
Contract. Each of the agreements conveyed by the Originator to an
Obligor pursuant to the Master Sale Agreement and subsequently pledged by such
Obligor to the Trustee pursuant to this Master Agreement or a Series Supplement,
pursuant to which the applicable originator thereof leases specified Equipment
to, or makes loans to or otherwise finances equipment for a User and, with
respect to a Series, which are identified on the List of Contracts delivered to
the Servicer on or about the date of issuance of such Series.
Contract File. With respect to each Contract, the following documents:
(i) The executed original counterparts of the Contract;
(ii) A copy of any related Broker Agreement;
(iii) Copies of all documents (which may be in microfiche form
or on the Servicer's computerized information system), if any, that the
Originator or the Servicer keeps on file for the benefit of the
Originator in accordance with the Originator's or Servicer's customary
procedures; and
(iv) Copies (together with all amendments, assignments, and
continuations thereof and including evidence of filings with the
appropriate office) of all UCC financing statements filed with respect
to the Contracts, identifying the User as debtor and the Originator as
secured party, if applicable.
Contract Principal. With respect to any Contract for any Collection
Period, an amount equal to the excess of (i) the Scheduled Payment due on such
Contract during such Collection Period over (ii) the product of (x) the Contract
Principal Balance as of the opening of business on the first day of such
Collection Period and (y) one-twelfth of the Applicable Discount Rate or Payment
Interval Adjusted Discount Rate, as applicable.
Contract Principal Balance. As to each Series, the amount described in
the Series Supplement.
Corporate Trust Office. The principal office of the Trustee at which at
any particular time its corporate trust business shall be administered, which
office at the date of this Master Agreement is specified in Section 15.03
hereof.
5
<PAGE> 12
Coupons. Any interest or other coupons attached to a Note.
Credit and Collection Policy. The credit and collection policies and
practices of the Servicer as the same may be modified from time to time in
accordance with the terms of this Master Agreement.
Cut-Off Date. With respect to any Series, the "Cut-Off Date" as set
forth in the related Series Supplement.
Default. Any occurrence that is, or with notice or the lapse of time or
both would become, an Event of Default.
Defaulted Contract: Any Contract (a)(i) that is a Delinquent Contract
with respect to which a User is contractually delinquent for 121 days or more
(without regard to any Servicer Advances or the application of any Security
Deposit) or (ii) as to which the Servicer has determined in accordance with its
customary servicing practices that eventual payment of the remaining Scheduled
Payments thereunder is unlikely or (iii) that has been rejected by or on behalf
of the User in a bankruptcy proceeding.
Definitive Notes. Has the meaning specified in Section 5.09 hereof.
Delinquent Contract. A Contract as to which any payment, or part
thereof, remains unpaid more than 60 days after the original due date for such
payment.
Depositaries. Means the Person(s), if any, specified in the applicable
Supplement, in its capacity as depositary for the respective accounts of any
Clearing Agency or any Foreign Clearing Agencies.
Depository Agreement. Means, if applicable with respect to any Series,
the agreement among the Obligors, the Trustee and a Clearing Agency, or as
otherwise provided in the related Series Supplement.
Determination Date. With respect to any Series as set forth in the
related Series Supplement.
Dollars or $. The lawful money of the United States.
Eligible Investments. Any instrument, security or security entitlement
evidencing any of the following:
(a) marketable obligations of the United States of America which are
backed by the full faith and credit of the United States of America;
(b) marketable obligations directly and fully guaranteed by the full
faith and credit of the United States of America;
6
<PAGE> 13
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations denominated in Dollars and issued by any bank with
capital, surplus and undivided profits aggregating at least $100,000,000, the
short-term securities of which are rated "A-1" by S&P, "P-1" by Moody's and
"F-1" by Fitch;
(d) repurchase obligations for underlying securities of the types
described in clauses (a), (b) and (c) above entered into with any bank of the
type described in clause (c) above;
(e) commercial paper rated at least "A-1+" by S&P and "P-1" by Moody's;
(f) freely redeemable shares in money market funds (including funds for
which the Trustee, any Noteholder or any affiliates of either of the foregoing
may act as sponsor or advisor or for which any of the foregoing Persons may
receive fee income) which invest solely in obligations, bankers' acceptances,
certificates of deposit, repurchase agreements and commercial paper of the types
described in clauses (a) through (e), bankers' acceptances, certificates of
deposit, repurchase agreements or commercial paper set forth in such clauses,
which money market funds are rated at least "AAm" or "AAm-g" by S&P and "Aa1" by
Moody's; and
(g) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time such investment, or the
commitment to make such investment, is entered into, the short-term debt rating
of such depository institution or trust company shall be at least "A-1" by S&P
and "P-1" by Moody's.
Notwithstanding anything set forth in clauses (a) through (g) above,
any Eligible Investment must mature no later than the Business Day prior to the
next Payment Date.
Eligible Contract. With respect to any Series, as defined in the
related Series Supplement.
Equipment. The equipment leased to or sold to a User or otherwise
financed pursuant to any Contract and any security interest in such equipment
and the Residual Interest therein or derived therefrom.
Euroclear Operator. Means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
Event of Default. Has the meaning specified in Section 10.01.
Event of Servicer Termination. An Event described in Section 9.01
hereof.
Exchange Act. Means the Securities Exchange Act of 1934, as amended.
7
<PAGE> 14
Final Date. With respect to any Series, the date on which all amounts
due to the related Series Secured Parties have been indefeasibly paid in full.
Fitch. Means Fitch IBCA, Inc.
Foreign Clearing Agency. Means Cedelbank and the Euroclear Operator.
Governmental Authority. The United States of America, any State or
other political subdivision of either of the foregoing and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
Holder or Noteholder. Means (i), with respect to a Book-Entry Note, the
Person who is the owner of such Book-Entry Note, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly or as an indirect participant, in accordance with
the rules of such Clearing Agency) and (ii) otherwise, the Registered Holder.
Increased Servicer Fee. Has the meaning ascribed to such term in
Section 9.02 hereof.
Increased Servicer Fee Differential. Has the meaning ascribed to such
term in Section 9.02 hereof.
Indebtedness. Means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (excluding trade obligations and accrued
expenses incurred in the ordinary course of business); (b) obligations of such
Person as lessee under leases which should have been or should be, in accordance
with generally accepted accounting principles, recorded as capital leases; (c)
current liabilities of such Person in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; (d) obligations issued for or liabilities
incurred on the account of such Person; (e) obligations or liabilities of such
Person arising under acceptance facilities, including obligations of such Person
under any guarantees, endorsements (other than for collection or deposit in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person or otherwise
to assure a creditor against loss; (f) obligations of such Person secured by any
lien on property or assets of such Person, whether or not the obligations have
been assumed by such Person; or (g) obligations of such Person under any
interest rate or currency exchange agreement.
Indemnified Amounts. Has the meaning set forth in subsection 8.01(b)
hereof.
Indemnified Party. Has the meaning set forth in subsection 8.01(b)
hereof.
Independent Accountant. A firm of nationally recognized independent
certified public accountants with respect to Advanta Leasing Holding Corp.,
Advanta Corp., Advanta Business
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Services Corp., the Originator, the Servicer (if other than Advanta Business
Services Corp.), and/or the Obligors, as applicable, within the meaning of the
Securities Act.
Initial Unpaid Amounts. Means with respect to a Contract, the excess of
the aggregate amount of all Scheduled Payments due prior to the related Cut-Off
Date over the aggregate of all Scheduled Payments made prior to the related
Cut-Off Date with respect to such Contract or Loan.
Insolvency Event. Means, with respect to a specified Person, either of
the following events:
(i) the commencement of a petition seeking entry of a decree
or order for relief by a court having, jurisdiction in the premises in
respect of such Person or any substantial part of such Person's assets
in an involuntary case under any applicable Federal or state
bankruptcy, insolvency, receivership, conservatorship or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of such
Person or for such Person or any substantial part of such Person's
assets, or ordering the winding-up or liquidation of such Person's
affairs, and such petition shall remain unstayed and in effect for a
period of 60 consecutive days or immediately upon entry of such decree
or order; or
(ii) the commencement by such Person of a voluntary case under
any applicable Federal or state bankruptcy, insolvency, receivership,
conservatorship or other similar law now or hereafter in effect, or the
consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to
the appointment or taking possession by a receiver, conservator,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of such Person for such Person or any substantial part of such
Person's assets, or the making, by such Person of any general
assignment for the benefit of creditors, or the failure by such Person
generally to pay its debts as such debts become due, or the admission
in writing by such Person of its inability generally to pay its debts
as they become due or the taking of action by such Person in
furtherance of any of the foregoing.
Insurance Policy. With respect to an item of Equipment and the related
Contract, any insurance policy or similar agreement required to be maintained by
the User pursuant to such Contract that covers physical damage to the Equipment
(including, policies procured by the Originator or the Servicer on behalf of the
User) or covering any liabilities arising from the Equipment or the use thereof
by the User.
Insurance Proceeds. With respect to an item of Equipment and the
related Contract, any amount received during a Collection Period pursuant to an
Insurance Policy issued with respect to such Equipment and the related Contract.
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Investment Earnings. Any income or earnings received from the
investment of funds from time to time on deposit in or credited to any Series
Account in accordance with a Series Supplement, net of any investment expenses
and losses on any such investments.
Lien. Any security interest, mortgage, deed of trust, lien (statutory
or otherwise), charge, pledge, equity, hypothecation, assignment, deposit
arrangement, encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitations any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing, of any financing statement under the UCC (other than
any such financing statement filed for informational purposes only) or
comparable law of any jurisdiction to evidence any of the foregoing.
List of Contracts. With respect to each Series the electronic list of
Contracts delivered to the Trustee and designating the Contracts pledged to
secure such Series. Each List of Contracts shall include for each Contract
listed thereon (a) a number identifying such Contract, (b) the Contract
Principal Balance, (c) the User, (d) the State in which the User's billing
address is located, (e) the scheduled maturity date of the Contract, (f) the
Scheduled Payment amount for such Contract, (g) the stated amount of the Booked
Residual Value if any, on such Contract, and (h) the Applicable Discount Rate or
the Payment Interval Adjusted Applicable Discount Rate, if applicable.
Majority Control Parties. Means those Series Controlling Parties for
the outstanding Series, the Outstanding Amounts of which represent, in the
aggregate, 66-2/3% or more of the aggregate Outstanding Amounts for all
outstanding Series.
Master Agreement. Means this Master Facility Agreement, as the same may
be amended, restated or otherwise modified from time to time.
Master Agreement Supplement. Means any Series Supplement or any other
document which amends or supplements this Master Agreement.
Master Sale Agreement. Means the Master Sale and Contribution
Agreement, dated as of August __, 1999, by and among the Originator and the
Obligors.
Maturity Date. When used with respect to any Note, means the date on
which the principal of such Note or an installment of principal becomes due and
payable as therein or herein provided, whether on the final scheduled Payment
Date or by declaration of acceleration, prepayment or otherwise,
Moody's. Moody's Investors Service, Inc.
Municipal Contract. Means a Contract under which the User is a state or
local Government or government agency.
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Non-Monthly Payment Contracts. Means any Contract that does not require
the User to make regularly scheduled monthly payments.
Note Register and Note Registrar. Have the respective meanings
specified in Section 5.04.
Noteholders' Agent. Means any Person designated by one or more
Noteholders to be their "agent."
Notes. Any Note authenticated and delivered under this Master Agreement
and a Series Supplement.
Obligors. Means Advanta Leasing Receivables Corp. VIII and Advanta
Leasing Receivables Corp. IX, the initial Obligors under this Master Agreement.
Obligors' Order or Obligors' Request. With respect to an Obligor, a
written request or order signed by such Obligor and, with respect to more than
one Obligor, a written request or order signed by all such Obligors and, in each
case, delivered to the Trustee.
Officer's Certificate. Means a certificate signed by an Authorized
Officer.
Offset Amount. The meaning ascribed to such term in Section 6.14
hereof.
Opinion of Counsel. A written opinion of counsel, who may be counsel
employed by the Servicer or the Originator or other counsel, in each case
acceptable to the named recipient thereof.
Organizational Documents. With respect to any Obligor, such Obligor's
articles of incorporation and bylaws.
Original Issue Date. Means, for any Series the date of original issue
of such Series of Notes, as specified in the related Series Supplement.
Original Servicer Fee Rate. With respect to any Series, the rate at
which the Servicer Fee is calculated, as specified on the related Series
Supplement.
Originator. Means Advanta Business Services Corp., its successors and
assigns.
Outstanding. When used with respect to Notes, means, as of the date of
determination, all Notes theretofore authenticated and delivered under this
Master Agreement except,
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation; and
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(ii) Notes for whose payment or prepayment money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent for the Holders of such Notes; and
(iii) Lost, destroyed or stolen notes in lieu of which other
Notes have been authenticated and delivered pursuant to Section 5.05
hereof, other than any such Notes in respect of which there shall have
been presented to the Trustee proof satisfactory to it that such Notes
are held by a bona fide purchaser in whose hands such Notes are valid
obligations of the Obligors;
provided, however, that any Notes which have been paid with proceeds of the
related Series Support shall continue to remain Outstanding for purposes of this
Master Agreement until the related Series Support Provider has been paid as
subrogee hereunder or reimbursed as evidenced by a written notice from the
related Series Support Provider delivered to the Trustee and the Servicer, and
the related Series Support Provider shall be deemed to be the Holder thereof to
the extent of any payments thereon made by the related Series Support Provider;
provided, further, however, that in determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or under
any related document, Notes owned by the Obligors, the Servicer, the Originator
or any Affiliate of any of the foregoing 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 Notes that the Trustee knows to be so owned
shall be so disregarded. Notes so owned that have been pledged in good faith 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 Notes and that the
pledgee is not an Obligor, any other obligor upon the Notes, the Originator or
any Affiliate of any Obligor or of any of the foregoing Persons.
Outstanding Amount. Means, with respect to any Series, the aggregate
principal amount of all Notes of such Series which are Outstanding at the date
of determination after giving effect to all distributions of principal on such
date of determination.
Overdue Payment. Any Scheduled Payment or portion thereof due on a
Contract and not received during the Collection Period in which such Scheduled
Payment was due.
Paying Agent. Means the Paying Agent appointed pursuant to Section
11.14 hereof.
Payment Date. With respect to a Series, the date specified therefor in
the related Series Supplement.
Payment Interval. Means, with respect to any Contract, notwithstanding
the number of actual periodic payments in any calendar year (without regard to
the actual duration of such Contract or whether such payments are actually made
with respect to such Contract), 12.
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Payment Interval Adjusted Applicable Discount Rate. With respect to any
Contract, shall mean the Applicable Discount Rate of such Contract multiplied by
a fraction, the numerator of which is one and the denominator of which is the
Payment Interval of such Contract.
Person. Any legal person, including any individual, corporation,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, Governmental Authority or any other entity.
Pledge. Means with respect to each Series, the pledge by the Obligors
of the related Series Trust Estate to the Trustee for the benefit of the
Noteholders of such Series in accordance with Section 3.01 hereof.
Pledged Property. With respect to any Series Trust Estate, the property
described as Pledged Property in the related Series Supplement.
Predecessor Note. Means every previous Note evidencing all or a portion
of the same debt as that evidenced by a particular Note; and, for the purposes
of this definition, any Note authenticated and delivered under Section 5.05 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be
deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Note.
Prepayment. With respect to a Collection Period and a Contract (except
a Defaulted Contract), the payment by the related User of all remaining
Scheduled Payments to become due on such Contract if the User has designated
such payment as a prepayment and the Servicer has consented to such prepayment.
Advance Payments and Residual Receipts are not "Prepayments."
Prepayment Amount. With respect to any Contract: (a) the Contract
Principal Balance of such Contract (without any deduction for any security
deposit paid by the related User, unless such security deposit has been applied
to the Contract Principal Balance pursuant to the Credit and Collection Policy
and deposited into the appropriate Series Account) as of the date of
reconveyance of such Contract to the related Obligor by the Trustee, plus (b)
the product of (i) the Contract Principal Balance as of the date of reconveyance
and (ii) one-twelfth of the Applicable Discount Rate, plus (c) the Booked
Residual Value for such Contract.
Principal Terms. With respect to any Series, (i) the name or
designation; (ii) the initial Outstanding Amount, the maximum Outstanding Amount
(or method for calculating such amounts); (iii) the interest rate (or method for
the determination thereof); (iv) the Payment Date or dates and the date or dates
from which interest shall accrue; (v) the method for allocating Collections to
Noteholders of such Series; (vi) the designation of any Series Accounts and the
terms governing the operation of any such Series Accounts; (vii) the method of
calculating the Servicer Fee with respect thereto; (viii) the terms of any form
of Series Support with respect thereto; (ix) the Series Termination Date; (x)
the number of Classes of Notes of such Series and, if such Series consists of
more than one Class, the rights and priorities of each such Class; (xi) whether
the Notes of such Series may be issued as Bearer Certificates and any
limitations
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imposed thereon; (xii) the priority of such Series with respect to any other
Series; and (xiii) any other terms of such Series.
Proceeding. Any suit in equity, action at law or other judicial or
administrative proceeding.
Property. Any right or interest in or to property of any kind
whatsoever, whether real, personal or mixed and whether tangible or intangible.
Rating Agencies. Moody's and Fitch and any other nationally recognized
rating agencies specified with respect to a Series in the Series Supplement for
such Series.
Record Date. With respect to any Series, as specified in the related
Series Supplement.
Records. Means, with respect to any Contract, all Contracts and other
documents, books, records and other information (including, without limitation,
Contract Files, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Contract, any Related
Security therefor and the related User.
Recoveries. Means all amounts received in respect of a Defaulted
Contract, including, without limitation, amounts received in connection with the
sale or other disposition of the related Equipment, amounts received in
connection with the sale or other disposition of the Defaulted Contracts,
Insurance Proceeds with respect to the related Equipment, or any other payments
made by or on behalf of the related User, including any amounts paid from a
Security Deposit and applied by the Servicer as a Recovery and net of costs of
collection in connection with such Defaulted Contract.
Refinance Proceeds. Means with respect to any Collection Period, (i)
any proceeds of the issuance of a new series of notes or the issuance of
certificates in connection with a securitization of leases and loans, remitted
by the Obligors to the Trustee on the Payment Date following such Collection
Period for deposit into the related Series Accounts and application in
accordance with the related Series Supplement, and (ii) any amounts remitted to
the Trustee by the Obligors in accordance with the related Series Supplement for
deposit into the related Series Accounts and application in accordance with the
related Series Supplement.
Registered Holder. Means the Person in whose name a Note is registered
on the Note Register on the applicable Record Date.
Registered Notes. Has the meaning set forth in Section 4.01 hereof.
Related Security. With respect to any Contract, all of Obligors'
rights, title and interest in, to and under:
(i) the related Master Sale Agreement and the Sale Agreement
Supplement (including without limitation, all rights, remedies, powers
and privileges thereunder),
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pursuant to which, among, other things, the Contract, the Contract
Files and the related Equipment have been purchased by or contributed
to the Obligors;
(ii) all of the Obligors' interest in the related Equipment,
together with such Obligor's interest in all property from time to time
securing or purporting to secure obligations under such Contract,
whether pursuant to such Contract or otherwise, together with all UCC
Financing Statements covering any such property filed by or otherwise
filed in favor of the Originator and/or such Obligors (and, in the case
of those UCC financial statements filed in favor of the Obligors,
assigned to the Trustee);
(iii) all guarantees, letters of credit, indemnities,
warranties, insurance policies (including, without limitation, the
Insurance Policies), and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing a payment of such Contract whether pursuant to
the Contract or otherwise (including, without limitation, the Security
Deposits);
(iv) all of such Obligors' interest in the Equipment, Residual
Receipts and Recoveries related to such Contract;
(v) the Contract Files and other instruments, documents,
agreements, Computer Tapes, books, and records relating to such
Contract; and
(vi) all proceeds of the foregoing.
Release Events. Has the meaning ascribed in Section 6.11 hereof.
Requirements of Law. Any law, treaty, rule or regulation, or final
determination of an arbitrator or Governmental Authority, and, when used with
respect to any Person, the certificate of incorporation and bylaws or other
organizational or governing, documents of such Person.
Residual Interest. The ownership interest in Residual Receipts and/or
the contractual right to receive and retain Residual Receipts as owner thereof.
Residual Receipts. With respect to any Collection Period, all residual
proceeds received by the Servicer, proceeds of the sale of the Equipment
received by the Servicer in the event the related User does not purchase the
Equipment at the end of the related Contract, any amounts collected by the
Servicer as judgments against a User or others related to the failure of such
User to pay any required amounts under the related Contract or to return the
Equipment, including any amounts relating to a Security Deposit applied by the
Servicer as Residual Receipts, plus any other amounts which are received by the
Servicer and applied against the Booked Residual Value of such Contract in
accordance with the Servicer's servicing standards during such Collection
Period, in each case as reduced by any reasonably incurred out-of-pocket
expenses incurred by the Servicer in enforcing such Contract or in liquidating
such Equipment.
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Responsible Officer. When used with respect to the Trustee, any officer
assigned to the corporate trust division (or any successor thereto), including
any Vice President, Second Vice President, Assistant Vice President, Senior
Trust Officer, Trust Officer, Authorized Signer, Assistant Trust Officer, any
Assistant Secretary, any trust officer or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and having a direct responsibility for the administration of
this Master Agreement, and also, with respect to a particular matter, any other
officer to whom such matter is referred because of such officer's knowledge of
and familiarity with the particular subject.
Rule 144A Information. Has the meaning specified in Section 14.10
hereof.
S&P. Standard & Poor's Ratings Services.
Sale Agreement Supplement. Each supplement to the Master Sale
Agreement.
Scheduled Payments. With respect to any Contract, the stated periodic
rental Payments (exclusive of any amounts in respect of insurance or taxes) set
forth in such Contract due from the User in the related Collection Period.
Securities Act. The Securities Act of 1933, as amended. and the
applicable published rules and regulations thereunder.
Security Deposit. Any amount paid to the Originator by a User as a
security deposit on a Contract, which has not previously been refunded to such
User.
Series. With respect to any Notes, means those Notes issued pursuant to
the same Series Supplement.
Series Accounts. Any deposit, trust, escrow, collateral, reserve or
similar account established and maintained by the Trustee for the benefit of the
Noteholders of any Series or Class as specified in any Series Supplement.
Series Closing Date. With respect to any Series, the date designated in
the related Series Supplement as the closing date for such Series.
Series Controlling Party. With respect to any Series on any date the
Person or Persons designated as such in the related Series Supplement.
Series Related Documents. With respect to a Series, has the meaning,
specified therefor in the related Supplement.
Series Secured Obligations. Has the meaning specified therefor in the
related Series Supplement.
Series Secured Parties. Has the meaning specified in the related Series
Supplement.
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Series Supplement. With respect to any Series, a Supplement to this
Master Agreement setting fourth the terms of such Series and, executed and
delivered in connection with the original issuance of the Notes of such Series,
and all amendments thereof and supplements thereto.
Series Support. The rights and benefits provided to the Trustee or the
Noteholders of any Series or Class pursuant to any letter of credit, surety
bond, cash collateral account, spread account, guaranteed rate agreement,
maturity liquidity facility, interest rate swap agreement, tax protection
agreement or other similar arrangement. The overcollateralization provided to
any Series and the subordination of any Series or Class to another Series or
Class shall be deemed to be Series Support. Notwithstanding that such Series
Support may be held by or in favor of the Trustee for the benefit of any Series
or Class, only those Series or Classes to which such Series Support relates
shall have any rights with respect thereto and all payments thereunder received
by the Trustee shall be distributed exclusively as prescribed in the Series
Supplement relating to such Series or Class.
Series Support Provider. The Person providing any Series Support, other
than the Noteholders of any Series or Class which is subordinated to another
Class or Series.
Series Termination Date. Has the meaning ascribed in the Series
Supplement.
Series Trust Estate. With respect to a Series, has the meaning,
specified therefor in the related Series Supplement.
Series Trustee-Secured Obligations. With respect to a Series, has the
meaning specified in the related Series Supplement.
Servicer. The Person performing the duties of the Servicer hereunder,
which shall initially be Advanta Business Services Corp. and may subsequently be
(i) any Person which is an Affiliate of Advanta Business Services Corp. and has
fulfilled the conditions set forth in Section 8.02 of this Master Agreement or
(ii) a successor Servicer appointed as provided in Section 9.02 of this Master
Agreement.
Servicer Advance. With respect to any Series, the amount, if any, which
the Servicer at its option advances with respect to Overdue Payments, in
accordance with the related Series Supplement.
Servicer Fee. With respect to each Series, the fee payable to the
Servicer on each Payment Date in consideration of the Servicer's performance of
its duties pursuant to Article VI with respect to the Series Trust Estate
related to such Series, payable as provided in the related Series Supplement.
Servicer Termination Notice. The notice described in subsection 9.01(a)
hereof.
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Servicer's Certificate. With respect to each Series Trust Estate, a
written informational statement, substantially in the form prescribed by the
related Series Supplement, to be provided by the Servicer in accordance with the
related Series Supplement and signed by a Servicing Officer and furnished by the
Servicer to the Trustee and to any other Persons which are entitled to such
certificate under the terms of any Series Supplement.
Servicing Charges. The sum of (i) any late payment charges paid by a
User on a delinquent Contract after application of any such charges to amounts
then due under such Contract and (ii) any other incidental charges or fees
received from a User, including (x) insurance premium payments and (y)
prepayment charges paid by a User in connection with a Prepayment.
Servicing Officer. Those officers of the Servicer involved in, or
responsible for, the administration and servicing of the Contracts, as
identified on the list of Servicing Officers furnished by the Servicer to the
Trustee and the Noteholders from time to time.
State. Any state of the United States of America, its territories and
possessions and the District of Columbia.
Supplement. Each supplement to amendment of this Master Agreement.
Support Default. With respect to a Series, those events specified in
the related Series Supplement.
Trust Indenture Act. The Trust Indenture Act of 1939, as amended from
time to time.
Trustee. Means the Person named as the "Trustee" in the first paragraph
of this instrument unless a successor Trustee shall have become such pursuant to
the applicable provisions of this Master Agreement, and thereafter "Trustee"
shall mean or include the Person who is then the Trustee hereunder.
UCC. The Uniform Commercial Code as in effect in the applicable
jurisdiction.
Unregistered Note. Any Note which is not registered under the
Securities Act.
User. Any obligor, under any Contract, whose obligations thereunder
constitute the principal source of payments under such Contract, including any
guarantor of such obligations.
Section 1.02. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Master Agreement to be given or taken by
the Holders of the related Notes may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person or
by agents duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or
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instruments are, delivered to the Trustee and, where it is hereby expressly
required, to the Obligors. Such instrument or instruments (and the action
embodied therein and evidenced thereby) are herein sometimes referred to as the
"Act" of the Holders signing such instrument or instruments. Proof of execution
of any such instrument or of a writing, appointing any such agent shall be
sufficient for any purpose of this Master Agreement and (subject to Section
11.01) conclusive in favor of the Trustee and the Obligors, if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner that the Trustee deems
sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Note shall bind every future Holder of
the same Note and the Holder of every Note issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Obligors in
reliance thereon, whether or not notation of such action is made upon such Note.
Section 1.03. Notice to Holders: Waiver. Where this Master Agreement or
any Series Supplement provides for notice to the Holders of the related Notes of
any event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first class postage prepaid, to
each Holder affected by such event, at such Holder's address as it appears in
the Note Register, or if in writing and by facsimile, to the facsimile number
provided by a Holder to the Person giving such notice, not later than the latest
date, and not earlier than the earliest date, prescribed for the giving of such
notice. In any case where notice to Holders is given by mail, neither the
failure to mail such notice, nor any defect in any notice so mailed, to any
particular Holder shall affect the sufficiency of such notice with respect to
other Holders, and any notice that is mailed in the manner herein provided shall
conclusively be presumed to have been duly given. Where this Master Agreement or
any Series Supplement provides for notice in any manner, such notice may be
waived in writing, by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
Where any Series Supplement provides for notice to the Rating Agencies,
failure to give such notice shall not affect any rights or obligations created
hereunder and shall not under any circumstance constitute a Default or Event of
Default.
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Section 1.04. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Master Agreement, any Series Supplement or any of the
Notes to the contrary, the Obligors may enter into any agreement with any Holder
of a Note providing for a method of payment, or notice by the Trustee or any
Paying Agent to such Holder, that is different from the methods provided for in
this Master Agreement or the related Series Supplement for such payments or
notices. The Obligors will furnish to the Trustee a copy of each such agreement
and the Trustee will cause payments to be made and notices to be given in
accordance with such agreements provided the Trustee is not adversely affected
thereby.
Section 1.05. Conflict with Trust Indenture Act. If this Master
Agreement is qualified under the Trust Indenture Act and any provision hereof
limits, qualifies or conflicts with another provision hereof that is deemed to
be included in and to govern this Master Agreement by any of the provisions of
the Trust Indenture Act, such provision deemed to be included herein shall
control.
Section 1.06. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 1.07. Successors and Assigns. All covenants and agreements in
this Master Agreement or any Series Supplement by the Servicer shall bind the
successors and assigns of the Servicer and all covenants and agreements in this
Master Agreement or any Series Supplement by any Obligor shall bind the
successors and assigns of such Obligor, whether so expressed or not.
All agreements by the Trustee in this Master Agreement or any Series
Supplement shall bind its successors and assigns.
Section 1.08. Benefits of Master Agreement. To the extent specified in
the related Series Supplement, the related Series Support Provider and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Master Agreement and such Series Supplement, insofar as such provisions
apply to the related Notes, and shall be entitled to rely upon and directly to
enforce such provisions of this Master Agreement and such Series Supplement so
long as no Support Default shall have occurred and be continuing with respect to
such Series Support Provider. Except as aforesaid, nothing in this Master
Agreement or any Series Supplement or in the Notes, express or implied, shall
give to any Person, other than the parties hereto and their successors hereunder
and the Holders of the related Notes, and any other party secured hereunder, and
any other Person with an ownership interest in any part of the related Series
Trust Estate, any benefit or any equal or equitable right, remedy or claim under
this Master Agreement. The related Series Support Provider may disclaim any of
its rights and powers under this Master Agreement (in which case the Trustee may
exercise such right or power hereunder), but not its duties and obligations
under the related Series Support, upon delivery of a written notice to the
Trustee and to the Obligors.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations, Warranties and Covenants of Obligors. By
its execution and delivery of this Master Agreement each Obligor hereby makes
each of the following representations, warranties and covenants to the Trustee
and the Noteholders of the related Series on which representations, warranties
and covenants the Trustee relies in accepting the related Series Trust Estate in
trust and on which the Noteholders of the related Series have relied in agreeing
to purchase the related Notes. Such representations, warranties and covenants
are deemed to be remade and reaffirmed on the Series Closing Date for each
Series, and shall survive the date of the making or remaking of such
representations and warranties. Each of the covenants of each Obligor with
respect to a Series shall continue until the Final Date of such Series.
(a) Each Obligor represents and warrants, as to itself, that:
(i) Corporate Existence and Power. Such Obligor is a legal
entity duly organized, validly existing and in good standing under the
laws of the State of its formation and has all corporate power and all
governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is
conducted.
(ii) No Conflict. The execution, delivery and performance by
such Obligor of this Master Agreement, the Master Sale Agreement and
the Series Related Documents to which it is a party, are within its
corporate powers, have been duly authorized by all necessary corporate
action, do not contravene or violate (i) its Organizational Documents,
(ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is
a party or by which it or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the creation or
imposition of any Adverse Claim on assets of such Obligor or its
subsidiaries (except the interest conveyed to the Trustee); and no
transaction contemplated hereby requires compliance with any bulk sales
act or similar law. Each of the Series Related Documents to which such
Obligor is a party has been duly executed and delivered by such
Obligor.
(iii) Governmental Authorization. Other than the filing of the
financing statements required hereunder, no authorization or approval
or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution,
delivery and performance by such Obligor of this Master Agreement, the
Master Sale Agreement and the Series Related Documents to which such
Obligor is a party, except for such authorizations, approvals, actions,
notices and filings as have already been obtained, taken or made in
connection with Municipal Contracts.
(iv) Binding Effect. Each of this Master Agreement, the Master
Sale Agreement and the Series Related Documents to which such Obligor
is a party constitutes
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the legal, valid and binding obligation of such Obligor, enforceable
against each Obligor, jointly and severally, in accordance with its
terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally or general equitable
principles.
(v) Accuracy of Information. All information furnished in
writing by such Obligor to the Trustee on or prior to the related
Series Closing Date for purposes of or in connection with the Series
Related Documents or any Pledge is true, accurate and complete in every
material respect on the date such information is stated or certified,
and all such information hereafter furnished by such Obligor to the
Trustee will be, true, accurate and complete in every material respect,
on the date such information is stated or certified.
(vi) Use of Proceeds. No proceeds of any sale of the Notes
will be used (i) for a purpose which violates, or would be inconsistent
with, Regulation T, U or X promulgated by the Board of Governors of the
Federal Reserve System from time to time or (ii) to acquire any
security in any transaction which is subject to Section 13 or Section
14 of the Securities Exchange Act of 1934, as amended.
(vii) Good Title; Perfection. Immediately prior to each Pledge
hereunder or under a Series Supplement, (i) such Obligor, if conveying
Contracts and such Obligor's right in the Related Security [(other than
the Residual Interest with respect thereto)] is the legal and
beneficial owner of the Contracts and the Related Security [(except the
Residual Interest in the Equipment)] subject to such Pledge and is
taking or has taken all requisite steps to obtain on its behalf a first
priority perfected security interest in, the Equipment related to such
contracts and the Related Security with respect to such equipment
(other than Equipment valued at $25,000 or less on its acquisition date
in which neither the Originator nor such Obligor has reserved a
perfected security interests) and the title and interest of such
Obligor is free and clear of any Adverse Claim except as created by
this Master Agreement, the Master Sale Agreement and the Series Related
Documents, and such Obligor has the legal right to Pledge the Contracts
and the associated Collections and Related Security to the Trustee and
(ii) such Obligor, if conveying the Residual Interest in the Equipment,
is the legal and beneficial owner of such Residual Interest in each
case, free and clear of any Adverse Claim except as created by this
Master Agreement, the Master Sale Agreement and the Series Related
Documents, and such Obligor has the legal right to Pledge such Residual
Interest.
(viii) Places of Business. Except in accordance with Section
3.05(b), such Obligor will not move its chief executive office to
another location and/or maintain any Records at any other locations.
(ix) No Proceedings. There are no proceedings or
investigations pending or, to the best knowledge of such Obligor,
threatened before any Governmental Authority (i) asserting, the
invalidity of this Master Agreement, the Master Sale Agreement or the
Series Related Documents, (ii) seeking to prevent the consummation of
any of the
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transactions contemplated by this Master Agreement, the Master Sale
Agreement or the Series Related Documents, (iii) seeking any
determination or ruling that, in the reasonable judgment of such
Obligor, would materially and adversely affect the performance by such
Obligor of its obligations under this Master Agreement, the Master Sale
Agreement or the Series Related Documents and (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of this Master Agreement, the Master Sale
Agreement or the Series Related Documents.
Section 2.02. Representations, Warranties and Covenants of Servicer.
The Servicer hereby makes the following representations, warranties and
covenants to the Trustee and the Noteholders of the related Series on which
representations, warranties and covenants the Trustee relies in accepting the
related Series Trust Estate in trust and in authenticating the related Notes and
on which the Noteholders of such Series have relied in purchasing their Notes.
Such representations, warranties and covenants shall be deemed to be made and
affirmed on each Series Closing Date and shall survive the date of the making or
remaking of such representations and warranties. Each of the Servicer's
covenants shall continue until the Final Date of the last outstanding Series.
(a) The Servicer represents and warrants, as to itself and its
responsibilities, that:
(i) Organization and Good Standing. The Servicer is a
corporation duly organized, validly existing, in good standing under
the laws of the State of Delaware (or, if other than Advanta Business
Services Corp., in the applicable state of its incorporation), has the
power to own its assets and to transact the business in which it is
presently engaged, and had at all relevant times and now has the power,
authority and legal right to service the related Series Trust Estate.
(ii) Power and Authority. The Servicer has the power,
authority and legal right to execute, deliver and perform this Master
Agreement, the Master Sale Agreement and the Series Related Documents
to which it is a party and the execution, delivery and performance of
this Master Agreement, the Master Sale Agreement and the other Series
Related Documents to which it is a party have been duly authorized by
the Servicer by all necessary corporate action.
(iii) Binding Obligation. This Master Agreement, the Master
Sale Agreement and the Series Related Documents to which the Servicer
is a party (assuming due authorization, execution and delivery by each
of the other parties hereto and thereto), constitute legal, valid and
binding obligations of the Servicer, enforceable against the Servicer
in accordance with their respective terms, except that (A) such
enforcement may be subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws (whether statutory, regulatory or
decisional) now or hereafter in effect relating, to creditors' rights
generally and (B) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to certain equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought, whether in a proceeding at law or in equity.
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(iv) No Violation. The consummation by the Servicer of the
transactions contemplated by this Master Agreement, the Master Sale
Agreement and the Series Related Documents to which it is a party and
the fulfillment of the terms hereof and thereof will not conflict with,
result in any breach of any of the terms and provisions of, or
constitute (with or without notice, lapse of time or both) a default
under, the charter documents or bylaws of the Servicer, or any material
indenture, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound, or result in the
creation or imposition of any Lien upon any of its material properties
pursuant to the terms of any such indenture, agreement, mortgage, deed
of trust or other instrument, other than as contemplated by the Master
Sale Agreement and this Master Agreement, or violate any law or, to the
best of the Servicer's knowledge, any order, rule or regulation
applicable to the Servicer of any court or other Governmental Authority
having a jurisdiction over the Servicer or any of its properties
(v) No Proceedings. There are no proceedings or investigations
to which the Servicer, or any of the Servicer's Affiliates, is a party
pending or, to the best of the Servicer's knowledge, threatened before
any court or other Governmental Authority (A) asserting the invalidity
of this Master Agreement, the Master Sale Agreement or any of the
Series Related Documents, (B) seeking to prevent the consummation of
any of the transactions contemplated by this Master Agreement, the
Master Sale Agreement or any of the Series Related Documents (C)
seeking any determination or ruling, that might materially and
adversely affect the performance by the Servicer of its obligations
under, or the validity or enforceability of, this Master Agreement, the
Master Sale Agreement or any of the Series Related Documents to which
it is a party.
(vi) Approvals. All approvals, authorizations, consents,
orders or other actions of any Governmental Authority or any other
Person required to be obtained or taken by, or on the part of, the
Servicer in connection with the execution and delivery of this Master
Agreement, the Master Sale Agreement or any of the Series Related
Documents to which it is a party have been or will be taken or obtained
on or prior to the date so required to be taken or obtained.
(vii) Information. Each certificate, information, exhibit,
financial statement, document, book or record or report furnished by
the Servicer to the Trustee, the Obligors, the Rating Agencies or any
Noteholder in connection with this Master Agreement, any Series
Supplement, any Series Related Document or the transactions
contemplated hereby is accurate in all material respects as of its
date, when considered as a whole with other such documents, and no such
document contains any material misstatement of fact or omits to state a
material fact or any fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
materially misleading as of its date.
(viii) Place of Business. The chief executive office of the
Servicer is at P.O. Box 1228, 1020 Laurel Oak Road, Voorhees, New
Jersey 08043. The Servicer shall give
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the Trustee and each Obligor at least 30 days' prior written notice of
any relocation of such chief executive office.
(b) The Servicer covenants as to the Pledged Property comprising each
Series Trust Estate:
(i) Lien in Force. The Servicer shall not release or assign
any Lien in favor of the Trustee on any item of Equipment related to
any Contract in whole or in part, except as expressly permitted
hereunder.
(ii) Fulfill Obligation. The Servicer will duly fulfill and
comply, in all material respects, with all obligations on the part of
the "lessor" to be performed and fulfilled under or in connection with
each Contract and all of the Servicer's other obligations to be
fulfilled under or in connection with each Series Trust Estate. The
Servicer will not amend, rescind, cancel or modify any Contract or any
term or provision thereof, except as contemplated herein, or, with
respect to Contracts contained in a Series Trust Estate, as
contemplated in the related Series Supplement, and the Servicer will
not do anything, that would materially impair the rights of the
Noteholders with respect to any Series Trust Estate, except as
contemplated herein or in the related Series Supplement.
(iii) Books and Records. The Servicer (1) will (A) maintain
its books and records, as Servicer, separate from the books and records
of the Originator and of any Obligor, (B) maintain bank accounts
separate from those of the Originator and of any Obligor and (C)
conduct its business in an office separate from that of any Obligor and
(2) will not (X) take any action that would cause the dissolution or
liquidation of the Originator and of any Obligor, (Y) guarantee
(directly or indirectly), endorse or otherwise become contingently
liable (directly or indirectly) for the obligations of the Originator
or any Obligor (except as expressly permitted hereunder) including a
merger, consolidation or other transfer of assets and assumption of
obligations permitted by Section 8.02 hereof involving the Servicer and
the Originator) or (Z) institute against the Originator or any Obligor,
or join any other person in instituting against the Originator and of
any Obligor, any case, proceeding, or other action under any existing,
or future bankruptcy, insolvency or similar laws.
ARTICLE III
PLEDGING THE TRUST ESTATE
Section 3.01. Series Trust Estates. In order to secure the due and
punctual payment of the principal of and interest on the Notes of the related
Series and all other Series Secured Obligations of the related Series when and
as the same shall become due and payable, whether as scheduled, by declaration
of acceleration, prepayment or otherwise, according to the terms of this Master
Agreement, the related Series Supplement and the related Notes, the Obligors,
shall
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pledge the related Series Trust Estate to and grant a security interest in
the related Series Trust Estate to the Trustee for the benefit of the Holders of
the related Series and the other Series Secured Parties.
Section 3.02. Preservation of Series Collateral. Subject to the rights,
powers and authorities granted to the Trustee and the related Series Controlling
Party specified in the Series Supplement, the Obligors shall take such action as
is necessary and proper with respect to the Series Trust Estate in order to
preserve and maintain such Series Trust Estate. The Obligors will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and
delivered, such instruments of transfer or take such other steps or actions as
may be necessary, or required by the Servicer or the Trustee to perfect the
security interests granted hereunder in the Series Trust Estate, to ensure that
such security interests rank prior to all other Liens and to preserve the
priority of such security interests and the validity and enforceability thereof.
Upon the delivery of any portion of any Series Trust Estate to the Trustee, the
Obligors shall be obligated to execute such documents and perform such actions
as are necessary to create in the Trustee for the benefit of the related Series
Secured Parties a valid first Lien on, and valid and perfected first priority
security interest in, such Series Trust Estate so delivered, free and clear of
any other Lien together with satisfactory assurances thereof, and to pay any
reasonable costs incurred by any of the Servicer or Trustee or otherwise in
connection with such delivery.
Section 3.03. Waiver of Stay or Extension Laws; Marshalling of Assets.
Each Obligor covenants, to the fullest extent permitted by applicable law, that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any appraisement, valuation, stay, extension
or redemption law wherever enacted, now or at any time hereafter in force, in
order to prevent or hinder the enforcement of this Master Agreement, any Series
Supplement or any part hereof or thereof, to the fullest extent permitted by
applicable law, for itself and all who may claim under it, hereby waives the
benefit of all such laws, and covenants that it will not hinder, delay or impede
the execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been enacted.
Each Obligor, for itself and all who may claim under it, waives, to the fullest
extent permitted by applicable law, all right to have any Series Trust Estate
marshalled upon any foreclosure or other disposition thereof.
Section 3.04. Noninterference, Etc. No Obligor shall (i) waive or alter
any of its rights under any portion of any Series Trust Estate (or any agreement
or instrument relating thereto) without the prior written consent of the Series
Controlling Party; or (ii) take any action, or fail to take any action, if such
action or failure to take action will interfere with the enforcement of any
rights under the Series Related Documents.
Section 3.05. Obligor Changes.
(a) Change in Name Structure, Etc. No Obligor shall change its name,
identity or corporate structure unless it shall have given the Trustee at least
30 days prior written notice thereof and shall effect any necessary or
appropriate assignments or amendments thereto and filings of financing
statements or amendments thereto within 60 days of such change.
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(b) Relocation of the Obligors. No Obligor shall change its principal
executive office unless it gives the Trustee at least 30 days prior written
notice of any relocation of its principal executive office and effects within 60
days of such change whatever appropriate recordations and filings of financing
statements or amendments thereto are necessary.
Section 3.06. Limited Recourse to Obligors.
(a) Notwithstanding anything to the contrary contained herein, the
Trustee and each Holder by such Holder's acceptance of a Note hereunder agree
that the obligations of the Obligors hereunder, including, without limitation,
the obligations of the Obligors in respect of the Notes shall be payable solely
from the related Series Trust Estate and that neither the Trustee nor any Holder
shall look to any other Property or assets of such Obligors including,
specifically but without limitation, the Series Trust Estate with respect to any
other Series. No recourse shall be had for the Payment of any amount owing in
respect of any Obligor's obligations hereunder or for any payment obligation or
claim arising out of or based on this Master Agreement against any Affiliate,
agent, stockholder, employee, officer, director or incorporator of such Obligor.
(b) The Obligors' obligation to pay certain fees or expenses under, or
claims arising out of, this Master Agreement shall be limited to moneys
available to such Obligors from the related Series Trust Estate in accordance
with the payment priority set forth in the related Series Supplement, and to the
extent such funds are insufficient to pay such fees or expenses, it shall not
constitute a claim against the Obligors.
Section 3.07. Authorization of Actions to be Taken by the Trustee.
(a) The Trustee may take all actions it deems necessary or appropriate
in order to enforce or exercise its rights under each Series Supplement in
accordance with and subject to the provisions thereof and hereof. Subject to the
provisions thereof and hereof, the Trustee shall have power to institute and to
maintain suits and proceedings to prevent any impairment of the related Series
Trust Estate by any acts which may be unlawful or in violation of the related
Series Supplement or this Master Agreement, and suits and proceedings to
preserve or protect its interests and the interests of the Holders of the
related Notes in the related Series Trust Estate (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security hereunder or be
prejudicial to the interests of such Holders or of the Trustee).
(b) The Trustee is authorized to receive any funds for the benefit of
the Holders distributed under the related Series Supplement and to make further
distributions of such funds to the Holders of the related Notes according to the
provisions of such Series Supplement.
Section 3.08. Termination of Security Interests. Upon the payment in
full of all Series Secured Obligations, the Trustee shall, at the request of the
Obligors and with the written consent of the Series Support Provider, if any,
deliver such certificates, notices, and instruments stating that all Series
Secured Obligations have been paid in full, and releasing the Trustee's Lien on
the
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related Series Trust Estate with respect to such Series Secured Obligations.
In addition, the Trustee shall, if and as provided in the related Series
Supplement, release the Lien on any Contract or other Property which has been
sold or otherwise disposed of by the Obligors.
Section 3.09. Filing; Maintenance of Contract Files. (a) On or prior to
the Series Closing Date with respect to a Series, the Obligors shall, and shall
cause the Originator to, file blanket UCC-1 financing statements with respect to
the related Series Trust Estate (which, in the case of any UCC-1 Financing
Statement filed by the Obligors against the Originator, shall be assigned by the
Obligors to the Trustee). Notwithstanding the foregoing, it is expressly agreed
that no such UCC-1 Financing Statement shall be filed with respect to the
Originator's ownership interest in any particular piece of Equipment, except to
the extent then required by the Servicer's Credit and Collection Policy, or as
may otherwise be required in the related Sale Agreement Supplement. On or prior
to each Series Closing Date the Obligors shall, and shall cause the Originator
to mark its internal records (including, where applicable, its electronic
ledger) to reflect (x) the conveyance of the related Pledged Property from the
Originator to the Obligors and (y) the Pledge of the related Pledged Property to
the Trustee.
Section 3.10. Costs and Expenses. The Obligors agree to pay all
reasonable costs and disbursements (and in the event the Obligors are unable to
pay such costs and disbursements, the Servicer shall pay such amounts) in
connection with the perfection and the maintenance of perfection and priority,
as against all third parties, of the Trustee's rights, title and interests in
and to each Series Trust Estate (other than the Equipment, except as otherwise
expressly agreed to herein).
ARTICLE IV
NOTE FORMS
Section 4.01. Forms Generally. The Notes of each Series shall be in
substantially the form set forth in the related Series Supplement, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Master Agreement or the related Series Supplement,
and may have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with the
rules of any securities exchange or as may, consistently herewith, be determined
by the officers executing such Notes, as evidenced by their execution of the
Notes.
The Notes of any Series or Class may be issued in bearer form ("Bearer
Notes") with attached interest coupons and any other applicable coupon
(collectively, the "Coupons") or in fully registered form (but which may be
uncertificated) ("Registered Notes") and shall, to the extent represented by
physical certificates, be substantially in the form of the exhibits with respect
thereto attached to the applicable Series Supplement.
The Trustee's certificate of authentication shall be in substantially
the form set forth in this Article.
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The Notes shall be printed, lithographed or engraved on steel engraved
borders or may be produced in any other manner (provided that if any Notes are
to be listed on any securities exchange, then in any such manner as may be
permitted by the rules of any such securities exchange, all as determined by the
officers executing such Notes, as evidenced by their execution of such Notes).
Section 4.02. Form of Trustee's Certificate of Authentication. This is
one of the Notes designated herein and issued pursuant to in the
within-mentioned Master Agreement and the within-mentioned Series Supplement
thereto.
__________________________
as Trustee
By _______________________
Authorized Signatory
Section 4.03. Securities Legend. Each Unregistered Note issued
hereunder will contain the following legend:
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND HAS NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR REGULATORY AUTHORITY
OF ANY STATE. THIS NOTE HAS BEEN OFFERED AND SOLD PRIVATELY.
THE HOLDER HEREOF ACKNOWLEDGES THAT THESE SECURITIES ARE
"RESTRICTED SECURITIES" THAT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT AND AGREES FOR THE BENEFIT OF THE OBLIGORS
AND THEIR AFFILIATES THAT THESE SECURITIES MAY NOT BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
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ARTICLE V
THE NOTES
Section 5.01. Amount Limited; Issuable in Series. The aggregate
principal amount of Notes which may be authenticated and delivered and
Outstanding at any time under this Master Agreement is not limited; provided
that any Series Supplement may so limit the aggregate principal amount of Notes
of the related Series. The Notes shall be issued in one or more Series, and may
be issued in Classes within a Series.
No Series of Notes shall be issued under this Master Agreement unless
such Notes have been authorized pursuant to a Series Supplement, and all
conditions precedent to the issuance thereof, as specified in the related Series
Supplement, shall have been satisfied.
All Notes of each Series issued under this Master Agreement shall be in
all respects equally and ratably entitled to the benefits hereof and secured by
the related Series Trust Estate without preference, priority or distinction on
account of the actual time or times of authentication and delivery, all in
accordance with the terms and provisions of this Master Agreement and the
related Series Supplement.
Section 5.02. Execution, Authentication, Delivery and Dating. The Notes
shall be executed on behalf of each of the Obligors by any of the Authorized
Officers of such Obligor. The signature of any of these officers on the Notes
may be manual or facsimile.
Notes bearing the manual or facsimile signatures of individuals who
were at the time of execution of such Notes the proper officers of the Obligors
shall bind the Obligors, notwithstanding that such individuals or any of them do
not hold such offices at the time of the authentication and delivery of such
Notes.
At any time and from time to time after the execution and delivery of
this Master Agreement and the related Series Supplement, and upon satisfaction
of all the conditions set forth in the related Series Supplement, the Obligors
may deliver Notes of the related Series (including Notes of any Class within
such Series) executed by the Obligors to the Trustee or Authenticating Agent for
authentication, together with an Obligors' Order for the authentication and
delivery of such Notes and an Officer's Certificate that all conditions
precedent for such issuance have been satisfied, and the Trustee in accordance
with the Obligors' Order shall authenticate and make available for delivery such
Notes.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Master Agreement or
any Series Supplement or be valid or obligatory for any purpose unless there
appears on such Note a certificate of authentication substantially in the form
provided for herein executed by the Trustee or the Authenticating Agent by
manual signature, and such certificate of authentication upon any Note shall be
conclusive evidence, and the only evidence, that such Note has been duly
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authenticated and delivered hereunder and is entitled to the benefits of this
Master Agreement and the related Series Supplement. Notwithstanding the
foregoing, if any Note shall have been authenticated and delivered hereunder but
never issued and sold by the Obligors, and the Obligors shall deliver such Note
to the Trustee or the Authenticating Agent for cancellation as provided in
Section 5.08 together with a written statement (which need not comply with
Section 1.02 and need not be accompanied by an Opinion of Counsel) stating that
such Note has never been issued and sold by the Obligors, for all purposes of
this Master Agreement such Note shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Master Agreement.
Section 5.03. Temporary Notes. Pending the preparation of definitive
Notes of any Series (or of any Class within a Series), the Obligors may execute,
and, upon receipt of an Obligors' Order, the Trustee or the Authenticating Agent
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, reproduced or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes of any Series (or of any Class within a Series) are
issued, Obligors will cause definitive Notes of that Series (or Class) to be
prepared without unreasonable delay. After the preparation of definitive Notes
of such Series (or Class), such temporary Notes shall be exchangeable for
definitive Notes of such Series (or Class) upon surrender of the temporary Notes
at the office or agency of the Obligors to be maintained as provided in Section
14.02. Upon surrender for cancellation of any one or more temporary Notes the
Obligors shall execute, and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery, in exchange therefor a like
principal amount of definitive Notes of the same Series (or Class) and tenor, of
authorized denominations. Until so exchanged, the temporary Notes of any Series
(or Class) shall in all respects be entitled to the same benefits under this
Master Agreement and the related Series Supplement as definitive Notes of such
Series (or Class).
Section 5.04. Registration, Registration of Transfer and Exchange,
Transfer Restrictions. The Obligors shall cause to be kept a register (the "Note
Register") in which, subject to such reasonable regulations as they may
prescribe, the Obligors shall provide for the registration of Notes and of
transfers of the Notes. The Trustee is hereby initially appointed "Note
Registrar" for the purpose of registering Notes and transfers of the Notes as
herein provided. Upon any resignation of any Note Registrar, the Obligors shall
promptly appoint a successor or, if the Obligors elect not to make such an
appointment, one of the Obligors shall assume the duties of the Note Registrar.
If a Person other than the Trustee is appointed by the Obligors as Note
Registrar, the Obligors will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Registrar, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note
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Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
Upon surrender for registration of transfer of any Note at the office
or agency of the Obligors to be maintained as provided in Section 14.02, the
Obligors shall execute, and the Trustee or the Authenticating Agent shall
authenticate and make available for delivery, in the name of the designated
transferee or transferees, one or more new Notes of any authorized denominations
and of a like tenor and aggregate principal amount.
At the option of a Registered Noteholder, Registered Notes (of the same
Series and Class) may be exchanged for other Registered Notes of authorized
denominations upon surrender of the Registered Notes to be exchanged at any such
office or agency; Registered Notes, including Registered Notes received in
exchange for Bearer Notes, may not be exchanged for Bearer Notes. At the option
of the Holder of a Bearer Note, subject to applicable laws and regulations,
Bearer Notes may be exchanged for other Bearer Notes or Registered Notes (of the
same Series and Class) of authorized denominations upon surrender of the Bearer
Notes to be exchanged at an office or agency of the Transfer Agent and Registrar
located outside the United States. Each Bearer Note surrendered pursuant to this
Section shall have attached thereto all unmatured Coupons; provided that any
Bearer Note so surrendered after the close of business on the Record Date
preceding the relevant payment date after the expected final payment date need
not have attached the Coupon relating to such payment date (in each case, as
specified in the applicable Series Supplement). Whenever any Notes are so
surrendered for exchange, the Obligors shall execute, and the Trustee or the
Authenticating Agent shall authenticate and make available for delivery, the
Notes which the Holder making the exchange is entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Obligors, evidencing the same debt, and
entitled to the same benefits under this Master Agreement and the related Series
Supplement, as the Notes surrendered upon such registration of transfer or
exchange.
Every Note presented or surrendered for registration of transfer or for
exchange shall (if so required by the Obligors or the Trustee) be duly endorsed,
or be accompanied by a written instrument of transfer in form satisfactory to
the Obligors, the Trustee and the Note Registrar duly executed by the Holder
thereof or his or her attorney duly authorized in writing with such signature
guaranteed by a commercial bank or trust company located, or having a
correspondent located, in the City of New York or the city in which the
Corporate Trust Office is located, or by a member firm of a national securities
exchange, and such other documents as the Trustee may require.
No service charge shall be made for any registration of transfer or
exchange of Notes, but the Obligors or the Trustee may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Sections 5.03 or 5.05 not involving any transfer.
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No Holder of an Unregistered Note shall transfer its Note, unless (i)
such transfer is made in accordance with Rule 144A of the Securities Act or (ii)
pursuant to an exemption from registration provided by Rule 144 under the
Securities Act (if available) and the registration and qualification
requirements under applicable state securities laws.
Section 5.05. Mutilated, Destroyed, Lost and Stolen Notes. If any
mutilated Note (together, in the case of Bearer Notes, with all unmatured
Coupons (if any) appertaining thereto) is surrendered to the Trustee, the
Obligors shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Note of the same Series and Class, of like tenor and
principal amount and bearing a number not contemporaneously outstanding. If
there shall be delivered to the Obligors and the Trustee, (i) evidence to their
satisfaction of the destruction, loss or theft of any Note and (ii) such
security or indemnity as may be required by them to hold each of them and any
agent of any of them harmless, then, in the absence of notice to the Obligors,
the Trustee or the Support Provider that such Note has been acquired by a bona
fide purchaser, the Obligors shall execute and upon its request the Trustee
shall authenticate and make available for delivery (in the case of Bearer Notes,
outside the United States), in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Note, a new Note (of the same Series and Class), in
lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Note has become
or is about to become due and payable, the Obligors in their discretion may,
instead of issuing a new Note, cause the Trustee to pay such Note by depositing
with the Trustee the full amount needed to pay such Note.
Upon the issuance of any new Note under this Section, the Obligors or
the Trustee may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note of any Series issued pursuant to this Section in lieu of
any destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Obligors, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Master Agreement and the related Series Supplement
equally and proportionately with any and all other Notes of the same Series duly
issued hereunder and under the related Series Supplement.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 5.06. Final Distribution.
(a) The Servicer shall give the Trustee at least 30 days prior notice
of the Payment Date on which the Noteholders of any Series or Class may
surrender their Notes for payment of
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the final distribution on and cancellation of such Notes. Not later than the
fifth day of the month in which the final distribution in respect of such Series
or Class is payable to Noteholders, the Trustee shall provide notice to the
Noteholders of such Series or Class specifying (i) the date upon which final
payment of such Series or Class will be made upon presentation and surrender of
Notes of such Series or Class at the office or offices therein designated, (ii)
the amount of any such final payment and (iii) that the Record Date otherwise
applicable to such payment date is not applicable, payments being made only upon
presentation and surrender of such Notes at the office or offices therein
specified (which, in the case of Bearer Notes, shall be outside the United
States). The Trustee shall give such notice to the Transfer Agent and Registrar
and the Paying Agent at the time such notice is given to Noteholders.
(b) Notwithstanding a final distribution to the Noteholders of any
Series or Class, except as otherwise provided in this paragraph, all funds then
on deposit in any Series Account allocated to such Noteholders shall continue to
be held in trust for the benefit of such Noteholders, and the Paying Agent or
the Trustee shall pay such funds to such Noteholders upon surrender of their
Notes. In the event that all such Noteholders shall not surrender their Notes
for cancellation within six months after the date specified in the notice from
the Trustee described in paragraph (a), the Trustee shall give a second notice
to the remaining such Noteholders to surrender their Notes for cancellation and
receive the final distribution with respect thereto (which surrender and
payment, in the case of Bearer Notes, shall be outside the United States). If
within six months after the second notice all such Notes shall not have been
surrendered for cancellation, the Trustee may take appropriate steps, or may
appoint an agent to take appropriate steps, to contact the remaining such
Noteholders concerning surrender of their Notes, and the cost thereof shall be
paid out of the funds in the Series Account held for the benefit of Noteholders.
The Trustee and the Paying Agent shall upon written request pay to the Obligors
any moneys held by them for the payment of principal or interest that remains
unclaimed for two years. After payment to the Obligors, Noteholders entitled to
the money must look to the Obligors for payment as general creditors unless an
applicable abandoned property law designates another Person.
(c) Any notice required or permitted to be given to a Holder of
Registered Notes shall be given by first-class mail, postage prepaid, at the
address of such Holder as shown in the Note Register. No Notice shall be
required to be mailed to a Holder of Bearer Notes or Coupons but shall be given
as provided below. Any notice so mailed within the time prescribed in this
Master Agreement shall be conclusively presumed to have been duly given, whether
or not the Noteholder receives such notice. In addition, (a) if and so long as
any Series or Class is listed on the Luxembourg Stock Exchange and such Exchange
shall so require, any notice to Noteholders shall be published in a newspaper of
general circulation in Luxembourg within the time period prescribed in this
Master Agreement and (b) in the case of any Series or Class with respect to
which any Bearer Notes are outstanding, any notice required or permitted to be
given to Noteholders of such Series or Class shall be published in a newspaper
designated in the related Series Supplement within the time period prescribed in
this Master Agreement.
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Section 5.07. Persons Deemed Owners. Prior to due presentment of a Note
for registration of transfer, the Obligors, the related Series Support Provider,
the Trustee and any agent of any of them may treat (a) prior to due presentation
of a Registered Note for registration of transfer, treat the Person in whose
name any Registered Note is registered as the owner of such Registered Note for
the purpose of receiving distributions pursuant to the terms of the applicable
Series Supplement and for all other purposes whatsoever, and (b) treat the
bearer of a Bearer Note or Coupon as the owner of such Bearer Note or Coupon for
the purpose of receiving distributions pursuant to the terms of the applicable
Series Supplement and for all other purposes whatsoever; and none of the
Obligors, the related Series Support Provider, the Trustee nor any agent of any
of them, shall be affected by notice to the contrary.
Section 5.08. Cancellation. All Notes surrendered for payment,
prepayment in whole, registration of transfer or exchange shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee and shall be
promptly cancelled by the Trustee. Any Obligor may at any time deliver to the
Trustee for cancellation any Notes previously authenticated and delivered
hereunder which the Obligor may have acquired in any manner whatsoever, and may
deliver to the Trustee (or to any other Person for delivery to the Trustee) for
cancellation any Notes previously authenticated hereunder which the Obligors
have not issued and sold, and all Notes so delivered shall be promptly cancelled
by the Trustee. No Notes shall be authenticated in lieu of or in exchange for
any Notes cancelled as provided in this Section, except as expressly permitted
by this Master Agreement. All cancelled Notes held by the Trustee shall be held
or destroyed by the Trustee in accordance with its standard retention or
disposal policy as in effect at the time.
Section 5.09. Book-Entry Notes. Unless otherwise specified in the
related Series Supplement for any Series or Class, the Notes of each Series,
upon original issuance, shall be issued in the form of one or more typewritten
Notes representing the Book-Entry Notes, to be delivered to the Clearing Agency
specified in the applicable Series Supplement, by, or on behalf of, the
Obligors. The Notes shall initially be registered on the Note Register in the
name of the Clearing Agency or its nominee, and no Noteholder will receive a
definitive certificate representing such Noteholder's interest in the Notes,
except as provided in Section 5.11. Unless and until definitive, fully
registered Notes ("Definitive Notes") have been issued to the applicable
Noteholders pursuant to Section 5.11 or as otherwise specified in any such
Series Supplement:
(a) the provisions of this Section shall be in full force and effect;
(b) the Obligors, the Servicer and the Trustee may deal with the
Clearing Agency and the Clearing Agency Participants for all purposes (including
the making of distributions) as the authorized representatives of the respective
Noteholders;
(c) to the extent that the provisions of this Section conflict with any
other provisions of this Master Agreement, the provisions of this Section shall
control; and
(d) the rights of the respective Noteholders shall be exercised only
through the Clearing Agency and shall be limited to those established by law and
agreements between such Noteholders and the Clearing Agency or the Clearing
Agency Participants. Pursuant to the
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Depository Agreement, unless and until Definitive Notes are issued pursuant to
Section 5.11, the Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit distributions of principal
and interest on the related Notes to such Clearing Agency Participants.
For purposes of any provision of this Master Agreement requiring, or
permitting actions with the consent of, or at the direction of, Noteholders
evidencing a specified percentage of the aggregate Outstanding Amount of Notes,
such direction or consent may be given by Noteholders (acting through the
Clearing Agency and the Clearing Agency Participants) owning Notes evidencing
the requisite percentage of Outstanding Notes.
Section 5.10. Notices to Clearing Agency. Whenever any notice or other
communication is required to be given to Noteholders of any Series or Class with
respect to which Book-Entry Notes have been issued, unless and until Definitive
Notes shall have been issued to the related Noteholders, the Trustee shall give
all such notices and communications to the applicable Clearing Agency.
Section 5.11. Definitive Notes. If Book-Entry Notes have been issued
with respect to any Series or Class and (a) the Obligors advise the Trustee that
the Clearing Agency is no longer willing or able to discharge properly its
responsibilities under the Depository Agreement with respect to such Series or
Class and the Trustee or the Obligors are unable to locate a qualified successor
or (b) the Obligors, at their option, advises the Trustee that they elect to
terminate the book-entry system with respect to such Series or Class through the
Clearing Agency, then upon surrender to the Trustee of any such Notes by the
Clearing Agency, accompanied by registration instructions from the Clearing
Agency for registration of Definitive Notes, the Obligors shall execute and the
Trustee shall authenticate and the Transfer Agent and Registrar shall deliver
such Definitive Notes. Neither the Obligors nor the Trustee shall be liable for
any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such instructions. The Trustee shall recognize
the Holders of such Definitive Notes as Noteholders hereunder.
The holding of Bearer Notes shall be proved by the production of such
Bearer Notes or by a certificate, satisfactory to the Obligors, executed by any
bank, trust company or recognized securities dealer, wherever situated,
satisfactory to the Obligors. Each such certificate shall be dated and shall
state that on the date thereof a Bearer Note bearing a specified serial number
was deposited with or exhibited to such bank, trust company or recognized
securities dealer by the Person named in such certificate. Any such certificate
may be issued in respect of one or more Bearer Notes specified therein. The
holding by the Person named in any such certificate of any Bearer Note specified
therein shall be presumed to continue for a period of one year from the date of
such certificate unless at the time of any determination of such holding (i)
another certificate bearing a later date issued in respect of the same Bearer
Note shall be produced, (ii) the Bearer Note specified in such certificate shall
be produced by some other Person or (iii) the Bearer Note specified in such
certificate shall have ceased to be outstanding. The appointment of any proxy
shall be proved by having a the signature of the Person executing the proxy
guaranteed by any bank, trust company or recognized securities dealer
satisfactory to the Trustee.
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ARTICLE VI
ADMINISTRATION AND SERVICING OF THE CONTRACTS AND EQUIPMENT
Section 6.01. Appointment of Servicer: Responsibilities of Servicer.
(a) The Obligors hereby appoint the Servicer, and the Servicer hereby
accepts such appointment, for the purpose of administering and servicing the
Contracts and the Equipment; provided, however, that the Servicer shall
administer and service the Contracts and the Equipment materially and only in
conformance with the terms of this Master Agreement and the Series Supplements
and shall take no action to affect adversely the interests of the Trustee or the
Noteholders in such Contracts and Equipment. In consideration of such
appointment, the Obligors hereby agree to pay to the Servicer the Servicer Fee,
such Servicer Fee to be paid as provided in Section 7.02 and in each Series
Supplement and neither the Trustee nor any Noteholder shall have any
responsibility for the payment of such fee.
(b) The Servicer, for the benefit of the Trustee and the Noteholders,
shall be responsible for managing, servicing and administering the Contracts and
the Equipment, enforcing and making collections on the Contracts, any Insurance
Policies and any Related Security and enforcing any security interest in each
item of Equipment, each in accordance with the standards and procedures set
forth in this Master Agreement. The Servicer's responsibilities shall include
collecting and posting of all payments, responding to inquiries of Users,
investigating delinquencies, applying the Security Deposits, accounting for
collections and furnishing monthly and annual statements to the Trustee, with
respect to each Series Trust Estate and distributions to be made hereunder. In
addition, the Servicer may make Servicer Advances at its option and shall make
Servicer Advances to the extent required by a Series Supplement, provide
appropriate Federal income tax information to the Trustee for use in providing
information to the Noteholders, collect and remit sales and property taxes on
behalf of taxing authorities and maintain the perfected any senior ownership
and/or security interest of the Trustee and the Noteholders in each Series Trust
Estate.
Subject to the terms of Section 6.02 of this Master Agreement, the
Servicer shall have full power and authority, acting at its sole discretion, to
do any and all things in connection with the management, servicing,
administration, enforcement and collection of the Contracts and the other
property comprising each Series Trust Estate that it may deem necessary or
desirable, including the prudent delegation of such responsibilities. Without
limiting the generality of the foregoing, the Servicer shall, and is hereby
authorized and empowered by the Obligors and the Trustee, subject to Section
6.02 hereof, to execute and deliver (on behalf of itself, the Noteholders, the
Trustee or any of them) any and all instruments of satisfaction or cancellation,
or of release or discharge and all other comparable instruments, with respect to
the Contracts and the other property comprising each Series Trust Estate in
accordance with (and to the extent permitted pursuant to) Section 6.11. The
Servicer may also, for itself and on behalf of the Obligors, in the Servicer's
sole discretion, waive any prepayment charge, late payment charge or penalty, or
any other Servicing Charges that may become due from any User in the ordinary
course of servicing
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any Contract. The Trustee and the Obligors shall execute and deliver any powers
of attorney and other documents reasonably necessary or appropriate to enable
the Servicer to carry out its servicing and administrative duties hereunder as
may be prepared by the Servicer, at the Servicer's expense, and delivered to the
Trustee and the Obligors for execution and delivery. The Trustee is not
responsible for any legal insufficiencies in any such powers of attorney or
other documents.
(c) The Servicer shall conduct the management, servicing
administration, collection or enforcement actions of or in connection with each
Series Trust Estate in the following manner:
(i) The Servicer may sue to enforce or collect upon Contracts
as agent for the Obligors and the Trustee. If the Servicer elects to
commence a legal proceeding to enforce a Contract, the act of
commencement shall be deemed to be an automatic assignment of the
Contract to the Servicer for purposes of collection only. If, however,
in any enforcement suit or legal proceeding, it is held that the
Servicer may not enforce a Contract on the ground that it is not a real
party in interest or a holder entitled to enforce the Contract, then
the related Obligor(s) and/or the Trustee shall, at the Servicer's
written request and upon receipt from the Servicer of satisfactory
indemnity, take such steps as the Servicer deems necessary to enforce
the Contract, including bringing suit in its name or the names of the
related Obligor(s) and/or the Trustee and/or the related Noteholders;
(ii) The Servicer shall exercise any rights of recourse
against third parties that exist with respect to any Contract in
accordance with the Servicer's usual practice. In exercising recourse
rights, the Servicer is authorized on the Trustee's behalf to reassign
the Contract to the person against whom recourse exists to the extent
necessary, and at the price set forth in the document creating the
recourse. The Servicer will not reduce or diminish such recourse
rights, except to the extent that it exercises such rights;
(iii) The Servicer may grant to the User under any Contract
any rebate, refund or adjustment that the Servicer in good faith
believes is required because of the prepayment in full of such
Contract; provided, however, that the Servicer will not permit any
rescission or cancellation of any Contract or take any action with
respect to any Contract which would materially impair the rights of the
Trustee in the Contract or the proceeds thereof;
(iv) In the event that the Servicer acquires title to any item
of Equipment in the enforcement of any Contract, the Servicer shall use
its best efforts to sell or otherwise dispose promptly of such item of
Equipment, consistent with the standard of care set forth in Section
6.02 hereof; and
(v) The Servicer may not allow an offset of the amount of any
Security Deposit against any Scheduled Payment or Booked Residual Value
under such Contract, except as expressly permitted in Section 6.14
hereof.
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Section 6.02. Standard of Care. In managing, administering and
servicing each Series Trust Estate and enforcing and making collections on the
Contracts and any Related Security and Insurance Policies related to the
Contracts pursuant to this Master Agreement, the Servicer will exercise that
degree of skill and care consistent with that which the Servicer customarily
exercises with respect to similar contracts owned by it; provided, however, that
to the extent that the Trustee shall be acting as Servicer, the Trustee shall
not have any liability for breaching any standard of care in its performance as
Servicer hereunder to the extent the Trustee was not grossly negligent or
willfully malfeasant. The Servicer shall comply with all applicable Federal and
State laws and regulations, shall maintain all State and Federal licenses and
franchises necessary for it to perform its servicing responsibilities hereunder
and thereunder and shall not materially impair the rights of the Trustee or the
Noteholders in any Contracts or payments thereunder.
The Servicer shall comply with all applicable Requirements of Law, the
noncompliance with which would, individually or in the aggregate, materially and
adversely affect the ability of the Servicer to perform its obligations under
this Master Agreement, the related Series Supplements or the related Series
Related Document.
Section 6.03. Credit and Collection Policy. The Servicer shall not
amend or modify the provisions of the Credit and Collection Policy if such
amendment or modification would, in the reasonable good faith business judgment
of the Servicer, materially and adversely affect the interests of any
Noteholder, the Trustee, or any Series Support Provider, without first obtaining
the prior written consent of the Series Controlling Party of each affected
Series.
Section 6.04. Maintenance of Interest in the Trust Estate. The Servicer
shall, in accordance with customary servicing procedures and at the expense of
the Obligors as provided in Section 3.10 of this Master Agreement, use its best
efforts to maintain perfection and priority of the Trustee's interest in each
Series Trust Estate (other than with respect to the Equipment as to which such
perfection is not required under Section 3.09 and other than with respect to the
Pledged Property removed from the Trust Estate pursuant to Sections 6.11, 6.12
or 6.15 hereof). In connection with enforcing a Defaulted Contract, if
necessary, the Servicer shall prepare and the related Obligor shall (and, to the
extent necessary, the related Obligor shall cause the Originator to) execute and
deliver to the Servicer, and the Servicer shall file any necessary UCC financing
statements and/or amendments naming the Trustee as secured party with respect to
the related Equipment.
Section 6.05. Servicing Compensation; Payment of Certain Expenses by
Servicer.
(a) As compensation for its activities, the Servicer shall be entitled
to receive the Servicer Fee in accordance with Section 7.02 hereof and the
Series Supplements. The monthly Servicer Fee shall be payable to the Servicer,
in arrears for each Collection Period, on the Payment Date in respect of such
Collection Period. The Servicer Fees shall be payable to the Servicer solely to
the extent amounts are available for distribution pursuant to Section 7.02
hereof and the Series Supplements; provided that in accordance with such
provisions, any such Servicer Fees not paid when due as a result of there not
being sufficient available funds therefor
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shall be payable on any future Payment Dates to the extent amounts are then
available for the payment thereof.
(b) The Servicer shall be required to pay all expenses incurred by the
Servicer in connection with its activities hereunder, including, without
limitation, fees and disbursements of the Independent Accountants, taxes imposed
on the Servicer (but excluding any sales taxes or other taxes imposed on any
User, any Broker, the Obligors, the Originator, the Trustee, any Noteholder, or
any other Person), expenses incurred in connection with distributions and
reports to Noteholders and all other fees and expenses not expressly stated
hereunder to be for the account of the Obligors.
Section 6.06. Servicer's Certificate. Not later than the time specified
in the related Series Supplement, the Servicer shall deliver to the Obligors and
the Trustee a Servicer's Certificate containing the information required by the
related Series Supplement, with respect to the related Series Trust Estate,
Collection Period and Payment Date.
Section 6.07. Annual Statement as to Compliance. The Servicer will
deliver to the Obligors and the Trustee, not later than 90 days after the end of
each fiscal year, an Officer's Certificate signed by a Servicing Officer, dated
as of the last day of such fiscal year, stating that (a) a review of the
activities of the Servicer during the preceding 12-month period and of the
Servicer's performance under this Master Agreement has been made under such
Servicing Officer's supervision and (b) nothing has come to such Servicing
Officer's attention to indicate that an Event of Servicer Termination (or an
event which with the giving of notice (other than pursuant to subsection
9.01(iv)) or passage of time, or both, would constitute an Event of Servicer
Termination) hereunder has occurred and is continuing on such last day of such
fiscal year or, if an Event of Servicer Termination or such other event has so
occurred and is continuing, specifying each such Event of Servicer Termination
or such other event known to such Servicing Officer and the nature and status
thereof, and the steps, if any, necessary to remedy such Event of Servicer
Termination or such other event.
Section 6.08. Financial Statements.
(a) The Servicer shall, not later than 90 days after the end of each
fiscal year, deliver to the Trustee, a copy of the Servicer's (or, in the case
of Advanta Business Services Corp. or another Affiliate of Advanta Corp., of
Advanta Corp.'s) annual audited financial statements for such fiscal year,
audited by an Independent Accountant.
(b) The Servicer shall, within 45 days after the end of each of the
first three calendar quarters of the Servicer's fiscal year, deliver to the
Obligors and the Trustee, quarterly, unaudited financial statements of the
Servicer (or, in the case of Advanta Business Services Corp. or another
Affiliate of Advanta Corp., of Advanta Corp.) for such calendar quarter.
(c) The Servicer shall inform the Obligors and the Trustee in writing
of the Servicer's fiscal year and any change in such fiscal year.
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Section 6.09. Access to Certain Documentation and Information Regarding
the Pledged Property.
(a) The Servicer and the Obligors shall each provide the Trustee,
and/or any of the Trustee's duly authorized representatives, attorneys or
accountants access to any and all documentation regarding each Series Trust
Estate (including the List of Contracts) that the Servicer or the Obligors, as
the case may be, may possess, such access being afforded without charge but only
upon reasonable request and during normal business hours, so as not to interfere
unreasonably with the Servicer's or any Obligor's, as the case may be, normal
operations or customer or employee relations, at such offices of the Servicer or
such Obligor, as the case may be, designated by the Servicer or an Obligor,
respectively.
(b) The Servicer shall at all times during the term hereof either (x)
keep available in physical form for inspection by the Trustee, or any of the
Trustee's duly authorized representatives, attorneys or accountants a list of
all Contracts then held as a part of each Series Trust Estate, together with a
reconciliation of such list to the List of Contracts and each of the Servicer's
Certificates, indicating the removals of Contracts from such List of Contracts
or (y) maintain electronic facilities which allow such a list and the
reconciliation thereof to be generated.
(c) The Servicer will maintain accounts and records, as to each
respective Contract serviced by the Servicer, that are accurate and sufficiently
detailed so as to permit (i) the reader thereof to know as of the most recent
Calculation Date the status of such Contract, including payments and recoveries
made and payments owing (and the nature of each), and (ii) reconciliation
between payments or recoveries on (or with respect to) each Contract and the
amounts from time to time deposited in the respective Series Account in respect
of such Contract.
(d) The Servicer will maintain its computerized accounts and records so
that (i) from and after the time of Pledge hereunder of each Contract to the
Trustee, the Servicer's accounts and records (including any back-up computer
archives) that refer to any Contract indicate clearly that the Contract is part
of a separate and distinct Series Trust Estate and (ii) the information relating
to such Contracts can be recreated in the event of the destruction of the
originals. Indication of a Contract being part of a Series Trust Estate will be
deleted from or modified on the Servicer's accounts and records when, and only
when, a Release Event has occurred with respect to such Contract.
(e) Nothing in this Section 6.09 shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of information
regarding the Brokers or Users, and the failure, as a result of such obligation
of the Servicer, to provide access as provided in this Section 6.09 shall not
constitute a breach of this Section 6.09.
(f) No person entitled to receive copies of such reports or tapes shall
disclose the information therein to any Person, except such disclosures as are
required upon appointment of a successor Servicer or by law, except when the
Servicer consents to the disclosure of any material nonpublic information with
respect to it (i) to any other such party, (ii) to any
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prospective or actual assignee or participant of any of them, (iii) by the
Trustee to any Rating Agency, commercial paper dealer or Support Provider, or
any entity organized for the purpose of purchasing, or making loans secured by,
financial assets for which any Noteholders' Agent provides managerial services
or acts as the administrative agent and (iv) to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing.
Section 6.10. Other Necessary Data. The Servicer shall, on request of
the Trustee, furnish the Trustee such data necessary for the Trustee to
discharge its obligations with respect to each Series Trust Estate and the
related Notes as can be generated by the Servicer's existing data processing
systems; provided, that to the extent that the Servicer's existing data
processing systems cannot generate such data, the Servicer will cooperate with
the Trustee in finding a method of furnishing such data; however, the Servicer
shall not be obligated to provide such a method. The Servicer will cooperate in
generating additional data reasonably requested by the Trustee.
Section 6.11. Release of Contracts.
(a) Each of the following events shall herein be a "Release Event": (i)
payment in full of any Contract by the User or by any Person on behalf of such
User, (ii) any removal of a Contract by the related Obligor pursuant to Section
6.15 hereof, (iii) the Servicer's reasonable determination that all Residual
Receipts with respect to any Defaulted Contract have been received, (iv)
delivery to the Servicer by an Obligor of evidence that a Defaulted Contract has
been sold and the sale proceeds deposited as Recoveries into the appropriate
Series Account, or (v) any removal of a Contract by the related Obligor pursuant
to subsection 6.12. Upon each Release Event, the Servicer will so notify the
Trustee on the next succeeding Determination Date or such other date as the
Servicer deems appropriate by certification to the Trustee from a Servicing
Officer, which certification shall include a statement to the effect that all
amounts received in connection with such Release Event have been remitted to the
appropriate Series Account and may request delivery of the Contract to the
Servicer or other person designated by the Servicer.
Upon the Trustee's receipt of such certification and request (subject
to its confirmation of the receipt of the required funds in the appropriate
Series Account), such Contract and the related Pledged Property appurtenant
thereto shall be deemed to be released from the related Series Trust Estate.
Upon release of such Contract, the Servicer is authorized to execute an
instrument in satisfaction of such Contract and to do such other acts and
execute such other documents as it deems necessary to discharge the User
thereunder (except that such release shall not be granted if the release is
pursuant to (iv) in the immediately preceding paragraph) and release the related
Equipment (v) to the related User in the event of a Release Event described in
clause (i) of the immediately preceding paragraph, (w) to or upon the direction
of the related Obligor in the event of a Release Event described in clause (ii)
of the immediately preceding paragraph, (x) to the Person, if any, purchasing
the related Equipment in the event of a Release Event described in clause (iii)
of the immediately preceding paragraph, or, if no person is purchasing such
Equipment, to the related Obligor, (y) to the purchaser of the Contract in the
event of a release
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under clause (iv) of the immediately preceding paragraph, and (z) to the related
Obligor in the event of a Release Event described in clause (v) of the
immediately preceding paragraph.
(b) With respect to all Contracts so released, the Trustee shall
assign, without recourse, representation or warranty, to the appropriate Person
as directed by the Servicer, all of the Trustee's right, title and interest in
and to such Contract and Pledged Property appurtenant thereto, such assignment
being an assignment outright and not for security. Such Person will thereupon
own such Contract and related Pledged Property appurtenant thereto free of any
further obligation to the Trustee or the Noteholders with respect thereto. The
Trustee shall also execute and deliver all such other instruments or documents
as shall be reasonably requested by any such Person to be required or
appropriate to effect a valid transfer of title to a Contract and the Pledged
Property appurtenant thereto. Any instrument or documents required to be
executed by the Trustee pursuant to this subsection 6.11(b) shall be prepared by
the Servicer (or such Person) at the Servicer's (or such Person's) expense;
provided, that if the Servicer is not Advanta Business Services Corp. or any of
its Affiliates, then any such expenses to be paid by the Servicer pursuant to
this subsection 6.11(b) shall be paid by the Obligors.
Section 6.12. Removal Related to Upgrades or Trade-Ins and to Defaulted
Contracts.
(a) In the event that a User requests an upgrade or trade-in of
Equipment, the Obligors may remove the Equipment and the related Contract from
the related Series Trust Estate during any Collection Period by remitting to the
Trustee the applicable Prepayment Amount for deposit in the appropriate Series
Account on or prior to the Determination Date relating to such Collection
Period.
(b) The Servicer may, at its option, during any Collection Period
remove any Defaulted Contract and the Related Security from the related Series
Trust Estate by deposit by the Servicer of the applicable Prepayment Amount in
the appropriate Series Account on or prior to the Determination Date relating to
such Collection Period; provided, however, that the terms under which such
removal may occur shall be set forth in the applicable Series Supplement and
provided that aggregate amount of such removals shall not exceed __ % of the
initial aggregate Contract Principal Balance, calculated as of the Settlement
Date, of the related Series Trust Estate.
Section 6.13. Notification to Noteholders of Defaults and Events of
Default. The Servicer shall promptly notify the Trustee of any Default or any
Event of Default upon the receipt of actual knowledge thereof by a Servicing
Officer, and the Trustee shall promptly thereupon give written notice thereof to
each of the Series Controlling Parties and each of the Series Support Providers.
Section 6.14. Security Deposits. [The Servicer acknowledges that the
Security Deposits are held by Obligors on behalf of the Users and the Trustee.]
In the event that (i) any User requests that a Security Deposit be applied as an
offset against such User's payment obligations or Booked Residual Value under a
Contract or (ii) any Contract becomes a Defaulted Contract, the Servicer shall
deliver to the appropriate Obligor written demand that such Obligor remit to
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the Servicer, on the next Business Day, out of the applicable User's Security
Deposit an amount (the "Offset Amount") equal to the lesser of (a) the amount of
such Security Deposit and (b) the amount of all unpaid and remaining Scheduled
Payments and Booked Residual Value as payment in respect of, first, any unpaid
Scheduled Payments under the related Contract, and second, any unpaid Booked
Residual Value under the related Contract. The Servicer shall deposit any Offset
Amount so delivered to it into the appropriate Series Account within two
Business Days after its receipt thereof. The Servicer shall not be required to
remit from its own funds any Offset Amounts not received from the Obligor.
The Servicer shall notify the appropriate Obligor in writing, of any
demand it receives from a User for refund of such User's Security Deposit at the
end of the term of the related Contract.
In no event shall the Trustee or any Noteholder be liable to any User
with respect to the Security Deposits. The Servicer shall indemnify and hold
harmless the Trustee and the Noteholders for any loss, cost and expense
(including legal fees and expenses incurred by such parties in connection with
the prosecution of claims made in connection therewith) suffered as a result of
the Servicer's misappropriation or misapplication of any Security Deposit
received by it from an Obligor. This right of indemnification shall survive the
termination of this Master Agreement.
Section 6.15. Removal of Nonconforming Pledged Property. Upon discovery
by an Obligor, the Trustee or the Servicer of a breach of any of the
representations or warranties of the Originator set forth in the related Master
Sale Agreement or Sale Agreement Supplement with respect to any Contract, the
related Equipment or the related Contract File, as the case may be, the party
discovering such breach shall give prompt written notice to the other parties.
Except as specifically provided herein, the Trustee has no obligation to review
or monitor the Pledged Property for compliance with such representations and
warranties. As of the last day of the calendar month in which such breach was
discovered or, if later, the last day of the calendar month in which the
Servicer received the notice thereof (or, at the Servicer's and such Obligor's
election, any earlier date), the Servicer, unless such breach shall have been
waived or cured in all material respects prior to such time, shall notify the
appropriate Obligor of such breach and the appropriate Obligor shall remove such
Contract and the related Pledged Property from the related Series Trust Estate.
In consideration for the removal of such Pledged Property, the appropriate
Obligor shall, no later than the Determination Date prior to the Payment Date
next following such date, pay the Prepayment Amount to the Servicer for deposit
into the appropriate Series Account. Without limiting the foregoing in any way,
in the event of a breach of any representation or warranty of the Originator
contained in any Master Agreement or Sale Agreement Supplement that materially
and adversely affects any Contract or the related Contract File, unless the
breach shall have been cured on or before the last day of the calendar month in
which such breach was discovered or, if later, the last day of the calendar
month in which the Servicer received the notice thereof, the Servicer shall
notify the related Obligor of such breach and the related Obligor shall remove
such Contract.
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ARTICLE VII
ACCOUNTS
Section 7.01. Establishment of Series Accounts. The Obligors shall in
the respective Series Supplement direct the Trustee to establish and maintain
with respect to each Series such Series Accounts as the Obligors shall deem to
be appropriate.
Section 7.02. Investment of Funds in the Series Accounts. The Trustee,
at the written instruction of the Servicer, shall or, if the Servicer fails to
so give such instruction, may, at the Trustee's sole discretion, invest the
amounts from time to time on deposit in the Series Accounts in Eligible
Investments or any other investments permitted by the Series Supplement.
ARTICLE VIII
THE SERVICER AND THE OBLIGORS
Section 8.01. Liability of Servicer; Indemnities.
(a) The Servicer shall be liable in accordance herewith only to the
extent of the obligations specifically undertaken by the Servicer herein and in
the Series Supplements.
(b) Without in any way limiting the foregoing, the Servicer shall
indemnify and hold harmless the Trustee, the Obligors, the Noteholders, any
Series Support Provider and any permitted assignee of any of the foregoing (each
an "Indemnified Party" and collectively, the "Indemnified Parties") from and
against any claims, expenses, losses or liabilities (including, without
limitation, attorneys' fees and court costs) suffered or incurred by any
Indemnified Party (collectively, "Indemnified Amounts") arising out of or
resulting in connection with (i) any breach by the Servicer of its
representations and warranties or of its obligations under this Master Agreement
or under any Series Supplement or (ii) from the use, repossession or operation
of the Equipment by the Servicer or any of its Affiliates.
(c) The Servicer shall pay any amounts owing pursuant to subsection
8.01(b) hereof directly to the applicable Indemnified Parties entitled to the
receipt thereof, and such amounts shall not be deposited in any Series Account.
Any request by any Indemnified Party for indemnity pursuant to this Section 8.01
shall be made in writing delivered to the Servicer and the Trustee describing in
reasonable detail the amount thereof and the circumstances giving rise thereto.
The Servicer shall pay any such Indemnified Amounts within 30 days after its
receipt of any such request therefor; it being understood and agreed, however,
that payment of such amount shall not constitute a waiver of the Servicer's
right to contest the basis for such indemnity so long as the Servicer provides
written notice to the applicable Indemnified Party at the time of the Servicer's
payment of the respective Indemnified Amounts, which written notice shall state
the basis, in reasonable detail, for the Servicer's dispute of the requested
Indemnified Amount.
(d) Indemnification under this Section 8.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the
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Servicer has made any indemnity payments to any of the Indemnified Parties
pursuant to this Section 8.01 and such party, thereafter collects any of such
amounts from others, such party will promptly pay such amounts collected to the
Servicer, without interest.
(e) Notwithstanding anything contained herein to the contrary, if and
to the extent that the Servicer is the Trustee or any successor Servicer
appointed by the Trustee then such Servicer shall only be responsible pursuant
to this Section 8.01 for any such amounts suffered or incurred by any such
indemnified party hereunder as a result of the Trustee's or such other successor
Servicer's negligence or willful misconduct.
(f) The agreements contained in this Section 8.01 shall survive the
Final Date of the last outstanding Series and the termination of this Master
Agreement and any applicable Series Supplement.
Section 8.02. Merger, Consolidation, or Assumption of the Obligations
of Servicer. Any corporation (i) into which the Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Servicer shall be a party or (iii) succeeding to the business of the Servicer,
shall be the successor to the Servicer hereunder without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, and such corporation in any of
the foregoing cases shall execute an agreement of assumption, in a form
reasonably satisfactory to the Trustee, agreeing to perform every obligation of
the Servicer hereunder and under each Series Supplement. Any corporation
succeeding to the business of the Servicer by merger, consolidation or otherwise
shall be a corporation organized and existing under the laws of the United
States or any State and have a tangible net worth of at least $20,000,000. The
Servicer shall provide prompt written notice of the effectiveness of any such
event to the Obligors and the Trustee.
In addition to the provisions set forth in the preceding paragraph, if
the Servicer is an Affiliate of Advanta Corp., the Servicer may transfer all of
its duties, obligations, rights and privileges as Servicer under this Master
Agreement and all Supplements hereto to such Affiliate of Advanta Corp. provided
that the then Servicer shall give 30 days prior written notice of such change to
the Trustee, each of the Obligors and each Series Controlling Person and the
entity assuming the Servicer position shall execute an agreement of assumption,
in a form reasonably satisfactory to the Trustee agreeing to perform every
obligation of the Servicer hereunder and under each Series Supplement. Upon the
execution and delivery to the Trustee of such written assumption such Affiliate
of Advanta Corp. shall become the Servicer hereunder and under each Series
Supplement without any further act on the part of any of the parties hereto and
the entity serving as servicer prior to such assumption shall be relieved of all
duties hereunder and shall cease to be the servicer. Any affiliate of Advanta
Corp. which becomes a Servicer under this paragraph shall not be required to
have a tangible net worth of at least $20,000,000.
Section 8.03. Limitation on Liability of Servicer and Others. No
directors, officers, employees or agents of the Servicer shall be under any
liability to the Trustee, the Obligors or any of the Noteholders, except as
provided in this Master Agreement, for any action taken or for refraining from
the taking of any action pursuant to this Master Agreement or for errors in
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judgment. The Servicer and any director or officer or employee or agent of the
Servicer may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
Except as provided herein, the Servicer shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental to its
duties to service each Series Trust Estate in accordance with this Master
Agreement and each Series Supplement and that in its opinion may involve it in
any expense or liability; provided, however, that the Servicer may take any such
action that is reasonable and that may be necessary or desirable in respect of
this Master Agreement and each Series Supplement and the rights and duties of
the parties hereto and thereto and the interests of the Trustee hereunder and
thereunder. In the event the Servicer takes such action, the reasonably incurred
legal expenses and costs of such action and any liabilities resulting therefrom
shall be expenses, costs and liabilities of the related Series Trust Estate, and
the Servicer shall be entitled to be reimbursed therefor in accordance with the
terms hereof.
Section 8.04. Servicer Not to Resign. Subject to the provisions of
Section 8.02 hereof, the Servicer shall not resign from the obligations and
duties hereby imposed on it as Servicer except upon determination that the
performance of its duties hereunder is no longer permissible under applicable
law. No such resignation shall become effective until a successor Servicer shall
have assumed the responsibilities and obligations of the Servicer in accordance
with Section 9.02 hereof.
Section 8.05. Reserved.
Section 8.06. Indemnities of the Obligors.
(a) Without limiting any other rights which any of the Indemnified
Parties may have hereunder, under any Series Supplement or under applicable law,
each Obligor hereby agrees to indemnify each Indemnified Party from and against
any and all Indemnified Amounts arising out of:
(i) reliance on any representation or warranty or statement of
such Obligor made or deemed made by such Obligor under or in connection
with this Master Agreement, the Master Sale Agreement or in any of the
Series Related Documents to which such Obligor is a party or in any
certificate or report delivered in connection with any of the
foregoing, which shall have been incorrect in any material respect when
made;
(ii) the failure by such Obligor to comply with this Master
Agreement, the Master Sale Agreement or any of the Series Related
Documents to which any such Person is a party, or the failure by such
Obligor or the Originator, to comply with any applicable law, rule or
regulation with respect to any Contract,
(iii) the nonconformity of any Contract with any applicable
law, rule or regulation;
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(iv) the failure of such Obligor to vest and maintain in the
name of the Trustee a valid first priority perfected security interest
in the property pledged by such Obligor (except to the extent that such
perfection is not required with respect to Equipment);
(v) the failure of such Obligor to pay or cause to be paid
when due any taxes, including without limitation sales, excise or
personal property taxes payable in connection with any of the Contracts
or any of the Equipment, to the extent required by Section 14.08
hereof.
(b) Any request by any Indemnified Party for indemnity pursuant to this
Section 8.06 shall be made in writing delivered to the affected Obligor and the
Trustee describing in reasonable detail the amount thereof and the circumstances
giving rise thereto. The related Obligor(s) shall pay any such Indemnified
Amounts within 30 days after its receipt of any such request therefor; it being
understood and agreed, however, that payment of such amount shall not constitute
a waiver of the Obligors' right to contest the basis for such indemnity so long
as the Obligor provides written notice to the applicable Indemnified Party at
the time of the affected Obligor's payment of the respective Indemnified
Amounts, which written notice shall state the basis, in reasonable detail, for
the Obligor's dispute of the requested Indemnified Amount.
(c) The agreement contained in this Section 8.06 shall survive the
Final Date of the last outstanding Series and the termination of this Master
Agreement and any applicable Series Supplement.
Section 8.07. Limitation on Liability of the Obligors. The directors,
officers, employees or agents of any Obligor shall not be under any liability to
the Trustee, the Noteholders, the Originator, the Servicer, any Series Support
Provider or any other Person hereunder or pursuant to any document delivered
hereunder, it being expressly understood that all such liability is expressly
waived and released as a condition of, and as consideration for, the Obligor's
execution and delivery of this Master Agreement and the issuance of the Notes.
The Obligors may rely in good faith on any document of any kind prima facie
properly executed and submitted by any other Person respecting any matters
arising hereunder.
ARTICLE IX
SERVICER TERMINATION
Section 9.01. Events of Servicer Termination.
(a) If any of the following events (each, an "Event of Servicer
Termination") shall occur and be continuing:
(i) any failure by the Servicer to make any payment, transfer
or deposit, or, if applicable, to give instructions or notice to the
Trustee to make such payment, transfer or deposit, relating to the
payment of the principal of or interest on any Note, in either case, on
or before the fifth calendar day following the date such payment,
transfer or deposit or
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such instruction or notice is required to be made or given, as the case
may be, under the terms of this Master Agreement or any applicable
Series Supplement; or
(ii) the Servicer shall fail to perform or observe any other
term, covenant or agreement hereunder, under the Master Sale Agreement,
or in any Series Related Document (other than as described in clause
(i) above), with the result that the interests of the Trustee, the
Noteholders or any Series Support Provider have been materially and
adversely affected, and such failure shall remain unremedied for 30
calendar days after the receipt by the Servicer of written notice of
such failure from the Trustee;
(iii) any representation, warranty, certification or statement
made by the Servicer in this Master Agreement, the Master Sale
Agreement, in any Series Related Document or in any other document
delivered pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made; provided, however, that the breach
of any representation or warranty made by the Servicer will be deemed
to be "material" only if it affects the Noteholders, the enforceability
of the Master Agreement or a Series Supplement or the Notes; and
provided further that such material breach of any representation or
warranty made by the Originator or a successor thereto in the Master
Sale Agreement or any Sale Agreement Supplement with respect to any of
the Contracts or the Equipment subject thereto will not constitute an
Event of Servicer Termination if the Originator repurchases such
Contract and the Equipment in accordance with the Master Sale Agreement
and the Sale Agreement Supplement in the manner provided therein.
(iv) an Insolvency Event shall occur with respect to the
Servicer;
then, and in each and every case, so long as an Event of Servicer Termination
shall be continuing, the Trustee may, and, at the direction of a majority in
aggregate principal amount of Notes Outstanding, shall, by notice (the "Servicer
Termination Notice") then given in writing to the Servicer, terminate all, but
not less than all, of the rights and obligations of the Servicer under this
Master Agreement and each Series Related Document.
(b) On and after the time the Servicer receives a Servicer Termination
Notice pursuant to this Section 9.01, all authority and power of the Servicer
under this Master Agreement and each Series Related Document, whether with
respect to the Notes or each Series Trust Estate or otherwise, shall pass to and
be vested in the successor Servicer appointed pursuant to Section 9.02 hereof
and, without limitation, such successor Servicer is hereby authorized and
empowered to execute and deliver, on behalf of the Servicer, as attorney-in-fact
or otherwise, any and all documents and other instruments, and to do or
accomplish all other acts or things necessary or appropriate to effect the
purposes of such Servicer Termination Notice, whether to complete the transfer
of each Series Trust Estate and related documents or otherwise.
The Servicer agrees to cooperate with the Trustee and the successor
Servicer in effecting the termination of the responsibilities and rights of the
Servicer hereunder, including, without limitation, the transfer to the successor
Servicer for administration by it of all cash amounts that shall at the time be
held by the Servicer for deposit, or have been deposited by the Servicer, in
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the Advance Payment Account or the Master Facility Account or thereafter
received with respect to the related Series Trust Estate. To assist the
successor Servicer in enforcing all rights with respect to any Related Security
or under Broker Agreements and Insurance Policies to the extent that they relate
to the Contracts, the Servicer, at its own expense, shall transfer its
electronic records relating to such Contracts to the successor Servicer in such
electronic form as the successor Servicer may reasonably request and shall
transfer the related Contract Files and all other records, correspondence and
documents relating to the Contracts that it may possess to the successor
Servicer in the manner and at such times as the successor Servicer shall
reasonably request. In addition to any other amounts that are then payable to
the Servicer under this Master Agreement or any Series Related Document, the
Servicer shall be entitled to receive reimbursement for any unreimbursed
Servicer Advances made during the period prior to the delivery of a Servicer
Termination Notice pursuant to this Section 9.01.
Section 9.02. Trustee to Act; Appointment of Successor. On and after
the time the Servicer receives a Servicer Termination Notice pursuant to Section
9.01, the Trustee shall without further action be the successor in all respects
to the terminated Servicer in its capacity as Servicer under this Master
Agreement, the Master Sale Agreement and each Series Related Document and the
transactions set forth or provided for herein and therein and shall be subject
to all the responsibilities, duties and liabilities relating thereto placed on
the Servicer by the terms and provisions hereof and thereof; provided, however,
that (a) the Trustee shall be permitted in its sole discretion, but shall have
no obligation, to make any Servicer Advances and (b) the Trustee shall not be
liable for any acts or omissions of the terminated Servicer or for any breach by
either the terminated Servicer or the Originator of any of their respective
representations and warranties contained herein, in the Master Sale Agreement,
in any other Series Related Document or in any related document or agreement. As
compensation for acting as Servicer hereunder, the Trustee shall be entitled to
the payment of the Servicer Fee and other compensation (whether payable out of
the Master Facility Account or otherwise) as the terminated Servicer would have
been entitled to hereunder if no such Servicer Termination Notice had been
given.
Notwithstanding the foregoing, the Trustee may or, upon the direction
of a majority in aggregate principal amount of Notes Outstanding, shall appoint
any servicing entity acceptable to or designated by a majority in aggregate
principal amount of Notes Outstanding to act as the successor to the Servicer
hereunder and to assume (prospectively) all responsibilities, duties or
liabilities of the Servicer hereunder, provided that any such servicing entity
has a net worth of, or is a member of a consolidated group of entities which has
a net worth of, not less than $20,000,000 and whose regular business includes
the servicing of receivables of a similar nature to the Contracts and the
Equipment. In connection with such appointment and assumption, the Trustee may
make such arrangements for the payment of a Servicer Fee to such successor
Servicer in such an amount as the Trustee and such successor Servicer shall
agree; provided, however, that except as set forth in the immediately succeeding
paragraph no such agreed upon Servicer Fee shall be in excess of the Servicer
Fee then being received by the Servicer; and provided further that in no event
shall the Trustee be liable to any successor Servicer for the Servicer Fee or
any additional amounts payable to such successor Servicer, either pursuant to
this Master Agreement, any Series Related Document or otherwise. The Trustee and
such successor
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Servicer shall take such action, consistent with this Master Agreement, as shall
be necessary to effectuate any such succession.
Notwithstanding the foregoing, if the Trustee is not legally permitted
to act as Servicer under any applicable law and the Trustee is unable to engage
a successor Servicer willing to act as Servicer for a fee equal to or less than
the Servicer Fee then being received by the Servicer then the Trustee may
solicit bids from not less than three entities currently engaged in businesses
similar to that of the Originator (at the time of the origination of the
Contracts) or providing servicing services similar to that of the Servicer
which, in either case, are qualified to act as successor Servicer pursuant to
this Section 9.02 and appoint the qualified entity submitting the proposal to
act as successor Servicer for the lowest fee, even if such fee exceeds the
Servicer Fee as calculated by reference to the Original Servicer Fee Rate (such
higher fee being an "Increased Servicer Fee") and the difference between such
Increased Servicer Fee and the Original Servicer Fee shall be the "Increased
Servicer Fee Differential". Any Increased Servicer Fee Differential shall be
payable in the manner and with the priority set forth in each of the Series
Supplements solely out of funds available for such purpose; provided, that any
such Increased Servicer Fee Differential not paid when due as a result of there
not being sufficient available funds therefor on any Payment Date shall be
payable on any future Payment Date to the extent amounts are then available for
the payment thereof.
Section 9.03. Notification to Noteholders. The Servicer shall promptly
notify the Trustee and the Obligors of any Event of Servicer Termination upon
the receipt of actual knowledge thereof by a Servicing Officer, and the Trustee
shall promptly thereupon give written notice thereof to each of the Series
Controlling Parties and each of the Series Support Providers. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article IX, the Trustee shall give prompt written notice thereof to each of the
Series Controlling Parties, the Noteholders, the Series Support Providers, the
Obligors and the Originator.
Section 9.04. Waiver of Past Events of Servicer Termination. A majority
in aggregate principal amounts of Notes Outstanding, on behalf of all
Noteholders may waive any default by the Servicer in the performance of its
obligations hereunder and its consequences. Upon any such waiver of a past
default, such default shall cease to exist, and any Event of Servicer
Termination arising, therefrom shall be deemed to have been remedied for every
purpose of this Master Agreement. No such waiver shall extend to any subsequent
similar or dissimilar default or impair any right consequent thereon except to
the extent expressly waived in accordance with this Section 9.04.
Section 9.05. Effects of Termination of Servicer.
(a) Upon the appointment of the successor Servicer, the terminated
Servicer shall hold in trust for the Trustee and immediately remit any Scheduled
Payments, Residual Receipts, Recoveries, Overdue Payments, Security Deposit,
Insurance Proceeds, Advance Payments, Prepayment Amounts, and proceeds of any
Related Security that it may receive pursuant to any Contract, any Broker
Agreement, Insurance Policy or otherwise to the successor Servicer for the
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benefit of the Trustee; provided, that amounts representing Security Deposits
shall be remitted as required by paragraph (b) below.
(b) After the delivery of a Servicer Termination Notice, the terminated
Servicer shall have no further obligations with respect to the management,
administration or servicing of any Series Trust Estate or the enforcement,
custody or collection of the Contracts, and the successor Servicer shall have
all of such obligations, except that the terminated Servicer will transmit or
cause to be transmitted directly to the successor Servicer for the benefit of
the Trustee (i) promptly upon receipt and in the same form in which received,
any amounts held or received by the former Servicer (properly endorsed where
required for the successor Servicer to collect them) as payments upon or
otherwise in connection with Contracts or any Series Trust Estate and (ii) when
and as required by Section 6.14 hereof, amounts representing Security Deposits.
The terminated Servicer's indemnification obligations pursuant to Section 8.01
hereof will survive its termination as the Servicer hereunder but will not
extend to any acts or omissions of any successor Servicer.
(c) Notwithstanding Section 9.05(b) hereof, it is hereby agreed by the
parties hereto that unless the Originator is Servicer, hereunder, the Obligors,
upon the request of the Trustee, shall instruct the Originator pursuant to the
Master Sale Agreement to exercise any rights under any Contract or guaranty
thereof, Insurance Policy for the benefit of the Trustee and the related Series
Secured Parties.
(d) An Event of Servicer Termination shall not affect the rights and
duties of the parties hereunder other than those relating to the management,
administration, servicing, custody or collection of the Contracts or the payment
of certain expenses by the successor Servicer, in each case, as expressly set
forth herein.
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
Section 10.01. Events of Default. The "Events of Default," with respect
to a Series, shall be set forth in the related Series Supplement.
Section 10.02. Collection of Indebtedness and Suits for Enforcement by
Trustee: Authority of Controlling Party.
(a) Subject to the provisions of the related Series Supplement, if the
Notes of any Series are accelerated following the occurrence of an Event of
Default with respect to such Series, there shall be due and payable (but only
from the funds available from the related Series Trust Estate), the whole amount
then due and payable on such Notes for principal and interest, with interest
upon the overdue principal, and, to the extent payment at such rate of interest
shall be legally enforceable, upon overdue installments of interest, at the
interest rate applicable to the Notes of such Series and in addition thereto
such further amount as shall be sufficient to cover
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the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
(b) If an Event of Default occurs and is continuing with respect to a
Series, the Trustee shall at the discretion of the related Series Controlling
Party, proceed to protect and enforce its rights and the rights of the
Noteholders of such Series by such appropriate Proceeding as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Master Agreement or
the related Series Supplement or in aid of the exercise of any power granted
herein or therein, or to enforce any other proper remedy or legal or equitable
right vested in the Trustee by this Master Agreement, the related Series
Supplement, or by law.
(c) In case there shall be pending, relative to any Obligor or any
other obligor upon the Notes or to the Originator or the Servicer or any Person
having or claiming an ownership interest in the related Series Trust Estate,
Proceedings under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency, receivership, conservatorship or other
similar law, or in case a receiver, conservator, assignee or trustee in
bankruptcy or reorganization, liquidator, sequestrator or similar official shall
have been appointed for or taken possession of any Obligor or any substantial
part of its property or such other obligor or Person, or in case of any other
comparable judicial Proceedings relative to such Obligor or other obligor upon
the Notes of such Series, or to the creditors or property of such Obligor or
such other obligor, the Trustee, irrespective of whether the principal of any
Notes of such Series shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section, shall be entitled and
empowered, by intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of such Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee against the related Series
Trust Estate (including, any claim for reasonable compensation to the
Trustee and each predecessor Trustee, and their respective agents,
attorneys and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the Trustee and each
predecessor Trustee, except as a result of negligence or bad faith) and
of the Noteholders of such Series allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes of such Series in any election
of a trustee, a standby-trustee or person performing similar functions
in any such Proceedings;
(iii) to collect and receive any moneys or other property
payable or deliverable on such claims and received with respect to the
related Series Trust Estate and to distribute all amounts received with
respect to the claims of the Noteholders of such Series and of the
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee or the Holders of Notes
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of such Series, in each case against the related Series Trust Estate,
allowed in any judicial proceedings relative to the Obligors, its
creditors and its property; and any trustee, receiver, liquidator,
custodian or other similar official in any such Proceeding is hereby
authorized by each of such Noteholders to make payments to the Trustee,
and, in the event that the Trustee shall consent to the making of
payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the
Trustee, each predecessor Trustee and their respective agents,
attorneys and counsel, and all other expenses and liabilities incurred,
and all advances made, by the Trustee and each predecessor Trustee
except as a result of negligence or bad faith.
(d) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(e) All rights of action and of asserting claims under this Master
Agreement, the related Series Supplement, or under any of the Notes, may be
enforced by the Trustee without the possession of any of the Notes or the
production thereof in any trial or other Proceedings relative thereto, and any
such action or Proceedings instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgement, subject to
the payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ramble benefit of the Holders of the related Notes.
(f) In any Proceedings brought by the Trustee (including any
Proceedings involving the interpretation of any provision of this Master
Agreement or the related Series Supplement), the Trustee shall be held to
represent all the Holders of the related Notes, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
Section 10.03. Limitation on Suits. No Holder of any Note shall have
any right to institute any Proceeding, judicial or otherwise, with respect to
this Master Agreement or the related Supplement, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with
respect to the Notes of the related Series;
(2) the Holders of not less than 50% of the Outstanding
Amount of the Notes of the related Series shall have
made written request to the Trustee to institute such
Proceeding in respect of such Event of Default in its
own name as Trustee hereunder;
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(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and
liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to
institute any such Proceeding;
(5) no direction inconsistent with such written request
has been given to the Trustee during such 60-day
period by the Holders of a majority of the
Outstanding Amount of the Notes of the related
Series; and
(6) if any Series Support secures such Series, a Support
Default shall have occurred and be continuing.
It is understood and intended that no one or more of the Holders shall
have any right in any manner whatever hereunder or under the Notes to (i)
affect, disturb or prejudice the rights of the Holders of any other Notes, (ii)
obtain or seek to obtain priority or preference over any other such Holder or
(iii) enforce any right under this Master Agreement, except in the manner herein
provided and for the equal, ratable and common benefit of all such Holders.
Section 10.04. Unconditional Right of Holders to Receive Principal and
Interest. Subject to the provisions of Section 3.06 hereof, the Holder of any
Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest on such Note on or after the respective
due dates thereof expressed in such Note, in this Master Agreement or the
related Series Supplement and to institute suit for the enforcement of any such
payment, and such rights shall not be impaired without the consent of such
Holder; provided, however, that (x) if such Series is secured by any Series
Support, then, so long as no Support Default shall have occurred and be
continuing, no such suit shall be instituted and (y) in no event shall such
right entitle any Holder to a payment from a source of funds other than the
related Series Trust Estate.
Section 10.05. Restoration of Rights and Remedies. If any of the
Trustee, the related Series Support Provider or any Holder has instituted any
Proceeding, to enforce any right or remedy under this Master Agreement (or the
related Series Supplement) and such Proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee, the
related Series Support Provider or to such Holder, then and in every such case,
subject to any determination in such Proceeding, the Obligors, the Trustee, the
related Series Support Provider and the related Holders shall be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Trustee, the related Series Support Provider and
the related Holders shall continue as though no such Proceeding had been
instituted.
Section 10.06. Rights and Remedies Cumulative. Except as otherwise
provided with respect to the replacement or payment of mutilated, destroyed,
lost or stolen securities in the last paragraph of Section 5.05, no right or
remedy herein conferred upon or reserved to any of the Trustee, the related
Series Controlling Party or to the related Holders is intended to be exclusive
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of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 10.07. Delay or Omission Not Waiver. No delay or omission of
any of the Trustee, the related Series Controlling Party or any Holder of any
related Note to exercise any right or remedy accruing upon any related Default
or related Event of Default shall impair any such right or remedy or constitute
a waiver of any such related Default or related Event of Default or an
acquiescence therein. Every right and remedy given by this Article or by law to
the Trustee or to the related Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the related Holders, as
the case may be.
Section 10.08. Control by Holders. If the Trustee is the Series
Controlling Party with respect to a Series, the Holders of a majority of the
Outstanding Amount of the Notes with respect to such Series shall have the right
to direct the time, method and place of conducting any Proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee, with respect to the Notes; provided that
(1) such direction shall not be in conflict with any rule
of law, with this Master Agreement or with the
related Series Supplement, and
(2) the Trustee may take any other action deemed proper
by the Trustee which is not inconsistent with such
direction.
Section 10.09. Waiver of Past Defaults. The Series Controlling Party
with respect to a Series may, on behalf of the Holders of all the Notes of the
related Series waive any past Default relating to such Series or Event of
Default relating to such Series hereunder and its consequences, except a Default
relating to such Series:
(1) in the payment of the principal of or interest, if
any, on any Note of the related Series, or
(2) in respect of a covenant or provision hereof which
cannot be modified or amended without the consent of
the Holder of each Outstanding Note of the related
Series affected.
The Trustee may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to waive any past Default or
Event of Default of the related Series. If a record date is fixed, the Holders
of the related Series on such record date, or their duly designated proxies, and
only such Persons, shall be entitled to waive any such Default or Event of
Default, whether or not such Holders remain Holders after such record date; and
unless such majority in principal amount shall have been obtained prior to the
date which is 90
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days after such record date, any such waiver previously given shall
automatically and without further action by any Holder be cancelled and of no
further effect.
Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Master Agreement and each applicable Series Supplements; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereon.
Section 10.10. Undertaking for Costs. All parties to this Master
Agreement and the related Series Supplement agree, and each Holder of any Note
by such Holder's acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Master Agreement or the related Series Supplement, or
in any Suit against the Trustee for any action taken, suffered or omitted by it
as Trustee, the filing by any party litigant in such suit of an undertaking to
pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Obligors, to any suit
instituted by the Trustee or any Series Support Provider, to any suit instituted
by any Holder, or group of Holders, holding in a the aggregate more than 10% of
the Outstanding Amount of the Notes of the related Series, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
or interest on any Note on or after the respective due dates expressed in such
Note and the related Series Supplement.
Section 10.11. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Master Agreement or any Series Supplement
shall not be affected by the seeking, obtaining or application for any other
relief under or with respect to this Master Agreement or such Series Supplement.
Neither the lien hereof, the related Series Supplement nor any rights or
remedies of the Trustee or the Noteholders shall be impaired by the recovery of
any judgment by the Trustee against the Obligors or by the levy of any execution
under such judgment upon any portion of the related Series Trust Estate or upon
any of the assets of the Obligors.
ARTICLE XI
THE TRUSTEE
Section 11.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default with respect
to a Series:
(1) the Trustee undertakes to perform with respect to
such Series such duties and only such duties as are
specifically set forth in this Master Agreement
and/or the related Series Supplement, and no implied
covenants or
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obligations shall be read into this Master Agreement
or the related Series Supplement against the Trustee;
and
(2) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth of the
statements and the correctness of the opinions
expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the
requirements of this Master Agreement and/or the
related Series Supplement; but in the case of any
such certificates or opinions which by any provision
hereof are specifically required to be furnished to
the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they
conform to the requirements of this Master Agreement
and/or the related Series Supplement.
(b) If an Event of Default with respect to a Series has occurred and is
continuing, the Trustee shall exercise such of the rights and powers with
respect to such Series vested in it by this Master Agreement and/or the related
Series Supplement, and use the same degree of care and skill in their exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of his or her own affairs.
(c) No provision of this Master Agreement or any Series Supplement
shall be construed to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct;
provided that
(1) this subsection shall not be construed to limit the
effect of subsection (a) of this Section;
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts;
(3) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good
faith in accordance with the direction of the related
Series Support Provider or, if the related Series
Support Provider is not a Series Controlling Party or
if there is no Series Support Provider for such
Series, the Holders of a majority of the Outstanding
Amount of the Notes of the related Series, relating
to the time, method and place of conducting any
proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the
Trustee, under this Master Agreement, the related
Series Supplement or the related Series Support with
respect to the Notes of the related Series; and
(4) no provision of this Master Agreement or the related
Series Supplement shall require the Trustee to expend
or risk its own funds or otherwise incur any
financial liability in the performance of any of its
duties hereunder or thereunder, or in the exercise of
any of its rights or powers, if it shall have
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reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not herein or therein expressly so provided, every
provision of this Master Agreement and the related Series Supplement relating to
the conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of paragraphs (a), (b) and (c) of this
Section.
(e) The Trustee shall not be liable for interest on any money received
by it.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Master
Agreement or the related Series Supplement.
(g) The Trustee shall, upon one Business Day's prior notice received by
the Trustee, permit any representative of the related Series Controlling Party,
the Servicer and the Obligors or any representative of the related Series
Support Provider, if any, during the Trustee's normal business hours, to examine
all books of account, records, reports and other papers of the Trustee relating
to the Notes of the related Series, to make copies and extracts therefrom and to
discuss the Trustee's affairs and actions, as such affairs and actions relate to
the Trustee's duties with respect to such Notes, with the Trustee's officers and
employees responsible for carrying out the Trustee's duties with respect to such
Notes.
(h) In no event shall the Trustee be required to perform, or be
responsible for the manner of performance of, any of the obligations of any
Servicer, with respect to any Series except during such time, if any, as the
Trustee, in its capacity as Successor Servicer for such Series shall be the
successor to, and be vested with the rights, powers, duties and privileges of
the Servicer in accordance with the provisions of Section 9.02 hereof.
(i) The Trustee shall maintain or cause to be maintained, in the
Borough of Manhattan in the City of New York, an office or agency where Notes
may be surrendered for registration of transfer or exchange (except that Bearer
Notes may not be surrendered for exchange at any such office or agency in the
United States) and where notices and demands to or upon the Obligors in respect
of the Notes, this Master Agreement and the related Series Supplement may be
served.
Section 11.02. Notice of Defaults. If a Default or Event of Default
occurs and is continuing with respect to a Series and if it is known to a
Responsible Officer of the Trustee, the Trustee shall mail to each Noteholder of
the related Series notice of such Default or Event of Default promptly after it
occurs and shall notify the Obligors, the Originator, the Servicer and the
related Series Support Provider, if any, of any such Default or Event of Default
promptly after it occurs. Except in the case of a Default in payment of
principal of or interest on any Note, the Trustee may withhold the notice (but
not to the related Series Support Provider, if any, or the Obligors) if and so
long as a committee of its Responsible Officers in good faith determines that
withholding the notice is not materially adverse to the interest of the
Noteholders of the related Series.
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Section 11.03. Certain Rights of Trustee. Subject to the provisions of
Section 11.01:
(a) the Trustee may rely on, and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Obligors mentioned herein shall be
sufficiently evidenced by an Obligors' Order;
(c) whenever in the administration of this Master Agreement and/or any
Series Supplement the Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering, or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officer's
Certificate;
(d) the Trustee may consult with counsel and the advice of such counsel
or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Master Agreement and/or any Series
Supplement at the request or direction of any of the related Series Support
Provider, if any, or the Holders of the related Series pursuant to this Master
Agreement, unless such Series Support Provider or such Holders shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with such
request or direction:
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation, into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the related Obligors, personally or by agent or
attorney; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 11.04. Not Responsible for Recitals or Issuance of Notes. The
recitals contained herein, in any Series Supplement and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Obligors, and the Trustee or any Authenticating Agent assumes no
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Master Agreement, any Series Supplement
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or of the Notes, or any Series Trust Estate. The Trustee or any Authenticating
Agent shall not be accountable for the use or application by the Obligors of
Notes or the proceeds thereof.
Section 11.05. May Hold Notes. The Trustee, any Authentication Agent,
any Paying Agent, any Note Registrar or any other agent of the Obligors, in its
individual or any other capacity, may become the owner or pledgee of Notes and,
subject to Sections 11.07 and 11.12, may otherwise deal with the Obligors with
the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, Note Registrar or such other agent.
Section 11.06. Compensation and Indemnity.
(a) The Obligors agree that the Trustee will be paid, and the Trustee
shall be entitled to, certain annual fees with respect to its administration of
the related Notes and the related Series Trust Estate, which shall not be
limited by any law on compensation of a Trustee of an express trust, and certain
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services as more further set
forth in the related Series Supplement. The agreement with respect to such fees
and expenses shall be set forth in a separate agreement between the Trustee and
the Obligors. The Obligors also agree to cause to be provided to the Trustee
indemnity against any and all loss, liability or expense (including attorneys'
fees) incurred by it in connection with the administration of this trust and the
performance of its duties hereunder.
(b) When the Trustee incurs expenses after the occurrence of an
Insolvency Event with respect to any Obligor, the expenses are intended to
constitute expenses of administration under Title 11 of the United States Code
or any other applicable Federal or state bankruptcy, insolvency or similar law.
Notwithstanding anything else set forth in this Master Agreement, any Series
Supplement or any Series Related Documents, the Trustee agrees that the
obligations of the Obligors to the Trustee hereunder and under the related
Series Related Documents shall be recourse to the related Series Trust Estate
only. In addition, the Trustee agrees that its recourse to the Obligors and the
related Series Trust Estate shall be limited to the right to receive the
distributions as provided for in the payment priority provisions of the related
Series Supplement.
Section 11.07. Disqualification; Conflicting Interests. If this Master
Agreement is qualified under the Trust Indenture Act and if the Trustee has or
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act, the Trustee shall either eliminate such interest or resign, to the extent
and in the manner provided by, and subject to the provisions of, the Trust
Indenture Act and this Master Agreement.
Section 11.08. Corporate Trustee Required; Eligibility. There shall at
all times be a Trustee hereunder, which (a) shall be a commercial bank or trust
company or organized and doing business under the laws of the United States of
America or any State thereof, (b) shall have a combined capital and surplus of
at least $50,000,000, (c) a long term deposit rating of at least A3 from Moody's
or otherwise be acceptable to Moody's and a long-term deposit rating of at least
A- from S&P or otherwise be acceptable to S&P and (d) shall be authorized to
exercise corporate trust powers and be subject to supervision or examination by
Federal or State authority. If such commercial bank or trust company publishes
reports of condition at least annually,
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pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such commercial bank or trust company shall be deemed to be its
combined capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
Section 11.09. Resignation and Removal, Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 11.08.
(b) The Trustee may resign at any time with respect to the Notes by
giving written notice thereof to the Obligors. If the instrument of acceptance
by a successor Trustee required by Section 11.10 shall not have been delivered
to the Trustee within 30 days after the giving of such notice of resignation,
the resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Notes.
(c) The Trustee may be removed at any time with respect to the Notes by
Act of the Majority Control Parties, delivered to the Trustee and to the
Obligors.
(d) If at any time:
(1) The Trustee shall fail to comply with Section 11.07
after written request therefor by the Obligors or by
any Holder who has been a bona fide Holder of a Note
for at least six months, or
(2) the Trustee shall cease to be eligible under Section
11.08 and shall fail to resign after written request
therefor by the Obligors or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or
any public officer shall take charge or control of
the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or
liquidation, then, in any such case, the Obligors
(with the consent of each Series Support Provider as
to which a Support Default has not occurred and is
continuing) may remove the Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Notes, the Obligors (with the consent of each Series Support
Provider as to which a Support Default has not occurred and is continuing) shall
promptly appoint a successor Trustee and shall comply with the applicable
requirements of Section 11.10.
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(f) The Obligors shall give notice of each resignation and each removal
of the Trustee with respect to the Notes and each appointment of a successor
Trustee with respect to the Notes by mailing written notice of such event by
first-class mail, postage prepaid, to all holders of Notes as their names and
addresses appear in the Note Register. Each notice shall include the name of the
successor Trustee with respect to the Notes and the address of its Corporate
Trust Office.
Section 11.10. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Notes, every such successor Trustee so appointed shall execute,
acknowledge and deliver to the Obligors, each Series Support Provider, if any
and to the retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers, trusts and duties
of the retiring Trustee; but, on the request of the Obligors, the related Series
Support Provider, if any, or the successor Trustee, such retiring Trustee shall,
upon Payment of its charges, execute and deliver an instrument transferring to
such successor Trustee all the rights, powers and trusts of the Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) Upon request of any such successor Trustee, the Obligors and each
Obligor shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts referred to in paragraph (a) of this Section.
Section 11.11. Merger, Conversion, Consolidation or Succession to
Business. Any corporation or other entity into which the Trustee may be merged
or converted or with which it may be consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation or other entity succeeding to all
or substantially all the corporate trust business of the Trustee, shall be the
successor of the Trustee hereunder, provided such corporation or other entity
shall be otherwise qualified and eligible under this Article, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto. The Trustee shall provide the Obligors and each Series Support
Provider prompt notice of any such transaction after the completion thereof. In
case any Notes shall have been authenticated, but not delivered, by the Trustee
then in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such authentication and deliver the Notes so
authenticated with the same effect as if such successor Trustee had itself
authenticated such Notes.
Section 11.12. Preferential Collection of Claims Against Obligors. If
this Master Agreement is ever qualified under the Trust Indenture Act, then the
provisions of Section 311 of the Trust Indenture Act shall govern.
Section 11.13. Appointment of Authenticating Agent. As of the date of
the Master Agreement and at any time when any of the Notes remain Outstanding
the Trustee may appoint an Authenticating Agent or agents with respect to one or
more Series or Classes of Notes which
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shall be authorized to act on behalf of the Trustee to authenticate Notes of
such Series or Class issued upon exchange, registration of transfer or partial
prepayment thereof, or pursuant to Section 5.05, and Notes so authenticated
shall be entitled to the benefits of this Master Agreement and shall be valid
and obligatory for all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Master Agreement or any Series Supplement to
the authentication and delivery of Notes by the Trustee upon exchange,
registration of transfer or partial prepayment thereof or the Trustee's
certificate of authentication in connection therewith, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Obligors, shall be authorized under law and shall meet the
eligibility criteria established for the Trustee, as set forth in Section 11.08
hereof. If such Authenticating Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, such Authenticating Agent shall
resign immediately in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Obligors. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice thereof
to such Authenticating Agent and to the Obligors. Upon receiving such a notice
of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Obligors and shall mail written notice of
such appointment by first-class mail, postage prepaid, to all Holders of the
related Notes, as their names and addresses appear in the Note Register. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section. No resignation or termination of an Authenticating
Agent shall become effective until a successor Authenticating Agent shall be
appointed and qualified hereunder or the Trustee assumes the duties of
Authenticating Agent hereunder.
The Obligors agree to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section.
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In the event an Authenticating Agent is appointed under this Master
Agreement, the Trustee shall incur no liability for such appointment or for any
misconduct or negligence of such Authenticating Agent, including without
limitation, its authentication of the Notes upon original issuance or pursuant
to Sections 5.03, 5.04 or 5.05. In the event the Trustee does incur liability
for any such misconduct or negligence of the Authentication Agent, the Obligors
agrees to indemnify the Trustee for, and hold it harmless against, any such
liability, including the costs and expenses of defending itself against any
liability in connection with such misconduct or negligence of the
Authenticating, Agent.
If an appointment with respect to one or more Series, Classes or
Tranches is made pursuant to this Section, the Notes of such Series or Classes
may have endorsed thereon, in addition to the Trustee's certificate of
authentication, an alternate certificate of authentication in the following
form:
This is one of the Notes referred to in the within-mentioned Master
Agreement and the within-mentioned Supplement thereto.
-------------------------------,
as Trustee
By:
----------------------------------
as Authenticating Agent
By:
----------------------------------
Authorized Officer
Section 11.14. Paying Agent.
(a) The payment responsibilities for the Notes shall be performed by a
Paying Agent, appointed by the Obligors which shall be authorized to exercise
corporate trust powers and shall meet the eligibility criteria established for
the Trustee, as set forth in Section 11.08 hereof. The Trustee is hereby
initially appointed Paying Agent for the purpose of making payments on the Notes
as herein provided.
(b) Each Paying Agent shall be acceptable to the Obligors, shall be
authorized under law and shall meet the eligibility criteria established for the
Trustee, as set forth in Section 11.08 hereof. If such Paying Agent publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such Paying Agent shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time a Paying Agent shall cease to be eligible
in accordance with the provisions of this
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Section, such Paying Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which a Paying Agent may be merged or converted or
with which it may be consolidated, or any corporation resulting from any mercer,
conversion or consolidation to which such Paying Agent shall be a party, or any
corporation succeeding to the corporate agency or corporate trust business of a
Paying Agent, shall continue to be a Paying Agent, provided such corporation
shall be otherwise eligible under this Section, without the execution or filing
of any paper or any further act on the part of the Trustee or the Paying Agent.
A Paying Agent may resign at any time by giving, written notice thereof
to the Trustee and to the Obligors. The Trustee may at any time terminate the
agency of a Paying Agent by giving a written notice thereof to such Paying Agent
and to the Obligors. Upon receiving- such a notice of resignation or upon such a
termination, or in case at any time such Paying Agent shall cease to be eligible
in accordance with the provisions of this Section, the Trustee may appoint a
successor Paying Agent which shall be acceptable to the Obligors and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of the related Notes, as their names and addresses appear in the Note
Register. Any successor Paying Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as a Paying
Agent. No successor Paying Agent shall be appointed unless eligible under the
provisions of this Section. No resignation or termination of a Paying Agent
shall become effective until a successor Paying Agent shall be appointed and
qualified hereunder or the Trustee assumes the duties of Paying Agent hereunder.
The Obligors agree to pay to each Paying Agent from time to time
reasonable compensation for its services under this Section.
In the event a Paying Agent is appointed under this Master Agreement,
the Trustee shall incur no liability for such appointment or for any misconduct
or negligence of such Paying, Agent. In the event the Trustee does incur
liability for any such misconduct or negligence of the Paying Agent, the
Obligors agree to indemnify the Trustee for, and hold it harmless against, any
such liability, including the costs and expenses of defending itself against any
liability in connection with such misconduct or negligence of the Paying Agent.
Section 11.15. Appointment of Co-Trustee or Separate Trustee.
(a) Notwithstanding any other provisions of this Master Agreement, at
any time, for the purpose of meeting any legal requirement of any jurisdiction
in which any part of the Trust may at the time be located, the Trustee, shall
have the power and may execute and deliver all instruments to appoint one or
more Persons to act as a co-trustee or co-trustees, or separate trustee or
separate trustees, of all or any part of the related Series Trust Estate, and to
vest in such Person or Persons, in such capacity and for the benefit of the
related Noteholders, such title to the related Series Trust Estate, or any part
hereof, and subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Trustee may consider necessary or
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desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor Trustee under Section 11.08 and no
notice to Noteholders of the appointment of any co-trustee or separate trustee
shall be required under Section 11.09 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder, and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing, given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Each instrument appointing any
separate trustee or co-trustee shall refer to this Master Agreement and the
conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Trustee or
separately, as may be provided therein, subject to all the provisions of this
Master Agreement and the related Series Supplement(s), specifically including
every provision of this Master Agreement and the related Series Supplement(s)
relating to the conduct of, affecting the liability of, or affording protection
to, the Trustee. Every such instrument shall be filed with the Trustee.
(d) If any separate trustee or co-trustee shall die, become incapable
of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Trustee, to the extent
permitted by law, without the appointment of a new successor trustee.
ARTICLE XII
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND OBLIGORS
Section 12.01. Obligors to Furnish Trustee Names and Addresses of
Holders. The Obligors will furnish or cause to be furnished to the Trustee with
respect to each Series of Notes
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(a) not more than five days after the earlier of (i) each Record Date with
respect to such Series and (ii) three months after the last Record Date with
respect to such Series, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Notes of such Series as of
such Record Date, (b) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Obligors of any such request, a list of
similar form and content as of a date not more than 10 days prior to the time
such list is furnished; provided, however, that so long as the Trustee is the
Note Registrar, no such list shall be required to be furnished. The Trustee or,
if the Trustee is not the Note Registrar, the Obligors shall furnish or cause to
be furnished to the related Series Support Provider, if any, in writing on an
annual basis and at such other times as such Series Support Provider may request
a copy of such list with respect to the related Series.
Section 12.02. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 12.01 and the names and
addresses of Holders received by the Trustee in its capacity as Note Registrar.
The Trustee may destroy any list furnished to it as provided in Section 12.01
upon receipt of a new list so furnished.
(b) If three or more Holders of Notes of any particular Series (herein
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Note for a period
of at least six months preceding the date of such application, and such
application states that the applicants desire to communicate with other Holders
of Notes of such Series with respect to their rights under this Master
Agreement, the related Series Supplement or under such Notes and is accompanied
by a copy of the form of proxy or other communication which such applicants
propose to transmit, then the Trustee shall, within five business days after the
receipt of such application, at its election, either
(i) afford such applicants access to the information preserved
at the time by the Trustee in accordance with subsection 12.02(a), or
(ii) inform such applicants as to the approximate number of
Holders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with subsection 12.02(a), and
as to the approximate cost of mailing to such Holders the form of proxy
or other communication, if any, specified in such application.
(iii) Every Holder of Notes, by receiving and holding the
same, agrees with the Obligors and the Trustee that neither the
Obligors nor the Trustee nor any agent of either of them shall be held
accountable by reason of the disclosure of any such information as to
the names and addresses of the Holders in accordance with Section 12.01
or 12.02(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason
of mailing any material pursuant to a request made under Section 12.01
or subsection 12.02(b).
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Section 12.03. Reports by Trustee. If this Master Agreement is ever
qualified under the Trust Indenture Act, then the Trustee shall comply with the
provisions of Section 313 of the Trust Indenture Act.
Section 12.04. Reports by Obligors. If this Master Agreement is
qualified under the Trust Indenture Act, the Obligors shall:
(1) file or cause to be filed with the Trustee, within 15 days
after the Obligors are required to file the same with the
Commission, copies of the annual reports and of the
information, documents and other reports (or copies of such
portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the
Obligors may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934; or, if the Obligors are not required to file
information, documents or reports pursuant to either of said
Sections, then it shall file with the Trustee and the
Commission, in accordance with rules and regulations
prescribed from time to time by the Commission, such of the
supplementary and periodic information, documents and reports
which may be required pursuant to Section 13 of the Securities
Exchange Act of 1934 in respect of a security listed and
registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(2) file or cause to be filed with the Trustee and the Commission,
in accordance with rules and regulations prescribed from time
to time by the Commission, such additional information,
documents and reports with respect to compliance by the
Obligors with the conditions and covenants of this Master
Agreement as may be required from time to time by such rules
and regulations;
(3) transmit or cause to be transmitted by mail to all Holders, as
their names and addresses appear in the Note Register and each
Series Support Provider within 30 days after the filing
thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Obligors
pursuant to paragraphs (1) and (2) of this Section as may be
required by rules and regulations prescribed from time to time
by the Commission; and
(4) furnish any other periodic reports as required by the Trust
Indenture Act.
ARTICLE XIII
MASTER AGREEMENT SUPPLEMENTS
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Section 13.01. Supplements Affecting All Series, or the Master
Agreement Generally.
(a) Without the consent of any Holders, the Obligors, the Trustee when
authorized by an Obligors' Order and the Servicer, at any time and from time to
time, may enter into one or more Master Agreement Supplements, in form
satisfactory to the Trustee, for any of the following purposes:
(1) to authorize the issuance of one or more series of Notes;
(2) to evidence the succession, in compliance with the applicable
provisions hereof, of another corporation to any Obligors and
the assumption by any such successor of the covenants of the
Obligors herein, in any Series Supplement and in the Notes; or
(3) to add to the covenants of the Obligors for the benefit the
Holders of the Notes or to surrender any right or power herein
conferred upon the Obligors; or
(4) to add to or change any of the provisions of this Master
Agreement to such extent as shall be necessary to permit or
facilitate the issuance of Notes in bearer form, registrable
or not registrable as to principal, and with or without
interest coupons, or to permit or facilitate the issuance of
Notes in uncertificated form, or to facilitate the issuance of
Notes in global form through the facilities of a Depository;
or
(5) to modify the restrictions on and procedures for resale and
other transfers of the Notes to reflect any change in
applicable law or regulation (or the interpretation thereof)
or in practices relating to the resale or transfer of
restricted securities generally; or
(6) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Notes and
to add to or change any of the provisions of this Master
Agreement as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 11.15; or
(7) to modify, eliminate or add to the provisions of this Master
Agreement to such extent as shall be necessary to qualify,
requalify or continue the qualification of this Master
Agreement (including any supplemental indenture) under the
Trust Indenture Act, or under any similar Federal statute
hereafter enacted, and to add to this Master Agreement such
other provisions as may be expressly permitted by the Trust
Indenture Act, excluding, however, the provisions referred to
in Section 316(a)(2) of the Trust Indenture Act as in effect
at the date as of which this instrument
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was executed or any corresponding provision in any similar
Federal statute hereinafter enacted; or
(8) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to
matters or questions arising under this Master Agreement, as
long as such action shall not adversely affect the interests
of the Holders of Notes of any Series affected thereby in any
material respect.
(b) The Obligors, the Servicer and the Trustee, when authorized by an
Obligors' Order, may, also without the consent of any of the Holders of the
Notes and with prior written notice to each Series Support Provider, enter into
a Master Agreement Supplement or Supplements for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Master Agreement or of modifying in any manner the rights of the
Holders of the Notes under this Master Agreement; provided, however that such
action shall not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of any Noteholder.
(c) The Obligors, the Servicer and the Trustee, when authorized by an
Obligors' Order, also may, with prior notice to each Series Support Provider,
and with the consent of the Holders of not less than a majority of the
Outstanding Amount of the Notes of each affected Series, by Act of said Holders
delivered to the Obligors and the Trustee, enter into a Master Agreement
Supplement or Supplements hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Master
Agreement or of modifying in any manner the rights of the Holders of Notes under
this Master Agreement; provided that, subject to the express rights of the
related Series Support Provider under the related Series Related Documents, no
such Master Agreement Supplement shall, without the consent of the Holder of
each Outstanding Note of each affected Series affected thereby,
(1) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount
thereof or the rate of, or method of computation of the rate
of, interest thereon or any prepayment or redemption price
with respect thereto, change the provision of this Master
Agreement relating to the application or collections on, or
the proceeds of the sale of, the related Series Trust Estate
to payment of principal of or interest on the Notes, or change
any place of payment where, or the coin or currency in which,
any Note or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such
payment on or after the respective due dates thereof, or
(2) reduce the percentage of the Outstanding Amount of the Notes,
the consent of whose Holders is required for any such Master
Agreement Supplement, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions
of this Master Agreement or certain
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defaults hereunder and their consequences) provided for in
this Master Agreement, or
(3) permit the creation of any lien prior to the lien created by
the related Series Supplement with respect to any part of the
related Series Trust Estate, or terminate the lien created by
the related Series Supplement on any Pledged Property subject
hereto or deprive any related Holder of the security afforded
by the lien of the related Series Supplement, except to the
extent expressly permitted by this Master Agreement, the
related Series Supplement or any other related Series Related
Document, or
(4) modify any of the provisions of this Section except to
increase any such percentage or to provide that certain other
provisions of this Master Agreement, the related Supplement or
the related Series Related Documents cannot be modified or
waived without the consent of the Holder of each Outstanding
Note affected thereby, or
(5) modify or alter the provisions of the second proviso to the
definition of the term "Outstanding."
The Trustee may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any Master
Agreement Supplement described in this Section 13.01. If a record date is fixed,
the applicable Holders on such record date or their duly designated proxies, and
only such Persons, shall be entitled to consent to such Master Agreement
Supplement, whether or not such Holders remain Holders after such record date;
provided that, unless such consent shall have become effective by virtue of the
requisite percentage having been obtained prior to the date which is 90 days
after such record date, any such consent previously given shall automatically
and without further action by any Holder be cancelled and of no further effect.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed Master Agreement Supplement, but it
shall be sufficient if such Act shall approve the substance thereof.
The Obligors shall in their discretion (which may be based on an
Opinion of Counsel) determine whether or not any Notes would be affected by any
Master Agreement Supplement and any such determination shall be conclusive upon
the Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
Promptly after the execution by the parties hereto of any Master
Agreement Supplement pursuant to this Section, the Trustee shall mail to the
Holders of the Notes of the affected Series a notice setting, forth in general
terms the substance of such Master Agreement Supplement. Any failure of the
Trustee to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such Master Agreement Supplement.
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Section 13.02. Supplements Authorizing a Series of Notes.
(a) Each Series of Notes issued hereunder shall be issued pursuant to a
Series Supplement, which shall set forth the terms and provisions of such
Series.
(b) Amendments to Series Supplements shall be covered by the provisions
of Section 13.01, which for such purpose shall be deemed to refer only to the
related Series Supplement. The Trustee may conclusively rely on an Opinion of
Counsel as to which Series Supplements relate to which Series, or to this Master
Agreement (and thus all Series) as a whole.
Section 13.03. Execution of Master Agreement Supplements. In executing,
or accepting the additional trusts created by, any Master Agreement Supplement
permitted by this Article or the modifications thereby of the created by this
Master Agreement, the Trustee may receive, and (subject to Section 11.01) shall
be fully protected in relying upon, an Opinion of Counsel stating that the
execution of such Master Agreement Supplement is authorized or permitted by this
Master Agreement. The Trustee may, but shall not be obligated to, enter into any
such Master Agreement Supplement which affects the Trustee's own rights, duties
or immunities under this Master Agreement or otherwise.
Section 13.04. Effect of Master Agreement Supplements. Upon the
execution of any Master Agreement Supplement under this Article, this Master
Agreement shall be modified in accordance therewith, and such Master Agreement
Supplement shall form a part of this Master Agreement for all purposes, and
every Holder of Notes theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 13.05. Reference in Notes to Master Agreement Supplements.
Notes authenticated and delivered after the execution of any Master Agreement
Supplement pursuant to this Article may, and shall if required by the Obligors,
bear a notation as to any matter provided for in such Master Agreement
Supplement. If the Obligors shall so determine, new Notes so modified as to
conform, in the opinion of the Obligors, to any such Master Agreement Supplement
may be prepared and executed by the Obligors and authenticated and delivered by
the Trustee in exchange for Outstanding Notes.
ARTICLE XIV
COVENANTS
The Obligors hereby covenant and agree that so long as this Master
Agreement is in effect and any Notes remain Outstanding:
Section 14.01. Payment of Principal and Interest. The Obligors will
duly and punctually pay or cause to be paid, on a nonrecourse basis and solely
from the funds available from the related Series Trust Estate, the principal of
and interest on the Notes of the related Series in accordance with the terms of
such Notes, this Master Agreement and the related Series Supplement. Amounts on
deposit in the related Series Accounts (other than amounts
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representing payments under any related Series Support) in respect of principal
and interest on a Payment Date shall constitute full satisfaction of the
Obligors' obligation with respect to the payment of such principal and interest
on the related Notes. Amounts properly withheld under the Code by any Person
from a payment to any Noteholder of interest or principal shall be considered as
having been paid by the Obligors to such Noteholder for all purposes of this
Master Agreement.
Section 14.02. Maintenance of Non-U.S. Office or Agency. The Obligors
will maintain or cause to be maintained (a) if and so long as any Series or
Class is listed on the Luxembourg Stock Exchange, Luxembourg, and (b) in London,
in the case of Bearer Notes and Holders thereof, if any for so long as any
Bearer Notes are outstanding, an office or agency where Notes may be surrendered
for registration of transfer or exchange (except that Bearer Notes may not be
surrendered for exchange at any such office or agency in the United States) and
where notices and demands to or upon the Obligors in respect of the Notes, this
Master Agreement and the related Series Supplement may be served. The Obligors
will give or cause to be given prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Obligors shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee, and each Obligor hereby appoints the Trustee as its agent
to receive all such presentations, surrenders, notices and demands.
Section 14.03. Consolidation, Merger, Sale of Assets.
(a) No Obligor shall consolidate or merge with or into any other
Person, unless
(i) the Person (if other than such Obligor) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any State
and shall expressly assume, by a Master Agreement Supplement, executed
and delivered to the Trustee, the Obligors and the Servicer the due and
punctual payment of the principal of and interest on all Notes
previously issued and the performance or observance of every agreement
and covenant of this Master Agreement and the related Series Supplement
and each other related Series Related Document on the part of such
Obligor to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default with respect to any Series or Event of Default with respect to
any Series previously issued and shall have occurred and be continuing;
(iii) each Series Support Provider relating to such Series
previously issued, if any, shall have consented in writing to such
transaction; and
(iv) any action as is necessary to maintain the lien and
security interest created in favor of the Trustee by the related Series
Supplement shall have been taken.
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<PAGE> 81
(b) No Obligor shall convey or transfer all or substantially all of its
properties or assets or any Series Trust Estate to any Person (except as
expressly permitted by this Master Agreement, the related Series Supplement or
the related Series Related Documents), unless
(i) the Person that acquires by conveyance or transfer such
Series Trust Estate shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any State, (B) expressly assume, by a Master Agreement Supplement,
executed and delivered to the Trustee the due and punctual payment of
the principal of and interest on all Notes previously issued and the
performance or observance of every agreement and covenant of this
Master Agreement, the related Series Supplement or the related Series
Related Documents on the part of such Obligor to be performed or
observed, all as provided herein or therein, (C) expressly agree by
means of such Master Agreement Supplement that all right, title and
interest so conveyed or transferred shall be subject and subordinate to
the rights of Holders of the related Notes, (D) unless otherwise
provided in such Master Agreement Supplement, expressly agree to
indemnify, defend and hold harmless such Obligor against and from any
loss, liability or expense arising under or related to this Master
Agreement, the related Series Supplement and the Notes previously
issued and (E) expressly agree by means of such supplemental indenture
that such Person (or if a group of Persons, then one specified Person)
shall make all filings with the Commission (and any other appropriate
Person) required by the Exchange Act in connection with the related
Notes;
(ii) immediately after giving effect to such transaction, no
Default with respect to the affected Series or Event of Default with
respect to any Series previously issued shall have occurred and be
continuing;
(iii) each Series Support Provider relating to such Series
previously issued, if any, shall have consented in writing to such
transaction; and
(iv) any action as is necessary to maintain the lien and
security interest created in favor of the related Trustee(s) by the
related Series Supplement(s) shall have been taken.
Section 14.04. Negative Covenants. Until the Termination Date, no
Obligor shall:
(i) except as expressly permitted by this Master Agreement,
each related Series Supplement and each related Series Related
Document, sell, transfer, exchange or otherwise dispose of any of the
properties or assets constituting any Series Trust Estate, unless
directed to do so by the related Series Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest in respect of, the Notes (other than amounts
properly withheld from such payments under the Code) or assert any
claim against any present or former Noteholder by reason of the payment
of the taxes levied or assessed upon any part of any Series Trust
Estate; or
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<PAGE> 82
(iii) (A) except as permitted by this Master Agreement, any
related Series Supplement or any related Series Related Documents,
permit the validity or effectiveness of the related Series Supplement
to be impaired, or permit the lien in favor of the Trustee created by
the related Series Supplement to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations with respect to any Notes
under this Master Agreement or any Series Supplement except as may be
expressly permitted hereby, (B) permit any lien, charge, excise, claim,
security interest, mortgage or other encumbrance (other than the lien
in favor of the Trustee created by the related Series Supplement) to be
created on or extend to or otherwise arise upon or burden any Series
Trust Estate or any part thereof or any interest therein or the
proceeds thereof (other than tax liens, mechanics' liens, storage liens
and other liens that arise by operation of law, in each case on any
Pledged Property and arising solely as a result of an action or
omission of the related underlying obligors), (C) permit the lien in
favor of the Trustee created by the related Series Supplement not to
constitute a valid first priority (other than with respect to any such
tax, mechanics', storage or other lien) security interest in the
related Series Trust Estate (provided that no notation or filing of the
transfer of the Liens on the title documents of any Pledged Property is
required as of the date of this Master Agreement), or (D) amend, modify
or fail to comply with the provisions of the related Series Related
Documents without the prior written consent of the related Series
Controlling Party.
Section 14.05. Performance of Obligations: Servicing of each Series
Trust Estate.
(a) No Obligor will take any action and will use its best efforts not
to permit any action to be taken by others that would release any Person from
any of such Person's material covenants or obligations under any instrument or
agreement included in any Series Trust Estate or that would result in the
amendment, hypothecation, subordination, termination or discharge of, or impair
the validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Master Agreement, the related Series Supplement or
related Series Related Document or such other instrument or agreement.
(b) Any Obligor may contract with other Persons (including other
Obligors) to assist it in performing its duties under this Master Agreement, and
any performance of such duties by a Person identified to the Trustee and each
related Series Support Provider in an Officer's Certificate of such Obligor
shall be deemed to be action taken by such Obligor.
(c) Each Obligor will punctually perform and observe or cause to be
performed and observed all of its obligations and agreements contained in this
Master Agreement, each related Series Supplement and each related Series Related
Document and in the instruments and agreements included in each Series Trust
Estate, including but not limited to filing, or causing to be filed all UCC
financing statements and continuation statements required to be filed by the
terms of this Master Agreement, each related Series Supplement and each related
Series Related Document in accordance with and within the time periods provided
for herein and therein.
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<PAGE> 83
(d) If any Obligor has knowledge of the occurrence of a "Servicer
Termination Event" under any Series Related Document, the Obligor shall promptly
notify the Trustee and the related Series Support Provider, if any, shall
specify in such notice the action, if any, such Obligor is taking with respect
of such default. If such Servicer Termination Event shall arise from the failure
of the Servicer to perform any of its duties or obligations hereunder with
respect to the related Series Trust Estate, the Obligors shall take all
reasonable steps available to it to remedy such failure.
(e) Upon any termination of any Servicer's rights and powers pursuant
to any Series Related Document, the Obligors shall promptly notify the Trustee.
As soon as a successor Servicer is appointed, the Obligors shall notify the
Trustee of such appointment, specifying in such notice the name and address of
such successor Servicer.
Section 14.06. Money for Note Payments to Be Held in Trust. All
payments of amounts due and payable with respect to any Notes that are to be
made from amounts withdrawn from the related Series Account shall be made on
behalf of the Obligors by the Trustee or by another Paying Agent, and no amounts
so withdrawn from any Series Account for payments of Notes shall be paid over to
any Obligor, except as provided in the related Series Supplement.
The Obligors will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will, with respect to each related Series of Notes:
(1) hold all sums held by it for the payment of the
principal of or interest on the related Notes in
trust for the benefit of the Persons entitled thereto
until such sums shall be paid to such Persons or
otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the
Obligors (or any other obligor upon the related
Notes) in the making of any payment of principal or
interest on such Notes;
(3) at any time during the continuance of any such
default, upon the written request of the Trustee,
forthwith pay to the Trustee all sums so held in
trust by such Paying Agent;
(4) immediately resign as a Paying Agent and forthwith
pay to the Trustee all sums held by it in trust for
the payment of the related Notes if at any time it
ceases to meet the standards required to be met by a
Paying Agent at the time of its appointment; and
(5) comply with all requirements of the Code with respect
to the withholding from any payments made by it on
any Notes of any applicable withholding
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<PAGE> 84
taxes imposed thereon and with respect to any
applicable reporting requirements in connection
therewith.
The Obligors may at any time, for the purpose of obtaining the
satisfaction and discharge of any Series Supplement or for any other purpose,
pay, or by Obligors' Order direct any Paying Agent to pay, to the Trustee all
sums held in trust by such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, in trust for
the payment of the principal of or interest on any Note and remaining unclaimed
for two years after such principal or interest has become due and payable shall
be paid to the Obligors, as specified in an Obligors' Order; and the Holder of
such Note shall thereafter, as an unsecured general creditor, look only to the
Obligors for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, shall thereupon cease; provided, however
that the Trustee or such Paying Agent, before being required to make any such
repayment, may at the expense of the Obligors cause to be published once, in a
newspaper published in the English language, customarily published on each
Business Day and of general circulation in the Borough of Manhattan, The City of
New York, notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
publication, any unclaimed balance of such money then remaining will be repaid
to the Obligors.
Section 14.07. Corporate Existence; Separate Corporate Existence.
Except as provided in Section 14.03, each Obligor will do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and material rights (charter and statutory) and material franchises of
such Obligor; provided, however that the Obligors with the prior written consent
of any Series Support Provider shall not be required to preserve any such right
or franchise if such Obligor shall determine that the preservation thereof is no
longer desirable in the conduct of the business of such Obligor, and that the
loss thereof is not disadvantageous in any material respect to the Holders of
the related Notes. Each Obligor shall, in addition:
(i) Maintain its own bank or securities account or accounts,
separate from those of any Affiliate of such Obligor, with commercial
financial institutions. The funds and other property of such Obligor
will not be diverted to any other Person or for other than the
corporate use of such Obligor, and, except as may be expressly
permitted by this Master Agreement or the Master Sale Agreement or any
Sale Agreement Supplement to which it is a party, the funds and the
other property of such Obligor shall not be commingled with those of
any Affiliate of such Obligor.
(ii) Ensure that, to the extent that it shares the same
officers or other employees as any of its stockholders or Affiliates,
the salaries of and the expenses related to providing benefits to such
officers and other employees shall be fairly
78
<PAGE> 85
allocated among such entities, and each such entity shall bear its fair
share of the salary and benefit costs associated with all such common
officers and employees.
(iii) Ensure that, to the extent that it jointly contracts
with any of its stockholders or Affiliates to do business with vendors
or service providers or to share overhead expenses, the costs incurred
in so doing shall be allocated fairly among such entities, and each
such entity shall bear its fair share of such costs. To the extent that
such Obligor contracts or does business with vendors or service
providers where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods
and services are provided, and each such entity shall bear its fair
share of such costs. All material transactions between such Obligor and
any of its Affiliates shall be only on an arm's length basis and shall
receive the approval of such Obligor's Board of Directors including at
least two Independent Directors (defined below).
(iv) Maintain a principal executive and administrative office
through which its business is conducted and a telephone number separate
from those of its stockholders and Affiliates. To the extent that such
Obligor and any of its stockholders or Affiliates have offices in
contiguous space, there shall be fair and appropriate allocation of
overhead costs among them, and each such entity shall bear its fair
share of such expenses.
(v) Conduct its affairs strictly in accordance with its
Articles of Incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to, holding
all regular and special stockholders' and directors' meetings
appropriate to authorize all corporate action, keeping separate and
accurate minutes of such meetings, passing all resolutions or consents
necessary to authorize actions taken or to be taken, and maintaining
accurate and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts. Regular
stockholders' and directors' meetings shall be held at least annually.
(vi) Ensure that its Board of Directors shall at all times
include at least two Independent Directors (for purposes hereof,
"Independent Directors" shall mean any member of the Board of Directors
of such Obligor that is not and has not at any time during the
preceding five years been (x) a director, officer, consultant, agent,
employee, affiliate or shareholder of any Affiliate of such Obligor or
any affiliate or subsidiary thereof, or of any major creditor thereof,
and who is not the beneficial owner, at the time of such individual's
appointment as an Independent Director, of more than 1,000 shares in
the aggregate of all classes of common stock of an Affiliate of such
Obligor, or if greater, such number of shares the value of which
constitutes no more than 10% of such individual's net worth or (y) a
member of the immediate family of any of the foregoing).
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<PAGE> 86
(vii) Ensure that decisions with respect to its business and
daily operations shall be independently made by such Obligor (although
the officer making any particular decision may also be an officer or
director of an Affiliate of such Obligor) and shall not be dictated by
an Affiliate of such Obligor.
(viii) Act solely in its own corporate name and through its
own authorized officers and agents, and no Affiliate of such Obligor
shall be appointed to act as agent of such Obligor, except as expressly
contemplated by this Master Agreement or the Master Sale Agreement or
any Sale Agreement Supplement to which it is a party. The Obligor shall
at all times use its own stationery.
(ix) Ensure that no Affiliate of such Obligor shall advance
funds to such Obligor, and no Affiliate of such Obligor will otherwise
guaranty debts of, such Obligor; provided, however, that an Affiliate
of such Obligor may provide funds to such Obligor in connection with
the capitalization of such Obligor, including capital necessary to
assure that such Obligor has "substantial assets" as described in
Treasury Regulation Section 301.7701-2(d)(2) as in effect on December
16, 1996 prior to amendment by Treasury Decision 8697.
(x) Other than organization expenses and as expressly provided
herein, pay all expenses, indebtedness and other obligations incurred
by it.
(xi) Not enter into any guaranty, or otherwise become liable,
with respect to any obligation of any Affiliate of such Obligor nor
shall such Obligor make any loans to any Person.
(xii) Ensure that any financial reports required of such
Obligor shall be issued separately from, but may be consolidated with,
any reports prepared for any of its Affiliates.
(xiii) Ensure that at all times it is adequately capitalized
to engage in the transactions contemplated in its Articles of
Incorporation.
Section 14.08. Payment of Taxes and Other Claims. Each Obligor will pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon such Obligor on any portion of any Series Trust Estate, or upon the
income, profits or property of such Obligor, and (2) all lawful claims for
labor, materials and supplies which, if unpaid, might by law become a Lien upon
the Property of such Obligor; provided, however, that such Obligor shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and such Obligor shall have
set aside on its books adequate reserves with respect thereto.
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<PAGE> 87
Section 14.09. Amendment of Organizational Documents.
(a) No Obligor will make any material change in any of its
Organizational Documents without the prior written consent of the related Series
Controlling Parties, and shall not amend its Organizational Documents in any
manner that materially and adversely affects the Holders of the related Notes or
any related Series Support Provider.
(b) No Obligor shall take any action which would adversely impact the
corporate separateness of such Obligor from its parent, or which would adversely
impact its status as a "bankruptcy remote" entity. Each Obligor shall strictly
abide by the restrictive provisions of its Organizational Documents in
furtherance of the forgoing.
Section 14.10. Rule 144A Information. With respect to the Holder of any
Unregistered Note, the Obligors shall promptly furnish or cause to be furnished
to such Holder or to a prospective purchaser of such an Unregistered Note
designated by such Holder, as the case may be, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act ("Rule 144A
Information") in order to permit compliance by such Holder with Rule 144A in
connection with the resale of such Unregistered Note by such Holder; provided,
however that the Obligors shall not be required to furnish Rule 144A Information
in connection with any request made on or after the date which is three years
from the later of (i) the date such Note (or any predecessor Note) was acquired
from the Obligors or (ii) the date such Note (or any predecessor Note) was last
acquired from an "affiliate" of the Obligors within the meaning of Rule 144
under the Securities Act; and provided, further, that the Obligors shall not be
required to furnish such information at any time to a prospective purchaser
located outside the United States who is not a "United States Person" within the
meaning of Regulation S under the Securities Act if such Note may then be sold
to such prospective purchaser in accordance with Rule 904 under the Securities
Act (or any successor provision thereto).
Section 14.11. Further Instruments and Acts. Upon request of the
Trustee or any Series Support Provider, each Obligor will execute and deliver
such further instruments and do such further acts as may be reasonably necessary
or proper to carry out more effectively the purpose of this Master Agreement,
any related Series Supplement and any related Series Related Document.
Section 14.12. Compliance with Laws. Each Obligor shall comply with all
applicable Requirements of Law, the noncompliance with which would, individually
or in the aggregate, materially and adversely affect the ability of such Obligor
to perform its obligations under the related Notes, this Master Agreement, the
Master Sale Agreement the related Series Supplements or the related Series
Related Document.
Section 14.13. Income Tax Characterization. For purposes of Federal
income, state and local income and franchise and any other income taxes, each
Obligor will treat the related Notes as debt of such Obligor.
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<PAGE> 88
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 15.01. Counterparts. For the purpose of facilitating the
execution of this Master Agreement and for other purposes, this Master Agreement
may be executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 15.02. Governing Law. This Master Agreement, each Series
Supplement and each Note shall be governed by, and construed in accordance with,
the laws of the State of New York and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws, without
regard to the conflict of laws provisions of any State.
Section 15.03. Notices. All demands, notices and communications (other
than periodic communications of a routine nature made in connection with the
dissemination of information regarding the Pledged Property and the Servicer
required to be delivered hereunder, which shall be delivered or mailed by first
class mail) hereunder shall be in writing, personally delivered or mailed by
first class mail or overnight courier, or delivered by facsimile and shall be
deemed to have been duly given upon receipt (a) in the case of the Originator
and the Servicer, at the following address: Advanta Business Services Corp.,
1020 Laurel Oak Road, Voorhees, New Jersey 08043, Attention: Treasurer; (b) in
the case of the Trustee, at the following address: Bankers Trust Company, 4
Albany Street, New York, New York 10006, Attention: _____________________; (c)
in the case of the Obligors, at the following, address: Advanta Leasing
Receivables Corp. VIII, 639 Isbell Road, Suite 390A, Reno, Nevada 89509;
Attention: Treasurer, and Advanta Leasing Receivables Corp. IX, Reno, 639 Isbell
Road, Suite 390B, Nevada 89509; Attention: Treasurer; and (d) in the case of any
Series Support Party, at the address specified for such notice in the applicable
Series Supplement, or, in each of the foregoing cases (a) through (d), at such
other address as shall be designated by such party in a written notice to the
other parties. Any notice required or permitted to be mailed to a Noteholder
shall be given by first class mail, postage prepaid, at the address of such
Holder as shown in the Note Register or the related Series Supplement,
respectively. Any notice to a Noteholder which is so mailed within the time
prescribed in this Master Agreement shall be conclusively presumed to have been
duly given on the fifth Business Day following mailing, whether or not the
Noteholder receives such notice.
Section 15.04. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Master Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions or terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of this Master Agreement and shall in no way
affect the validity or enforceability of the other provisions of this Master
Agreement or of the Notes or the rights of the Holders thereof.
Section 15.05. Binding Effect. This Master Agreement shall inure to the
benefit of, and shall be binding upon, (i) the Servicer, (ii) each Obligor,
(iii) the Trustee, (iv) the Noteholders,
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<PAGE> 89
(v) the Series Support Providers, if any, (vi) to the extent expressly provided
hereunder, the Affiliates of the Trustee, the Noteholders and the Series Support
Providers, if any, and (vii) the respective successors and permitted assigns of
each of the foregoing, subject, in each of the foregoing cases, to the
limitations contained in this Master Agreement.
Section 15.06. Exhibits. The exhibits to this Master Agreement are
hereby incorporated herein and made a part hereof and are an integral part of
this Master Agreement.
Section 15.07. Calculations. All interest rate calculations under this
Master Agreement will be carried out to at least seven decimal places. All
payments on the Contracts shall be calculated on the Actuarial Method.
Section 15.08. Further Assurances. The Obligors and the Servicer agree
to do and perform and the Obligors agree to cause the Originator to do and
perform, from time to time, any and all acts and to execute (or cause the
Originator to execute) any and all further instruments and documents required or
reasonably requested by the Trustee to effect more fully the purposes of this
Master Agreement, including, without limitation, the execution of any financing
statements or continuation statements relating to the Trust Estate for filing
under the provisions of the UCC of any applicable jurisdiction.
Section 15.09. Nonpetition Covenant. Notwithstanding any prior
termination of this Master Agreement, none of the parties hereto, any
Noteholder, any Series Support Provider, the Originator, nor any Obligor shall,
prior to the date which is one year and one day after the payment in full of the
Notes of all Series, acquiesce, petition or otherwise invoke or cause any
Obligor to invoke the process of any Governmental Authority for the purpose of
commencing or sustaining a case against any Obligor under any Federal or state
bankruptcy, insolvency or similar law or appointing a receiver, liquidator,
assignee, trustee, custodian, sequestrator or other similar official of or for
any Obligor or any substantial part of its property or ordering the winding-up
or liquidation of the affairs of any Obligor.
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IN WITNESS WHEREOF, the Servicer, the Obligors and the Trustee have
caused this Master Agreement to be duly executed by their respective officers,
all as of the day and year first above written.
ADVANTA BUSINESS SERVICES
CORP., as Servicer
By:
----------------------------------
Name:
Title:
ADVANTA LEASING RECEIVABLES
CORP. VIII, as Obligor
By:
----------------------------------
Name:
Title:
ADVANTA LEASING RECEIVABLES
CORP. IX, as Obligor
By:
----------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Trustee
By:
----------------------------------
Name:
Title:
<PAGE> 1
Exhibit 4.2
OH&S DRAFT
8/10/99
======================================================================
ADVANTA BUSINESS SERVICES CORP.,
Individually, and as the Servicer,
ADVANTA LEASING RECEIVABLES CORP. VIII,
as an Obligor
ADVANTA LEASING RECEIVABLES CORP. IX,
as an Obligor
and
BANKERS TRUST COMPANY,
as Trustee
=========================================
SERIES 1999-1 SUPPLEMENT
Dated as of August __, 1999
to the
MASTER FACILITY AGREEMENT
Dated as of August __, 1999
======================================================================
<PAGE> 2
ADVANTA EQUIPMENT RECEIVABLES
ASSET-BACKED NOTES
Reconciliation and Tie between the Master Agreement and Series 1999-1 Supplement
and the Trust Indenture Act of 1939, as amended
<TABLE>
<CAPTION>
Trust Indenture
Act Section Master Agreement Series 1999-1 Supplement
<S> <C> <C>
Section 310(a)(1) Section 11.08 Section See Master Agreement
(a)(2) 11.08 See Master Agreement
(a)(3) 11.15 See Master Agreement
(a)(4) Not Applicable Not Applicable
(b) 11.07 See Master Agreement
(c) Not Applicable Not Applicable
311(a) 11.12 See Master Agreement
(b) 11.12 See Master Agreement
312(a) 12.01, 12.02 See Master Agreement
(b) 12.02 See Master Agreement
(c) 12.02 See Master Agreement
313(a) 12.03 See Master Agreement
(b)(1) Not Applicable Not Applicable
(b)(2) 12.03 See Master Agreement
(c) 12.03; 1.03 See Master Agreement
(d) 12.03 See Master Agreement
314(a) 12.04; 6.07;
6.08; 1.03 See Master Agreement
(b) Not Applicable Not Applicable
(c)(1) See Series
1999-1 Supplement 6.06
(c)(2) See Series
1999-1 Supplement 6.06
(c)(3) 1.05 See Master Agreement
(d) 1.05 See Master Agreement
(e) See Series
1999-1 Supplement 6.06
(f) Not Applicable Not Applicable
315(a) 11.01(a) See Master Agreement
(b) 11.02; 1.03 See Master Agreement
(c) 11.01(b) See Master Agreement
(d) 11.01(c) See Master Agreement
(e) 10.10 4.14
316(a)(1)(A) 10.08 4.12
(a)(1)(B) See Series
1999-1 Supplement 4.13
(a)(2) Not Applicable Not Applicable
(a)(last
sentence) 1.01 See Master Agreement
(b) 10.04, 13.01(c) See Master Agreement
(c) 10.09 See Master Agreement
317(a)(1) See Series
1999-1 Supplement 4.03(c)
(a)(2) 10.02(c) 4.04
(b) 14.06 See Master Agreement
318(a) 1.05 See Master Agreement
(c) 1.05 See Master Agreement
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
EXHIBIT A -- FORM OF SERVICER'S CERTIFICATE
EXHIBIT B -- FORM OF CONTRACT
EXHIBIT C -- FORMS OF NOTES
</TABLE>
<PAGE> 4
This Series 1999-1 Supplement, dated as of August __, 1999 (the "Series
1999-1 Supplement"), supplements the Master Agreement (as described herein) and
is by and among Advanta Business Services Corp., a Delaware corporation,
individually ("ABS"), as the entity which originated or acquired the Contracts
and which will sell or contribute the Contracts and other property, rights and
interests to the Obligors (in such capacity, the "Originator"), and as initial
servicer (ABS in such capacity or any successor, the "Servicer"), Advanta
Leasing Receivables Corp. VIII, a Nevada corporation, as an obligor ("ALRC
VIII"), Advanta Leasing Receivables Corp. IX, a Nevada corporation, as an
obligor ("ALRC IX" and, together with ALRC VIII, the "Obligors") and Bankers
Trust Company, a New York banking corporation, as trustee (in such capacity, the
"Trustee") for the Noteholders.
RECITALS
This Series 1999-1 Supplement is being executed and delivered by the
parties hereto pursuant to Section 13.02 of the Master Facility Agreement, dated
as of August __, 1999 (the "Master Agreement"), among the Servicer, the Obligors
and the Trustee. In the event that any term or provision contained herein shall
conflict with or be inconsistent with any term or provision contained in the
Master Agreement, the terms and provisions of this Series 1999-1 Supplement
shall govern with respect to the Series 1999-1 Notes. Capitalized terms used
herein, but not defined herein, shall have the meaning as set forth in the
Master Agreement.
ARTICLE I.
CREATION OF THE SERIES 1999-1 NOTES
SECTION 1.01 Designation. There is hereby created a Series of Notes to be
issued pursuant to the Master Agreement and this Series 1999-1 Supplement to be
known as "Advanta Business Receivables Master Facility Notes, Series 1999-1"
(the "Series 1999-1 Notes"). The Obligors with respect to the Series 1999-1
Notes are ALRC VIII and ALRC IX, jointly and severally.
SECTION 1.02 Pledge of Series 1999-1 Trust Estate. (a) Each Obligor hereby
pledges to the Trustee and grants a security interest to the Trustee for the
benefit of the Series 1999-1 Noteholders, and the Trustee hereby accepts the
pledge of and grant of a security interest in, all of such Obligor's now owned
and existing and hereafter acquired or arising right, title and interest, if
any, in, to and under all of the following: (1) each and every Contract now or
hereafter listed as a Series 1999-1 Contract on the List of Contracts delivered
to the Trustee together with all amounts due or to become due under such Series
1999-1 Contracts, (2) all Collections and Related Security associated therewith,
(3) all balances, instruments, monies and other securities and investments from
time to time in the Collection Account, the Reserve Account and the Residual
Account, (4) the Contribution Agreement and the Series 1999-1 Contribution
Agreement Supplement and all of its rights to enforce the provisions of, and to
benefit from the representations, warranties and covenants made in, the
Contribution Agreement and the Series 1999-1 Contribution Agreement Supplement,
(5) all rights, if any, of the Obligor in the Equipment associated with the
Series 1999-1 Contracts and the Residual Interest therein, and (6) all proceeds
of each of the foregoing and all
<PAGE> 5
accounts, contract rights, general intangibles, chattel paper, instruments,
documents, money, deposit accounts, certificates of deposit, goods, letters of
credit, advices of credit, certificated securities and uncertificated securities
consisting of, arising from or related to any of the foregoing, but excluding
any obligations of the Obligors, if any, under each Series 1999-1 Contribution
Agreement Supplement and excluding any Servicing Charges, taxes, Initial Unpaid
Amounts and Security Deposits, all in accordance with, and for the purposes set
forth in, this Series 1999-1 Supplement (such property, the "Series 1999-1 Trust
Estate").
(b) It is the intention of the Obligors, which intention is acknowledged
by the Trustee, that this Series 1999-1 Supplement, together with the Master
Agreement, shall be deemed to be a security agreement within the meaning of
Article 8 and Article 9 of the UCC as in effect in the States of New York,
Nevada and Delaware and the pledge provided for by this Section 1.02 and
elsewhere herein shall be deemed to be a grant by the Obligors to the Trustee
for the benefit of the Series 1999-1 Noteholders of a valid first-priority
perfected security interest in all of the Obligors' right, title and interest in
and to the Series 1999-1 Trust Estate. The Obligors hereby grant and assign such
interests, in each case to the Trustee, to secure the obligations of the
Obligors to the Trustee and the Series 1999-1 Noteholders hereunder and under
the Series 1999-1 Notes.
(c) The Obligors and ABS represent that as of the Closing Date, UCC-1
financing statements will have been filed against the User and in favor of ABS
in respect of each item of Equipment having an original Equipment cost greater
than $25,000.
(d) In the case of any Series 1999-1 Contract which has been prepaid in
full during the period from the related Cut-Off Date to the Closing Date, the
Obligors shall, on the Closing Date, deposit the Prepayment Amount therefor in
the Collection Account in lieu of pledging such Series 1999-1 Contract to the
Trustee.
SECTION 1.03 Custody of the Series 1999-1 Trust Estate. For the avoidance
of doubt, the parties agree that notwithstanding the use of the terms "deposit,"
"deposited," "transfer" and "transferred" in this Series 1999-1 Supplement, the
Trustee will not take physical possession of any of the Series 1999-1 Trust
Estate (other than the amounts on deposit in the Series 1999-1 Accounts)
pursuant to the terms hereof. Instead, the Servicer will hold the Series 1999-1
Trust Estate (other than the amounts on deposit in the Series 1999-1 Accounts)
as custodian on behalf of the Trustee as further described in Section 3.10
hereof.
SECTION 1.04 Conditions to Issuance of the Series 1999-1 Notes. As
conditions to the execution by the Obligors, and the authentication and delivery
by the Trustee of the Series 1999-1 Notes at the written direction of the
Obligors and the sale of the Series 1999-1 Notes by the Obligors on the Closing
Date, (i) the Obligors shall have received by wire transfer the net proceeds of
sale of the Class A Notes and the Class B Notes and (ii) the Trustee shall have
received the following on or before the Closing Date:
(a) The List of Contracts;
(b) Copies of resolutions of the board of directors of ABS and of each of
ALRC VIII,
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ALRC IX, approving the execution, delivery and performance of this Series 1999-1
Supplement and the transactions contemplated hereby, certified, in each case, by
a secretary or an assistant secretary of the respective corporation;
(c) A copy of an officially certified document, dated not more than 30
days prior to the Closing Date and evidencing the due organization and good
standing of each of ABS and the Obligors in their respective states of
organization;
(d) Copies of the Certificate of Incorporation and By-Laws of ABS and
copies of the Articles of Incorporation and By-Laws of each of ALRC VIII and
ALRC IX certified, in each case, by a secretary or an assistant secretary of the
respective corporation;
(e) Delivery of executed UCC-1 financing statements, prepared by the
Servicer for filing (i) with the Secretary of State of New Jersey, naming the
Originator as the debtor and the Obligors as secured parties, and (ii) with the
Secretary of State of Nevada naming the Obligors as the debtors and the Trustee
as secured party;
(f) A certificate listing the Servicing Officers as of the Closing Date;
and
(g) An executed copy each of the Contribution Agreement, the Series 1999-1
Contribution Agreement Supplement, the Master Agreement and this Series 1999-1
Supplement.
SECTION 1.05 Acceptance by Trustee. The Trustee acknowledges its
acceptance, simultaneously with the execution and delivery of this Series 1999-1
Supplement, of the pledge of and security interest in all right, title and
interest in and to the Series 1999-1 Trust Estate and declares that the Trustee
holds and will continue to hold the pledge of and security interest in such
right, title and interest in and to the Series 1999-1 Trust Estate for the
benefit of all present and future Series 1999-1 Noteholders for the use and
purpose and subject to the terms and provisions of this Series 1999-1
Supplement. The Obligors hereby (x) appoint the Trustee as the Obligors'
attorney-in-fact with all power independently to enforce all of the Obligors'
rights against the Originator and the Servicer under the Contribution Agreement
and the Series 1999-1 Contribution Agreement Supplement, as applicable and (y)
direct the Trustee to enforce such rights. The Trustee hereby accepts such
appointment and agrees to enforce such rights.
SECTION 1.06 Liabilities of the Trustee and Parties to the Master
Agreement, this Series 1999-1 Supplement and the Series 1999-1 Notes;
Limitations Thereon. The obligations evidenced by the Series 1999-1 Notes
provide recourse only to the Series 1999-1 Trust Estate and provide no recourse
against either of the Obligors generally, the Originator, the Servicer, the
Trustee, or any other Person.
(a) The Obligors, the Servicer and the Originator shall not be liable to
the Trustee except as expressly provided herein and in the Master Agreement,
and, with respect to the Originator, as provided in the Contribution Agreement.
The Obligors, the Originator and the Servicer shall not be liable to the Series
1999-1 Noteholders except, with respect to the Obligors and the Servicer, for
the non-performance of obligations expressly undertaken by them pursuant
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<PAGE> 7
hereto and, with respect to the Originator, as expressly provided for in the
Contribution Agreement. Without limiting the generality of the foregoing, if any
User fails to pay any Scheduled Payment, Final Contract Payment, exercised
Purchase Option Payment or other amounts due under a Series 1999-1 Contract,
then neither the Trustee nor the Series 1999-1 Noteholders will have any
recourse against the Obligors, the Originator or the Servicer for such Scheduled
Payment, Final Contract Payment, exercised Purchase Option Payment, other
amounts due under such Series 1999-1 Contract or any losses, damages, claims,
liabilities or expenses incurred by the Trustee or any Series 1999-1 Noteholder
as a direct or indirect result thereof.
(b) The Trustee agrees that in the event of a default by a User under the
terms of a Series 1999-1 Contract, which default is not cured within any
applicable cure period set forth in such Series 1999-1 Contract, the Trustee and
the Series 1999-1 Noteholders shall be expressly limited to the sources of
payment specified herein. In addition, the Trustee shall have the right to
exercise the rights of the Originator (which rights have been assigned to the
Obligors and then to the Trustee) under the Series 1999-1 Contracts, the
Insurance Policies, any document in any Contract File and any Related Document
in the name of the Trustee and the Series 1999-1 Noteholders, either directly or
through the Servicer as agent, and the Trustee is hereby directed by the
Obligors to exercise such rights; provided, however, that the Trustee shall not
be required to take any action pursuant to this Section 1.06 except upon written
instructions from the Servicer and to the extent it is fully indemnified to its
reasonable satisfaction therefor.
(c) A carbon, photographic or other reproduction of the Master Agreement,
this Series 1999-1 Supplement or any financing statement is sufficient as a
financing statement in any applicable jurisdiction.
The receipt of the Series 1999-1 Trust Estate by the Trustee (through
possession thereof by the Servicer acting as custodian) does not constitute and
is not intended to result in an assumption by the Trustee or any Series 1999-1
Noteholder of any obligation (except for the obligation not to disturb a User's
right of quiet enjoyment) of the Originator, either Obligor or the Servicer to
any User or other Person in connection with the Equipment, the Series 1999-1
Contracts, the Insurance Policies, any document in the Contract Files or any
Related Document.
SECTION 1.07 Forms of Notes. The Series 1999-1 Notes shall be in the forms
set forth in Exhibit C hereto.
ARTICLE II
DEFINITIONS
SECTION 2.01 Definitions.
(a) Whenever used in this Series 1999-1 Supplement and when used in the
Master Agreement with respect to the Series 1999-1 Notes, the following words
and phrases shall have the following meanings, and the definitions of such terms
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of
7
<PAGE> 8
such terms. Unless otherwise defined in this Series 1999-1 Supplement, terms
defined in the Master Agreement are used herein as therein defined.
ABS: Advanta Business Services Corp., a Delaware corporation.
Additional Principal: With respect to each Payment Date, an amount equal
to the Monthly Payment Amount less the Class A Principal Payment Amount and the
Class B Principal Payment Amount to be made on such date.
Aggregate Contract Balance Remaining: With respect to any Payment Date,
the aggregate Contract Balances Remaining of all Series 1999-1 Contracts (other
than Defaulted Contracts) in the Series 1999-1 Trust Estate as of the related
Calculation Date.
Aggregate Contract Principal Balance: With respect to any Calculation
Date, the aggregate of the Contract Principal Balances of all Series 1999-1
Contracts (other than Defaulted Contracts) in the Series 1999-1 Trust Estate as
of such date.
ALRC VIII: Advanta Leasing Receivables Corp. VIII, a Nevada corporation.
ALRC IX: Advanta Leasing Receivables Corp. IX, a Nevada corporation.
Ancillary Servicing Income: Certain miscellaneous amounts which revert to
the Servicer in consideration of the servicing function performed by the
Servicer, such as late fees (if a Servicer Advance has been made for such late
payment), insufficient funds charges, and the like.
Applicable Discount Rate: The rate of [__%] which is equal to the sum of
(a) the weighted average of the Class A-1 Interest Rate, Class A-2 Interest
Rate, Class A-3 Interest Rate and the Class B Interest Rate, each weighted by
(i) the initial principal balance of the Class A-1 Notes, the initial principal
balance of the Class A-2 Notes, the initial principal balance of the Class A-3
Notes and the initial principal balance of the Class B Notes and (ii) the
weighted average life to call of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes and the Class B Notes under a 6.0% conditional prepayment rate
and no loss scenario, as applicable, and (b) the Servicer Fee Rate.
Available Funds: With respect to a Payment Date, (i) all amounts on
deposit in the Collection Account which relate to the Collection Period for such
Payment Date (including, without limitation, Scheduled Payments, Servicer
Advances, Residual Receipts, Prepayment Amounts, amounts deposited into the
Collection Account as a result of the repurchase of a Contract under Section
6.15 of the Master Agreement or subsection 6.12(b) of the Master Agreement and
investment earnings on each of the Series 1999-1 Accounts), plus (ii) amounts
transferred from the Reserve Account and/or the Residual Account with respect to
such Payment Date and deposited in the Collection Account.
Available Reserve Amount: As of any date of determination, the amount on
deposit in the Reserve Account on such date.
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<PAGE> 9
Available Residual Amount: As of any date of determination, the amount on
deposit in the Residual Account on such date.
Bankruptcy Code: The Bankruptcy Code of 1978, as amended, as codified
under Title 11 of the United States Code, and the Bankruptcy Rules promulgated
thereunder, as the same may be in effect from time to time.
Balloon Payment: With respect to any Contract, a final payment which is
more than 10% greater in amount than any prior Scheduled Payment.
Class A Initial Principal Balance: $99,907,209.
Class A Noteholder: Person in whose name a Class A Note is registered in
the Note Register.
Class A Note Interest: With respect to any Payment Date, the sum of the
Class A-1 Note Interest, the Class A-2 Note Interest and the Class A-3 Note
Interest.
Class A Notes: The Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes.
Class A Percentage: A fraction, expressed as a percentage, equal to (i)
the sum of the Class A-2 Initial Principal Balance and the Class A-3 Initial
Principal Balance divided by (ii) the Initial Aggregate Contract Principal
Balance minus the Class A-1 Initial Principal Balance, and being __%.
Class A Principal Balance: As of any date of determination, the sum of the
Class A-1 Principal Balance, the Class A-2 Principal Balance, and the Class A-3
Principal Balance.
Class A Principal Payment Amount: (a) With respect to any Payment Date on
which all or a portion of the Class A-1 Notes remain outstanding after giving
effect to payments on such day, the Monthly Principal Amount, (b) with respect
to the Payment Date on which the outstanding principal of the Class A-1 Notes is
reduced to $0, the sum of (i) the amount necessary to reduce the outstanding
principal of the Class A-1 Notes to $0 and (ii) the amount necessary to reduce
the sum of the outstanding principal amount of the Class A-2 Notes and the Class
A-3 Notes to the Class A Target Investor Principal Amount or (c) on any
subsequent Payment Date, the amount necessary to reduce the sum of the
outstanding principal amount of the Class A-2 Notes and the Class A-3 Notes to
the Class A Target Investor Principal Amount.
Class A Target Investor Principal Amount: With respect to each Payment
Date, an amount equal to the product of (i) the Class A Percentage and (ii) the
Aggregate Contract Principal Balance as of the related Calculation Date.
Class A-1 Initial Principal Balance: $51,460,585.
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<PAGE> 10
Class A-1 Interest Rate: ____ % per annum.
Class A-1 Maturity Date: September 2000 Payment Date.
Class A-1 Note Factor: The seven digit decimal number that the Servicer
will compute or cause to be computed for each Collection Period and will make
available on the related Determination Date representing the ratio of (i) the
Class A-1 Principal Balance which will be outstanding on the next Payment Date
(after taking into account all distributions and allocations to be made on such
Payment Date) to (ii) the Class A-1 Initial Principal Balance.
Class A-1 Noteholder: Person in whose name a Class A-1 Note is registered
in the Note Register.
Class A-1 Note Interest: With respect to any Payment Date, the sum of (i)
the product of (A) the Class A-1 Principal Balance immediately prior to such
Payment Date and (B) one-twelfth of the Class A-1 Interest Rate from the
preceding Payment Date; provided that on the first Payment Date, the Class A-1
Interest shall be $_____.
Class A-1 Notes: The Equipment Receivables Asset-Backed Notes, Series
1999-1, Class A-1 issued by ALRC VIII and ALRC IX.
Class A-1 Percentage: A fraction, expressed as a percentage, equal to the
Class A-1 Initial Principal Balance divided by the Initial Aggregate Contract
Principal Balance.
Class A-1 Principal Balance: As of any date of determination, an amount
equal to the Class A-1 Initial Principal Balance less any principal payments
previously made on the Class A-1 Notes.
Class A-2 Initial Principal Balance: $38,232,647.
Class A-2 Interest Rate: ____ % per annum.
Class A-2 Maturity Date: September 2002 Payment Date.
Class A-2 Note Factor: The seven digit decimal number that the Servicer
will compute or cause to be computed for each Collection Period and will make
available on the related Determination Date representing the ratio of (i) the
Class A-2 Principal Balance which will be outstanding on the next Payment Date
(after taking into account all distributions and allocations to be made on such
Payment Date) to (ii) the Class A-2 Initial Principal Balance.
Class A-2 Noteholder: Person in whose name a Class A-2 Note is registered
in the Note Register.
Class A-2 Note Interest: With respect to any Payment Date, the sum of (i)
the product of (A) the Class A-2 Principal Balance immediately prior to such
Payment Date and (B) one-twelfth
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<PAGE> 11
of the Class A-2 Interest Rate and the Class A-2 Overdue Interest from the
Preceding Payment Date; provided that on the first Payment Date, the Class A-2
Note Interest shall be $ ________.
Class A-2 Notes: The Equipment Receivables Asset-Backed Notes, Series
1999-1, Class A-2 issued by ALRC VIII and ALRC IX.
Class A-2 Percentage: A fraction, expressed as a percentage, equal to the
Class A-2 Initial Principal Balance divided by the Initial Aggregate Contract
Principal Balance.
Class A-2 Principal Balance: As of any date of determination, an amount
equal to the Class A-2 Initial Principal Balance less any principal payments
previously made on the Class A-2 Notes.
Class A-3 Initial Principal Balance: $10,213,977.
Class A-3 Interest Rate: ____ % per annum.
Class A-3 Maturity Date: November 2003 Payment Date.
Class A-3 Note Factor: The seven digit decimal number that the Servicer
will compute or cause to be computed for each Collection Period and will make
available on the related Determination Date representing the ratio of (i) the
Class A-3 Principal Balance which will be outstanding on the next Payment Date
(after taking into account all distributions and allocations to be made on such
Payment Date) to (ii) the Class A-3 Initial Principal Balance.
Class A-3 Noteholder: Person in whose name a Class A-3 Note is registered
in the Note Register.
Class A-3 Note Interest: With respect to any Payment Date, the sum of (i)
the product of (A) the Class A-3 Principal Balance immediately prior to such
Payment Date and (B) one-twelfth of the Class A-3 Interest Rate and the Class
A-3 Overdue Interest from the Preceding Payment Date; provided that on the first
Payment Date, the Class A-3 Note Interest shall be $ ________.
Class A-3 Notes: The Equipment Receivables Asset-Backed Notes, Series
1999-1, Class A-3 issued by ALRC VIII and ALRC IX.
Class A-3 Percentage: A fraction, expressed as a percentage, equal to the
Class A-3 Initial Principal Balance divided by the Initial Aggregate Contract
Principal Balance.
Class A-3 Principal Balance: As of any date of determination, an amount
equal to the Class A-3 Initial Principal Balance less any principal payments
previously made on the Class A-3 Notes.
Class B Floor: With respect to each Payment Date, (i) _____ % of the
Initial Aggregate Contract Principal Balance, plus (ii) the Cumulative Loss
Amount as of such Payment Date, minus (iii) the sum of the amounts on deposit in
the Reserve Account and the Residual Account after giving effect to payments and
withdrawals on such Payment Date.
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<PAGE> 12
Class B Initial Principal Balance: $11,720,956.
Class B Interest Rate: ____% per annum.
Class B Maturity Date: April 2005 Payment Date.
Class B Note Factor: With respect to any Payment Date, a seven digit
decimal number representing the ratio of (i) the Class B Principal Balance which
will be outstanding on the such Payment Date (after taking into account all
distributions and allocations to be made on such Payment Date) to (ii) the Class
B Initial Principal Balance.
Class B Noteholder: The Person in whose name a Class B Note is registered
in the Note Register.
Class B Note Interest: With respect to any Payment Date, the sum of (i)
the product of (A) the Class B Principal Balance immediately prior to such
Payment Date and (B) one-twelfth of the Class B Interest Rate and (ii) the Class
B Overdue Interest from the preceding Payment Date; provided that on the first
Payment Date, the Class B Note Interest shall be $_____.
Class B Notes: The Equipment Receivables Asset-Backed Notes, Series
1999-1, Class B issued by ALRC VIII and ALRC IX.
Class B Percentage: A fraction, expressed as a percentage, equal to (i)
the Class B Initial Principal Balance divided by (ii) the Initial Aggregate
Contact Principal Balance minus the Class A-1 Initial Principal Balance, and
being approximately __%.
Class B Principal Balance: As of any date, an amount equal to the Class B
Initial Principal Balance less any Class B Principal Payments previously made on
the Class B Notes.
Class B Principal Payment Amount: An amount equal to (a) for any Payment
Date on which all or a portion of the Class A-1 Notes remain outstanding after
giving effect to payments on such day, $0, and (b) for any subsequent Payment
Date, the amount necessary to reduce the aggregate outstanding principal amount
of the Class B Notes to the greater of the Class B Target Investor Principal
Amount and the Class B Floor.
Closing Date: August __, 1999.
Collateral Factor: With respect to any Payment Date, the seven digit
decimal number representing the ratio of (i) the Aggregate Contract Principal
Balance as of the immediately preceding Calculation Date to (ii) the Initial
Aggregate Contract Principal Balance.
Collection Account: The account by that name established and maintained by
the Trustee pursuant to subsection 3.01(a) hereof.
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Contribution Agreement: That certain Master Sale and Contribution
Agreement, dated as of August __, 1999, by and among ALRC VIII, ALRC IX and ABS.
Contracts: The Series 1999-1 Contracts pledged to the Trustee or the
receivables of which are pledged to the Trustee on the Closing Date, as
identified on the List of Contracts.
Contract Principal Balance: As of any date of calculation with respect to
a Series 1999-1 Contract, the present value of the Scheduled Payments to become
due with respect to such Series 1999-1 Contract on and after such date of
calculation (but in any event on or prior to March 31, 2005 (excluding Scheduled
Payments previously due and unpaid), discounted monthly at one-twelfth of the
Applicable Discount Rate, except that a Defaulted Contract has a Contract
Principal Balance of $0.
Cumulative Loss Amount: The excess, if any, of (a) the remainder of (i)
the outstanding principal amount of the Series 1999-1 Notes minus (ii) the
lesser of (A) the Monthly Principal Amount and (B) Available Funds (after the
payment of amounts described in Section 3.04(a)(i) through (iv) hereof) over (b)
the Aggregate Contract Principal Balance as of the related Calculation Date.
Cumulative Net Loss Percentage: With respect to each Collection Period,
the percentage equivalent of a fraction, the numerator of which is the excess of
(x) the aggregate amount of the Contract Principal Balances of all Series 1999-1
Contracts which become Defaulted Contracts during all prior Collection Periods
over (y) the aggregate amount of all Defaulted Residual Receipts collected by
the Servicer with respect to such Collection Periods and the denominator of
which is the Initial Aggregate Contract Principal Balance.
Cut-Off Date: With respect to the Series 1999-1 Contracts, the opening of
business on August 1, 1999.
Defaulted Contract: Any Series 1999-1 Contract (a)(i) that is a Delinquent
Contract with respect to which a User is contractually delinquent for 121 days
or more (without regard to any Servicer Advances or the application of any
Security Deposit) or (ii) as to which the Servicer has determined in accordance
with its customary servicing practices that eventual payment of the remaining
Scheduled Payments thereunder is unlikely or (iii) that has been rejected by or
on behalf of the User in a bankruptcy proceeding.
Defaulted Residual Receipts: With respect to any Series 1999-1 Contract
which has previously become a Defaulted Contract, all proceeds of the sale of
the Equipment, all Insurance Proceeds and any amounts collected related to the
failure of a User to pay any required amounts under the related Series 1999-1
Contract or to return the Equipment, in each case as reduced by (i) any
unreimbursed Servicer Advances with respect to such Series 1999-1 Contract or
such Equipment and (ii) any reasonably incurred out-of-pocket expenses incurred
by the Servicer in enforcing such Series 1999-1 Contract or in liquidating such
Equipment.
Delinquent Contract: As of any date, a Series 1999-1 Contract as to which
a Scheduled
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Payment, or part thereof, remains unpaid for more than 60 days from the original
due date for such Scheduled Payment.
Determination Date: The third Business Day prior to each Payment Date.
Eligible Contracts: Means, as of the Closing Date or, where indicated, the
Cut-Off Date, a Series 1999-1 Contract which:
(i) (a) is with a User whose billing address is in the United States
or its territories and possessions and requires all payments under such
Series 1999-1 Contract to be made in United States dollars and (b) is with
a User who, if a natural person, is a resident of the United States or its
territories and possessions with legal capacity to contract or, if a
corporation or other business organization, is organized under the laws of
the United States, its territories or any political subdivision thereof
and has its chief executive office in the United States or its
territories;
(ii) has not had any of its terms, conditions or provisions modified
or waived other than in compliance with the Credit and Collection Policy
and has not been restructured at any time when the Series 1999-1 Contract
was a Delinquent Contract;
(iii) the payments arising under the Series 1999-1 Contract
constitute an account or general intangible which is evidenced by a
Contract that constitutes "chattel paper" within the meaning of Section
9-105(b) of the UCC of all applicable jurisdictions and for which there is
only one original of such Series 1999-1 Contract that constitutes "chattel
paper" for purposes of the UCC;
(iv) does not contravene any applicable federal, state and local
laws and regulations thereunder (including, without limitation, any law,
rule and regulation relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and, with respect to which no part of such Series
1999-1 Contract thereto is in violation of any applicable law, rule or
regulation;
(v) satisfies in all material respects all applicable requirements
of the Credit and Collection Policy;
(vi) is not a Municipal Contract;
(vii) as of the Cut-Off Date, is not a Delinquent Contract;
provided, however, that the Series 1999-1 Contract can be a Delinquent
Contract so long as the Contract is not more than 90 days delinquent and
so long as the Contract Principal Balance of such Series 1999-1 Contract
when added to the Contract Principal Balances of all other Contracts which
are more than 61 days delinquent is less than 2% of the Initial Aggregate
Contract Principal Balance;
(viii) as of the Cut-Off Date, the Series 1999-1 Contract is not a
Defaulted
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Contract;
(ix) (other than a Contract which is a loan in form), (a) contains
"hell or high water" provisions requiring the related User to assume all
risk of loss or malfunction of the related Equipment, (b) makes the
related User absolutely and unconditionally liable for all payments
required to be made thereunder, (c) is a triple-net base and (d) is not
cancellable at the option of the User;
(x) as of the Cut-Off Date, when aggregated with the sum of the
Contract Principal Balances of all other Series 1999-1 Contracts relating
to a single User, shall not be greater than the product of (a) 1% and (b)
the Aggregate Contract Principal Balance at that time;
(xi) creates a valid and enforceable security or ownership interest
in favor of the Originator in the related Equipment, if any, for Equipment
with an initial balance of more than $25,000;
(xii) has only one set of original documentation;
(xiii) is free and clear of any Adverse Claims, other than the
claims arising pursuant to the Master Agreement, this Series 1999-1
Supplement and the Related Documents; provided, however, that nothing in
this clause (xii) shall prevent or be deemed to prohibit the Originator
from allowing any Adverse Claim for federal, state, municipal or other
local taxes to exist upon such Series 1999-1 Contract if such taxes shall
not at the time be due and payable or if the Originator shall concurrently
be contesting the validity thereof in good faith by appropriate
proceedings that have stayed enforcement thereof and shall have set aside
on its books adequate reserves with respect thereto;
(xiv) is in full force and effect in accordance with its terms and
contains enforceable provisions such that the right and remedies of the
holder thereof shall be adequate for realization against the Equipment, if
any, thereunder and of the benefits of any security granted thereunder;
(xv) does not provide for the substitution, exchange, or addition of
any other items of Equipment pursuant to such Contract which would result
in any reduction or extension of payments due thereunder;
(xvi) by its terms is due and payable on or within 84 months of the
Closing Date and, in either event, has not had its payment terms extended
other than in compliance with the Credit and Collection Policy;
(xvii) is in substantially the form of one of the standard form
contracts that ABS uses (set forth in Exhibit B hereto) or a form reviewed
and accepted by ABS;
(xviii) (a) does not preclude the pledge, transfer or assignment
thereof, (b) does not
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require the consent of the User to the pledge, assignment or transfer
thereof, and (c) does not contain a confidentiality provision that
purports to restrict the ability of the Trustee to exercise its rights
under the Related Documents with respect thereto, including, without
limitation, its right to review the Series 1999-1 Contract;
(xix) was originated or purchased by the Originator in the ordinary
course of its business, (b) approved and purchased or funded in the
ordinary course of the Originator's business and (c) if purchased from a
broker or vendor, has been re-underwritten by the Originator in the
ordinary course of the Originator's business and in compliance with its
underwriting policies;
(xx) either (a) is an account receivable representing all or part of
the sales price of merchandise, insurance and/or services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940, as
amended, or (b) represents a financial asset that converts to cash within
a finite period of time within the meaning of Rule 3a-7 promulgated under
the Investment Company Act of 1940, as amended;
(xxi) does not require a Balloon Payment;
(xxii) relates to Equipment which is located in the United States of
America, its territories or possessions;
(xxiii) as of the Cut-Off Date, the Contract Principal Balance of
the Contract when aggregated with the Contract Principal Balances of all
Contracts acquired by the Originator or its affiliates from the same
single broker or vendor, shall not exceed 6% of the Aggregate Contract
Principal Balance at that time;
(xxiv) it is not a consumer lease;
(xxv) is not subject to any guaranty by the Originator;
(xxvi) no adverse selection was used in selecting the Contract for
transfer to the Obligors;
(xxvii) the information with respect to the Contract is true and
correct in all material respects; and
(xxviii) all filings necessary to evidence the conveyance or
transfer of the Contract and security interest in the related Equipment,
if any, to one of the Obligors have been made in all appropriate
jurisdictions.
Equipment: The equipment leased to or sold to a User pursuant to any
Contract and any security interest in such equipment and the Residual Interest
therein or derived therefrom.
Event of Default: As defined in Section 4.01 hereof.
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<PAGE> 17
Final Contract Payment: With respect to any Series 1999-1 Contract, any
specified amount or minimum specified amount set forth in such Series 1999-1
Contract and required to be paid by the related User at the maturity of such
Series 1999-1 Contract.
Initial Aggregate Contract Principal Balance: The Aggregate Contract
Principal Balances on the Closing Date, which is an amount equal to $__________.
Interest Accrual Period: With respect to any Payment Date, the period
commencing on and including the prior Payment Date (or in the case of the first
Payment Date, the Closing Date) and ending on and including the day immediately
preceding such Payment Date.
List of Contracts: With respect to the Series 1999-1 Contracts, a printed
or electronic list of such Contracts, certified by an Authorized Officer of each
of the Obligors.
Master Agreement: The Master Facility Agreement, dated as of August __,
1999, among the Servicer, ALRC VIII, ALRC IX and the Trustee.
Monthly Delinquency Percentage: With respect to any Payment Date, the
percentage equivalent of a fraction (a) the numerator of which is the aggregate
Contract Balance Remaining of all Contracts which are 31 or more days
delinquent, determined as of the related Calculation Date and (b) the
denominator of which is the Aggregate Contract Principal Balance as of the
related Calculation Date.
Monthly Net Loss Percentage: With respect to any Collection Period, the
percentage equivalent of a fraction, the numerator of which is the excess of (x)
the aggregate amount of the Contract Principal Balances of all Series 1999-1
Contracts which became Defaulted Contracts during such Collection Period over
(y) the aggregate amount of all Defaulted Residual Receipts collected by the
Servicer with respect to such Collection Periods, and the denominator of which
is the Aggregate Contract Principal Balance as of the beginning of such
Collection Period.
Monthly Principal Amount: With respect to any Payment Date, is the excess
of (a) the aggregate outstanding principal amount of all Classes of Series
1999-1 Notes as of the immediately preceding Payment Date after giving effect to
all principal payments on that day, over (b) the Aggregate Contract Principal
Balance as of the related Calculation Date.
Monthly Residual Receipt Percentage: With respect to any Payment Date, the
percentage equivalent of a fraction (a) the numerator of which is the aggregate
dollar amount of Residual Receipts collected during the immediately preceding
Collection Period and (b) the denominator of which is equal to the aggregate
Booked Residual Value with respect to those Series 1999-1 Contracts for which
Residual Receipts were collected during such immediately preceding Collection
Period.
Monthly Remittance Amount: With respect to any Payment Date, the aggregate
amount of Collections received by the Servicer during the prior Collection
Period with respect to the Series
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1999-1 Trust Estate (other than Collections representing Advance Payments until
such Advance Payments are applied as Collections), together with all Servicing
Advances paid by the Servicer with respect to such Payment Date.
Nonrecoverable Advances: With respect to any Delinquent Contract, a
Servicer Advance which the Servicer has determined that it will be unable to
recover, in whole or in part, with respect to such Delinquent Contract.
Obligors: Advanta Leasing Receivables Corp. VIII and Advanta Leasing
Receivables Corp. IX.
Obligors' Interest: The Obligors' reversionary rights to the Series 1999-1
Trust Estate and the proceeds thereof, to the extent such proceeds are not
needed to make payments on the Series 1999-1 Notes.
Obligors' Interest Principal Balance: As of any date of determination, an
amount equal to the excess of (x) the Aggregate Contract Principal Balance over
(y) the Outstanding Principal Balance as of such date.
Originator: Advanta Business Services Corp. and its successors and
assigns.
Outstanding Obligors Interest Principal Balance: As of any Payment Date,
the excess, if any, of (x) the Aggregate Contract Principal Balance as of the
related Calculation Date over (y) the Outstanding Principal Balance at the end
of such Payment Date.
Outstanding Principal Balance: As of any date of determination, the sum of
the Class A Principal Balance and the Class B Principal Balance as of such date.
Payment Date: The 15th day of each month, or, if such day is not a
Business Day, the next succeeding Business Day, commencing September 15, 1999.
Principal Payments: The payments of principal each Class of Series 1999-1
Notes is entitled to receive in accordance with the priorities set forth in
Section 3.04 hereof.
Rating Agencies: Moody's and Fitch.
Record Date: With respect to any Payment Date, the close of business on
the Business Day preceding such Payment Date.
Required Reserve Amount: With respect to any Payment Date, an amount equal
to the lesser of (x) the sum of 1% of the Initial Aggregate Contract Principal
Balance and 2% of the Outstanding Principal Balance and (y) the outstanding
principal amount of the Series 1999-1 Notes.
Reserve Account: The account or accounts by that name established and
maintained by the
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<PAGE> 19
Trustee pursuant to Section 3.02 hereof.
Reserve Account Initial Deposit: $_____________.
Residual Account: The account or accounts by that name established and
maintained by the Trustee pursuant to subsection 3.02(c) hereof.
Residual Event: Means the occurrence of one or more of the following: (a)
the occurrence of an Event of Default; (b) ABS or an Affiliate of ABS is no
longer the Servicer; (c) the Three-Month Residual Receipt Percentage calculated
on the related Calculation Date is less than [100%]; (d) the Three-Month
Delinquency Percentage calculated on the related Calculation Date is greater
than [10.50%]; or (e) the Cumulative Net Loss Percentage as of any Calculation
Date occurring during the following periods exceeds the "Loss Trigger Level
Percentage" set forth below:
<TABLE>
<CAPTION>
Loss Trigger
Period Level Percentage
------ ----------------
<S> <C>
First Collection Period through 12th Collection
Period thereafter [4.0]%
13th Collection through 24th
Collection Period thereafter [5.5]%
25th Collection Period and thereafter [7.0]%
</TABLE>
Notwithstanding the foregoing: (i) the Residual Event referred to in
clause (c) may be cured if the Three-Month Residual Receipt Percentage is
greater than or equal to [100%], (ii) the Residual Event referenced in clause
(d) may be cured if the Three-Month Delinquency Percentage for any Collection
Period thereafter is less than or equal to [10.50%] and (iii) the Residual Event
reference in cause (e) may be cured if the Cumulative Net Loss Percentage,
although it exceeds the "Loss Trigger Level Percentage" in a prior period, is
less than or equal to the "Loss Trigger Level Percentage" in a subsequent
period.
Scheduled Payments: With respect to any Series 1999-1 Contract, the stated
periodic rental payments (exclusive of any amounts in respect of insurance or
taxes) set forth in such Series 1999-1 Contract due from the related User.
Series 1999-1 Accounts: The Collection Account, the Residual Account and
the Reserve Account.
Series 1999-1 Contracts: The Contracts pledged to the Trustee on the
Closing Date pursuant to Section 1.02 hereof and listed on the List of
Contracts.
Series 1999-1 Contribution Agreement Supplement: The Contribution
Agreement
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Supplement, dated as of August __, 1999, and delivered with respect to the
Series 1999-1 Trust Estate.
Series 1999-1 Noteholders: The Class A Noteholders and the Class B
Noteholders.
Series 1999-1 Notes: Collectively, the Class A Notes and the Class B
Notes.
Series 1999-1 Trust Estate: As defined in Section 1.02 hereof.
Servicer: The Person performing the duties of the Servicer hereunder,
initially Advanta Business Services Corp., a Delaware corporation.
Servicer Fee Percentage: The product of one-twelfth and the Servicer Fee
Rate.
Servicer Fee Rate: 1% per annum.
Servicer's Certificate: A written informational statement, substantially
in the form of Exhibit A hereto, to be provided by the Servicer in accordance
with Section 6.06 of the Master Agreement and signed by a Servicing Officer and
furnished to the Trustee and each Rating Agency by the Servicer.
Servicing Fee: The fee payable to the Servicer on each Payment Date in
consideration for the Servicer's performance of its duties pursuant to Section
3.06 hereof in an amount equal to the product of (a) one-twelfth of the Servicer
Fee Rate and (b) the Aggregate Contract Principal Balance as of the beginning of
the previous Collection Period.
Series Related Documents: The Master Agreement, the Series 1999-1
Supplement, the Contribution Agreement, the Series 1999-1 Contribution Agreement
Supplement and all amendments and supplement thereto.
Settlement Date: For the purpose of this Series 1999-1 Supplement, each
Payment Date.
Three-Month Delinquency Percentage: With respect to any Payment Date
commencing with the third Payment Date, the percentage equivalent of a fraction,
(a) the numerator of which is the sum of the Monthly Delinquency Percentage for
such Payment Date and the two immediately preceding Payment Dates and (b) the
denominator of which is three.
Three-Month Residual Receipt Percentage: With respect to any Payment Date
commencing with the third Payment Date, the percentage equivalent of a fraction,
(a) the numerator of which is the sum of the Monthly Residual Receipt Percentage
for such Payment Date and the two immediately preceding Payment Dates and (b)
the denominator of which is three.
Trustee: Bankers Trust Company, a New York banking corporation.
ARTICLE III
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SERIES ACCOUNTS; DISTRIBUTIONS AND STATEMENTS TO
SERIES 1999-1 NOTEHOLDERS; SERIES 1999-1 SPECIFIC COVENANTS
SECTION 3.01 Collection Account.
(a) The Trustee, for the benefit of the Series 1999-1 Noteholders, shall
establish and maintain an account (the "Collection Account") as a segregated
trust account in the Trustee's corporate trust department, identified as the
"Advanta Leasing Receivables Asset-Backed Notes Series 1999-1 Collection Account
in trust for the Series 1999-1 Noteholders." The Trustee shall make or permit
withdrawals from the Collection Account only as provided in this Series 1999-1
Supplement.
(b) Except as otherwise provided in this Series 1999-1 Supplement, the
Servicer and the Obligors shall deposit to the Collection Account any
Collections received by any of them as soon as practicable (and, in any event,
within two Business Days) after their respective receipt thereof.
Notwithstanding anything else in the Master Agreement or this Series 1999-1
Supplement to the contrary, for so long as Advanta Business Services Corp. or an
Affiliate thereof remains the Servicer and (x) maintains a short-term debt
rating of A-1 or better by S&P and P-1 by Moody's (or such other rating below
A-1 or P-1, as the case may be), or (y) the Servicer has provided to the Trustee
a letter of credit covering collection risk of the Servicer, the Servicer and
the Obligors need not make the daily deposits of Collections into the Collection
Account as provided in the preceding sentence, but the Servicer may make a
single deposit in the Collection Account in immediately available funds not
later than 12:00 noon, New York City time, on the date which is the Business Day
immediately preceding each Settlement Date following the Collection Period in
which the deposits were to have been made into the Collection Account.
Notwithstanding anything else in the Master Agreement or this Series 1999-1
Supplement to the contrary, with respect to any Collection Period, 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 Monthly Remittance Amount for
such Collection Period and (ii) if at any time prior to such Settlement 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 the excess from the Collection Account and pay such amount
to the Obligors.
(c) Furthermore, the Servicer is required to deposit Advance Payments
received by the Servicer in the Collection Account not later than the
Determination Date for the related Collection Period; provided, however, that
the Advance Payment or any portion thereof shall be treated as collections of
Scheduled Payments only in the Collection Period in which such payment is due
and owing.
(d) Notwithstanding the foregoing, the Trustee and/or the Servicer may
deduct from amounts otherwise specified for deposit to the Collection Account
any amounts previously deposited by the Trustee or the Servicer into the
Collection but which are (i) subsequently uncollectible as a result of dishonor
of the instrument of payment for or on behalf of the User or (ii) later
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determined to have resulted from mistaken deposits.
(e) The Collection Account shall be under the sole dominion and control of
the Trustee for the benefit of the Series 1999-1 Noteholders; provided, however,
that the Trustee may rely on the information and instructions provided by the
Servicer in determining the amount of any withdrawals or payments to be made
from either such account for the purposes of carrying out the Trustee's duties
under the Master Agreement or under this Series 1999-1 Supplement. Neither the
Trustee nor the Servicer shall have any right of setoff or banker's lien
against, and no right to otherwise deduct from, any funds held in the Collection
Account for any amount owed to it by the Servicer, the Obligors, the Trustee, or
any Series 1999-1 Noteholder.
(f) On each Payment Date the Trustee shall distribute the Monthly
Remittance Amount with respect to such Payment Date as provided in Section 3.04
hereof.
(g) The Trustee shall deposit all net investment earnings on each Series
1999-1 Account, as collected, to the Collection Account.
SECTION 3.02 Reserve Account and Residual Account.
(a) (i) The Trustee shall establish and maintain an account (the "Reserve
Account") as one or more segregated trust accounts in the Trustee's corporate
trust department in the name of "Advanta Equipment Receivables Asset-Backed
Notes Series 1999-1 Reserve Account, in trust for the Series 1999-1
Noteholders." The Trustee shall make or permit withdrawals from the Reserve
Account only as provided in this Series 1999-1 Supplement.
(ii) If, based solely on information contained in the Servicer's
Certificate delivered on the related Determination Date as specified in
Section 3.05 hereof:
(A) on any Payment Date, (x) the amounts described in clauses
(a)(iii), (a)(iv), (a)(v), (a)(vi) and (a)(vii) of Section 3.04
hereof exceed the Available Funds (exclusive of any Reserve Account
transfers, but inclusive of any Residual Account transfers pursuant
to paragraph (b) below) in the Collection Account after taking into
account the payment of amounts described in clauses (a)(i) and
(a)(ii) of Section 3.04 on such Payment Date;
(B) then, to the extent of the Available Reserve Amount on
deposit in the Reserve Account, the Trustee shall transfer, prior to
making payments to the Series 1999-1 Noteholders on such Payment
Date, from the Reserve Account to the Collection Account such amount
as shall be necessary to fund any such shortfall.
(iii) In the event that after giving effect to all the disbursements
required to be made on any Payment Date, the Available Reserve Amount
exceeds the Required Reserve Amount, the Trustee shall transfer, not later
than the end of business on such Payment Date, an amount equal to such
excess to the Obligors, in the proportions set forth in the
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<PAGE> 23
Servicer's Certificate delivered on the related Determination Date as
specified in Section 3.05 hereof, as the holders of the Obligors'
Interest.
(iv) Upon payment in full of the Series 1999-1 Notes, any balance
remaining in the Reserve Account, after all obligations to the Noteholders
hereunder have been fully satisfied, shall be paid to reimburse the
Trustee for any amounts owing to it arising from the performance of its
obligations under the Master Agreement and this Series 1999-1 Supplement
and, then, to the Obligors, as holders of the Obligors' Interest.
(b) (i) The Trustee shall establish and maintain an account (the "Residual
Account") as one or more segregated trust accounts in the Trustee's corporate
trust department, in the name of "Advanta Leasing Receivables Asset-Backed Notes
Series 1999-1 Residual Account, in trust for the Series 1999-1 Noteholders." The
Trustee shall make or permit withdrawals from the Residual Account only as
provided in this Series 1999-1 Supplement.
(ii) If, on any Payment Date, a Residual Event is in effect (i.e.,
has occurred and not been cured), the Trustee shall deposit to the
Residual Account the amounts described in subsection 3.04(a)(x).
(iii) If, based solely on information contained in the Servicer's
Certificate delivered on the related Determination Date as specified in
Section 3.05 hereof:
(A) on any Payment Date, (x) the amounts described in clauses
(a)(iii), (a)(iv), (a)(v), (a)(vi) and (a)(vii) of Section 3.04
hereof exceed (y) the Available Funds (exclusive of any Reserve
Account or Residual Account transfers) in the Collection Account
after taking into account the payment of amounts described in
clauses (a)(i) and (a)(ii) of Section 3.04 on such Payment Date;
(B) then, to the extent of the Available Residual Amount on
deposit in the Residual Account, the Trustee shall transfer, prior
to making payments to the Series 1999-1 Noteholders on such Payment
Date and prior to making any transfers from the Reserve Account on
such Payment Date, from the Residual Account to the Collection
Account such amount as shall be necessary to fund any such
shortfall.
(iv) In the event that on any Payment Date the Trustee determines
that a Residual Event which has previously occurred has been cured, the
Trustee, prior to making any other transfers or disbursements from the
Series 1999-1 Accounts on such Payment Date, shall transfer the full
amount then on deposit in the Residual Account to the Collection Account.
(v) Upon payment in full of the Series 1999-1 Notes, any balance
remaining in the Residual Account, after all obligations to the
Noteholders hereunder have been fully satisfied, shall be paid to
reimburse the Trustee for any amounts owing to it arising from the
performance of its obligations under the Master Agreement and this Series
1999-1
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<PAGE> 24
Supplement and, then, to ALRC VIII.
SECTION 3.03 Investment of Monies Held in the Series 1999-1 Accounts;
Subaccounts.
(a) The Servicer shall direct the Trustee in writing to invest the amounts
in each Series 1999-1 Account in Eligible Investments that mature or are
otherwise available not later than the Business Day immediately preceding the
next Payment Date following the investment of such amounts. Eligible Investments
shall not be sold or disposed of prior to their maturities. Net investment
earnings on amounts held in any Series 1999-1 Account shall be deposited in the
Collection Account as earned.
(b) The Trustee and the Servicer may, from time to time and in connection
with the administration of each Series 1999-1 Account, establish and maintain
with the Trustee one or more sub-accounts of any of the Series 1999-1 Accounts,
as the Trustee and/or the Servicer may consider useful.
SECTION 3.04 Flow of Funds.
(a) On the Payment Date, the Trustee (based solely on information
contained in the Servicer's Certificate delivered on the related Determination
Date as specified in Section 3.05 hereof) will be required to make the following
payments from the Available Funds (including amounts transferred from the
Reserve Account and/or the Residual Account on such Payment Date) then on
deposit in the Collection Account, in the following order of priority:
(i) from the Available Funds, to the Servicer, any Nonrecoverable
Advances;
(ii) from the Available Funds then remaining in the Collection
Account to the Servicer, the Servicing Fee then due, together with the
Ancillary Servicing Income;
(iii) from the Available Funds then remaining in the Collection
Account, to the Class A Noteholders, the Class A Note Interest for the
related Interest Accrual Period, pari passu with respect to the Class A-1
Notes, the Class A-2 Notes and the Class A-3 Notes;
(iv) from the Available Funds then remaining in the Collection
Account, to the Class B Noteholders, the Class B Note Interest for the
related Interest Accrual Period;
(v) from Available Funds then remaining in the Collection Account,
until the Class A-1 Principal Balance has been reduced to zero, to the
Class A-1 Noteholders, the Class A Principal Payment Amount; after the
Class A-1 Principal Balance has been reduced to zero, then until the Class
A-2 Principal Balance has been reduced to zero, to the Class A-2
Noteholders, the Class A Principal Payment Amount; after the Class A-1
Principal Balance and the Class A-2 Principal Balance have been reduced to
zero, then until the Class A-3 Principal Balance has been reduced to zero,
the Class A-3 Noteholders, the Class A Principal Payment Amount;
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<PAGE> 25
(vi) until the Class B Principal Balance has been reduced to zero,
to the Class B Noteholders, from the Available Funds then remaining in the
Collection Account, the Class B Principal Payment Amount;
(vii) if on such date the Class B Floor is greater than the Class B
Target Investor Principal Amount, an amount equal to the Additional
Principal for such date shall be to the extent thereof, shall be paid
sequentially to the Class A-2 Noteholders, Class A-3 Noteholders and Class
B Noteholders, in that order, until the principal amount of such Class has
been reduced to zero;
(viii) from the Available Funds then remaining in the Collection
Account, to the Reserve Account, the amount needed to increase the amount
on deposit in the Reserve Account to the Required Reserve Amount for such
Payment Date;
(ix) upon the occurrence and continuance of a Residual Event, the
lesser of (A) the remaining Available Funds and (B) the aggregate amount
of Residual Receipts originally included in Available Funds for such
Payment Date will be deposited to the Residual Account;
(x) to the Obligors, in the proportions set forth in the Servicer's
Certificate delivered on the related Determination Date as specified in
Section 3.05 hereof, as the holders of the Obligors' Interest, any
remaining Available Funds on deposit in the Collection Account.
(b) All payments to Series 1999-1 Noteholders shall be made on each
Payment Date to each Series 1999-1 Noteholder of record on the related Record
Date by check, or, if requested by such Series 1999-1 Noteholder, by wire
transfer to the account designated in writing delivered to the Trustee on or
prior to the related Determination Date, in immediately available funds, in
amounts equal to such Series 1999-1 Noteholder's pro rata share of such payment.
SECTION 3.05 Statements to Series 1999-1 Noteholders.
(a) Provided that the Servicer shall have delivered to the Trustee the
Servicer's Certificate on the preceding Determination Date containing all
information necessary to enable the Trustee to make all distributions pursuant
to Section 3.04 hereof as well as all distributions and transfers pursuant to
Sections 3.01 and 3.02 hereof, then on each Payment Date, the Trustee will
forward to each Rating Agency, and mail to each Series 1999-1 Noteholder, a
statement based solely on such Servicer's Certificate, not later than one
Business Day prior to such Payment Date, setting forth the following information
(per $1,000 of Class A-1 Initial Principal Balance, Class A-2 Initial Principal
Balance, Class A-3 Initial Principal Balance and Class B Initial Principal
Balance (as the case may be) as to (i) and (ii) below):
(i) The amount of such payment allocable to the Class A-1 Principal
Payment Amount, Class A-2 Principal Payment Amount, Class A-3 Principal
Payment Amount or Class B Principal Payment Amount, as applicable;
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<PAGE> 26
(ii) The amount of such payment allocable to such Class A-1 Note
Interest, Class A-2 Note Interest, Class A-3 Note Interest or Class B Note
Interest, as applicable;
(iii) The aggregate amount of fees and compensation received by the
Servicer for the related Collection Period;
(iv) The aggregate Class A-1 Principal Balance, Class A-2 Principal
Balance, Class A-3 Principal Balance and Class B Principal Balance, as
applicable, and the Class A-1 Note Factor, Class A-2 Note Factor, Class
A-3 Note Factor, or Class B Note Factor, as applicable, after taking into
account all distributions made on such Payment Date, the Aggregate
Contract Principal Balance and the Collateral Factor;
(v) The total unreimbursed Servicer Advances with respect to the
related Collection Period;
(vi) The aggregate Contract Principal Balance for all Series 1999-1
Contracts that became Defaulted Contracts during the related Collection
Period, calculated immediately prior to the time such Contracts became
Defaulted Contracts;
(vii) The amount on deposit in the Reserve Account and the Residual
Account;
(viii) 31-60, 61-90 and greater than 90 days delinquencies as of the
end of the related Collections Period; and
(ix) Prepayment Amounts received during the related Collection
Period;
provided, however, the Trustee may deliver a copy of the Servicer's
Certificate to each Series 1999-1 Noteholder and Rating Agency in
satisfaction of the requirement set forth in this Section.
(b) By January 31 of each calendar year, commencing January 31, 2000, or
as otherwise required by applicable law, the Trustee shall furnish to each
Person who at any time during the immediately preceding calendar year was a
Series 1999-1 Noteholder a statement containing the applicable aggregate amounts
of interest and principal paid to such Noteholder for such calendar year or, in
the event such Person was a Series 1999-1 Noteholder during a portion of such
calendar year, for the applicable portion of such year, for the purposes of such
Series 1999-1 Noteholder's preparation of federal income tax returns. In
addition to the foregoing, the Trustee shall make available to Series 1999-1
Noteholders any other information provided to the Trustee or otherwise in the
Trustee's possession reasonably requested by Series 1999-1 Noteholders in
connection with tax matters, in accordance with the directions of the Servicer.
The obligation of the Trustee set forth in this paragraph shall be deemed to
have been satisfied to the extent that substantially comparable information
shall be provided by the Servicer pursuant to any requirements of the Code.
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(c) The Servicer and the Trustee shall furnish to each Series 1999-1
Noteholder, on request, such periodic, special or other reports or information
not specifically provided for herein, as shall be necessary, reasonable or
appropriate with respect to such Series 1999-1 Noteholder and at the expense of
such requesting party all such reports or information to be provided by and in
accordance with such applicable instructions and directions as the Series 1999-1
Noteholder may reasonably require and as the Servicer and the Trustee may
reasonably be able to produce. A Series 1999-1 Noteholder may, by notice to the
Trustee, waive receipt of any reports. The Trustee's obligation under this
subsection 3.05(c) shall only pertain to information provided by the Servicer to
the Trustee or otherwise in the Trustee's possession.
(d) The Trustee shall promptly send to each Series 1999-1 Noteholder and
to each Rating Agency in writing:
(i) Notice of any breach by the Originator, either Obligor or the
Servicer of any of their respective representations, warranties and
covenants made herein or in the Contribution Agreement;
(ii) A copy of each Servicer compliance statement delivered to the
Trustee pursuant to Section 6.07 of the Master Agreement;
(iii) A copy of each financial statement delivered to the Trustee
pursuant to Section 6.08 of the Master Agreement;
(iv) Notice of any failure of the Trustee to conform to the
eligibility requirements for the Trustee pursuant to Section 11.08 of the
Master Agreement;
(v) Notice of the appointment of any co-trustee or separate trustee
pursuant to Section 11.15 of the Master Agreement; and
(vi) Notice of the occurrence of any Event of Servicer Termination
or of any Event of Default;
provided, however, that in each case the Trustee shall only be required to send
such notices and other items to the Series 1999-1 Noteholders to the extent that
the Trustee has itself received the related information and the Series 1999-1
Noteholders have not already received such notice or other items. Except as may
be specifically provided herein, the Trustee shall have no obligation to seek to
obtain any such information.
SECTION 3.06 Compliance With Withholding Requirements. Notwithstanding any
other provisions of the Master Agreement and this Series 1999-1 Supplement, the
Trustee, as paying agent for and on behalf of, and at the direction of the
Servicer, shall comply with all federal withholding requirements respecting
payments (or advances thereof) to Series 1999-1 Noteholders as may be applicable
to instruments constituting indebtedness for federal income tax purposes. Any
amounts so withheld shall be treated as having been paid to the related Series
1999-1 Noteholder for all purposes of this Series 1999-1 Supplement. In no event
shall the consent of
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Series 1999-1 Noteholders be required for any withholding.
SECTION 3.07 Servicer Advances. No later than one Business Day preceding
each Payment Date, the Servicer may, but is not required, to make a Servicer
Advance for each Series 1999-1 Contract which is a Delinquent Contract with
respect to each overdue Scheduled Payment as of the related Calculation Date in
an amount equal to the Scheduled Payments, or portion thereof, which were due
but not received during the related Collection Period (and not previously
covered by an unreimbursed Servicer Advance). On each Determination Date, the
Servicer shall deliver to the Trustee the Servicer's Certificate listing the
aggregate amount of Scheduled Payments not received for the immediately prior
Collection Period as of the related Calculation Date, together with a listing of
which such unpaid Scheduled Payments will not be the subject of a corresponding
Servicer Advance. The Servicer shall remit any Servicer Advances to the
Collection Account.
SECTION 3.08 Modifications of Contracts and Purchase of Contracts.
(a) The Servicer may allow modifications and prepayments of Contracts as
provided in Sections 6.01, 6.02 and 6.03 of the Master Agreement.
(b) The Obligors may, at their option remove Defaulted Contracts from the
Series 1999-1 Trust Estate. The aggregate amount of Defaulted Contracts which
the Obligors may remove from the Series 1999-1 Trust Estate shall not, however,
exceed 5% of the Initial Aggregate Contract Principal Balance. In determining
the amount of a Defaulted Contract which is removed, the amount of such Contract
shall be equal to the Contract Principal Balance of such Contract calculated as
if it were not a Defaulted Contract.
(c) The Obligors shall remove from the Series 1999-1 Trust Estate those
contracts described in Section 6.15 of the Master Agreement and such removal
shall occur as provided in such Section 6.15.
(d) Upon removal of a Contract from the Series 1999-1 Trust Estate under
(b) or (c) above, the appropriate Obligor shall pay the Prepayment Amount to the
Servicer for deposit into the Collection Account.
SECTION 3.09 Servicer to Act as Custodian.
(a) The Servicer shall hold and acknowledges that it is holding the Series
1999-1 Contracts hereunder as custodian for the Trustee.
(b) The Servicer shall promptly report to the Trustee any failure by it to
hold the Series 1999-1 Contracts as herein provided and shall promptly take
appropriate action to remedy any such failure but only to the extent (i) any
such failure is caused by the acts or omissions of the Servicer and (ii) such
remedial action is otherwise within its capabilities or control. As custodian,
the Servicer shall have and perform the following powers and duties:
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(1) hold the Series 1999-1 Contracts on behalf of the Trustee for
the benefit of the Series 1999-1 Noteholders, maintain accurate records
pertaining to each Series 1999-1 Contract to enable it to comply with the
terms and conditions of the Master Agreement and this Series 1999-1
Supplement, and maintaining a current inventory thereof;
(2) implement policies and procedures in accordance with the
Servicer's normal business practices with respect to the handling and
custody of the Series 1999-1 Contracts so that the integrity and physical
possession of the Series 1999-1 Contracts will be maintained; and
(3) attend to all details in connection with maintaining custody of
the Series 1999-1 Contracts on behalf of the Trustee on behalf of the
Series 1999-1 Noteholders.
(c) In acting as custodian of the Series 1999-1 Contracts, the Servicer
agrees further that it does not and will not have or assert any beneficial
ownership interest in such Series 1999-1 Contracts. The Servicer on behalf of
the Series 1999-1 Noteholders shall mark conspicuously its master data
processing records evidencing each Series 1999-1 Contract with a legend
evidencing that all right, title and interest in the Series 1999-1 Contracts has
been granted to the Trustee as provided in this Series 1999-1 Supplement.
(d) The Servicer agrees to maintain the Series 1999-1 Contracts at either
its office in Voorhees, New Jersey or at such other location as shall from time
to time be identified by prior written notice to the Trustee. Subject to the
foregoing, the Servicer may temporarily move individual Series 1999-1 Contracts
or any portion thereof without notice as necessary to conduct collection and
other servicing activities.
ARTICLE IV
SERIES 1999-1 EVENTS OF DEFAULT
SECTION 4.01 Events of Default. Events of Default and Notice thereof.
The following events constitute "Events of Default":
(a) default by the Obligors in making payment of any installment of
interest on any Series 1999-1 Note when such payment becomes due and payable and
continuation of such default for five calendar days;
(b) the outstanding principal balance of a Class of Series 1999-1 Notes is
not reduced to zero by that Class's Stated Maturity Date;
(c) default in the performance, or breach, by either Obligor of the
provisions of its related organizational documents relating to corporate
separateness;
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(d) default in the performance, or breach, of any covenant of either
Obligor in the Master Agreement, or herein, and continuance of such default or
breach for a period of 30 days after the earliest of (i) any officer of either
Obligor first acquiring the knowledge thereof, (ii) the Trustee's giving written
notice thereof to the applicable Obligor or (iii) the holders of a majority of
the then Outstanding Principal Balance giving written notice thereof to the
Obligors and the Trustee;
(e) if any representation or warranty of either Obligor made in the Master
Agreement, this Series 1999-1 Supplement or any other writing provided to the
Series 1999-1 Noteholders proves to be incorrect in any material respect as of
the time when the same has been made; provided, however, that the breach of any
representation or warranty made by either Obligor will be deemed to be
"material" only if it negatively affects the Series 1999-1 Noteholders, the
enforceability of the Master Agreement, this Series 1999-1 Supplement or the
Series 1999-1 Notes; or
(f) the commencement by either or both of the Obligors of a voluntary or
involuntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization, or other similar law, or the consent by either or
both of the Obligors to the entry of a decree or order for relief in respect of
either or both of the Obligors in an involuntary case or proceeding under any
applicable federal or state bankruptcy or insolvency case or proceeding against
either or both of the Obligors, or the filing by either or both of the Obligors
of a petition or answer or consent seeking reorganization or relief under any
applicable federal or state law, or the consent by it to the filing of such
petition or to the appointment of or taking possession of any substantial part
of the property of either or both of the Obligors by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of either or
both of the Obligors, or the making by either or both of the Obligors of an
assignment for the benefit of creditors, or the failure by either or both of the
Obligors to pay their debts generally as they become due, or the taking of
corporate action by either or both of the Obligors in furtherance of any such
action.
(g) either or both of the Obligors becomes an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
The Trustee shall give the Series 1999-1 Noteholders notice of all uncured
defaults known to it.
The Obligors shall furnish to the Trustee, annually before January 31st of
each year, commencing in 2000, a statement of certain officers of the Obligors
to the effect that to the best of their knowledge the Obligors is not in default
in the performance and observance of the terms of the Master Agreement, this
Series 1999-1 Supplement or the Series 1999-1 Notes or, if the Obligors are in
default, specifying such default.
SECTION 4.02 Acceleration of Maturity; Rescission and Annulment.
(a) If an Event of Default of the kind specified in subsection 4.01(f)
occurs, the unpaid principal amount of the Series 1999-1 Notes shall
automatically become due and payable at par
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together with all accrued and unpaid interest thereon, without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Obligors. If an Event of Default (other than an Event of Default of the kind
described in subsection 4.01(f)) occurs and is continuing, then and in every
such case the Trustee may, or if so directed by the holders of Series 1999-1
Notes evidencing 66-2/3% of the then Outstanding Principal Balance, shall
declare the unpaid principal amount of all the Series 1999-1 Notes to be due and
payable immediately, by a notice in writing to the Obligors (and to the Trustee
if given by Series 1999-1 Noteholders), and upon any such declaration such
principal amount shall become immediately due and payable together with all
accrued and unpaid interest thereon, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Obligors. The
Trustee may, however, if the Event of Default involves other than non-payment of
principal or interest on the Series 1999-1 Notes, not sell the Series 1999-1
Trust Estate unless such sale is for an amount greater than or equal to the
Outstanding Principal Balance of the Series 1999-1 Notes unless directed to do
so by the holders of 66-2/3% of the then Outstanding Principal Balance.
(b) At any time after such a declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the holders of Series
1999-1 Notes evidencing 66-2/3% of the then Outstanding Principal Balance, by
written notice to the Obligors and the Trustee, may rescind and annul such
declaration and its consequences if:
(i) the Obligors have paid or deposited with the Trustee a sum
sufficient to pay:
(A) all principal on any Class A Notes and Class B Notes which has
become due otherwise than by such declaration of acceleration and interest
thereon from the date when the same first became due until the date of
payment or deposit at the Class A-1 Interest Rate, Class A-2 Interest
Rate, Class A-3 Interest Rate and the Class B Interest Rate, as
applicable;
(B) all interest due with respect to any Class A Notes or Class B
Notes and, to the extent that payment of such interest is lawful, interest
upon overdue interest from the date when the same first became due until
the date of payment or deposit at a rate per annum equal to the Class A-1
Interest Rate, Class A-2 Interest Rate, Class A-3 Interest Rate, or Class
B Interest Rate, as applicable; and
(C) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements, and advances of the
Trustee, its agents and counsel;
and
(ii) all Events of Default, other than the non-payment of the
Outstanding Principal Balance which has become due solely by such
declaration of acceleration, have been cured or waived.
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No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 4.03 Remedies.
(a) If an Event of Default occurs and is continuing of which a Responsible
Officer has actual knowledge, the Trustee shall immediately give notice to each
Series 1999-1 Noteholder and shall solicit the Series 1999-1 Noteholders for
advice. The Trustee shall then take such action as the Trustee shall deem
appropriate provided that, if the Trustee is directed to take action by the
holders of Series 1999-1 Notes evidencing 66-2/3% of the then Outstanding
Principal Balance the Trustee shall act in accordance with such direction
subject to the provisions of Section 4.12 hereof.
(b) Following any acceleration of the Series 1999-1 Notes, the Trustee
shall have all of the rights, powers and remedies with respect to the Series
1999-1 Trust Estate as are available to secured parties under the UCC or other
applicable law. Such rights, powers and remedies may be exercised by the Trustee
in its own name as trustee of an express trust.
(c) If an Event of Default specified in subsection 4.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Obligors for the whole amount of
principal and interest remaining unpaid.
(d) In exercising its rights and obligations under this Section 4.03, the
Trustee may sell the Series 1999-1 Trust Estate in accordance with Section 4.16
hereof; provided that, if the Event of Default involves other than non-payment
of principal or interest on the Series 1999-1 Notes, then such sale must be for
an amount greater than or equal to amounts due under clauses first through
fourth in Section 4.06. Neither the Trustee nor any Series 1999-1 Noteholder
shall have any rights against the Obligors other than to enforce the Lien
against the Series 1999-1 Trust Estate and to sell the Series 1999-1 Trust
Estate.
SECTION 4.04 Trustee Shall File Proofs of Claim.
(a) In case of the tendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition, or other
judicial proceeding relative to the Obligors, the Originator, the Servicer or
any other obligor upon the Series 1999-1 Notes or the other obligations secured
hereby or relating to the property of the Obligors, the Originator, the Servicer
or of such other obligor or their creditors, the Trustee (irrespective of
whether the principal of the Series 1999-1 Notes shall then be due and payable
as therein expressed or by declaration or otherwise and irrespective of whether
the Trustee shall have made any demand on the Obligors, the Originator or the
Servicer for the payment of overdue principal or interest or any such other
obligation) shall by intervention in such proceeding or otherwise,
(i) file and prove a claim for the whole amount of principal and
interest owing and unpaid in respect of the Series 1999-1 Notes and any
other obligation secured hereby and file such other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
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disbursements and advances of the Trustee, its agents and counsel) and of
the Series 1999-1 Noteholders allowed in such judicial proceeding, and
(ii) collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator, or
other similar official in any such judicial proceeding is hereby authorized by
each Series 1999-1 Noteholder to make such payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Series 1999-1 Noteholders to pay to the Trustee any amount due it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee.
(b) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Series 1999-1
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Series 1999-1 Notes or the rights of any holder thereof or to
authorize the Trustee to vote in respect of the claim of any Series 1999-1
Noteholder in any such proceeding.
SECTION 4.05 Trustee May Enforce Claims Without Possession of Series
1999-1 Notes. All rights of action and claims under the Master Agreement, this
Series 1999-1 Supplement or the Series 1999-1 Notes may be prosecuted and
enforced by the Trustee without the possession of any of the Series 1999-1 Notes
or the production thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment shall, after provision for the
payment of the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, be for the ratable benefit of the holders
of the Series 1999-1 Notes in respect of which such judgment has been recovered.
SECTION 4.06 Application of Money Collected. Any money collected by the
Trustee pursuant to this Article, and any moneys that may then be held or
thereafter received by the Trustee shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution of the
entire amount due on account of principal or interest, upon presentation of the
Series 1999-1 Notes and surrender thereof:
first to the payment of all costs and expenses of collection
incurred by the Trustee and the Series 1999-1 Noteholders (including the
reasonable fees and expenses of any counsel to the Trustee and the Series
1999-1 Noteholders);
second to the payment of all Servicing Fees then due to the
Servicer;
third first, pro rata, to the payment of all accrued and unpaid
interest on the Class A-1 Principal Balance, Class A-2 Principal Balance
and Class A-3 Principal Balance, respectively, to the date of payment
thereof, including (to the extent permitted by applicable law) interest on
any overdue installment of interest and principal from the
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maturity of such installment to the date of payment thereof at the rate
per annum equal to the Class A-1 Interest Rate, Class A-2 Interest Rate
and the Class A-3 Interest Rate, respectively; second, to the payment of
all accrued and unpaid interest on the Class B Principal Balance to the
date of payment thereof, including (to the extent permitted by applicable
law) interest on any overdue installment of interest and principal from
the maturity of such installment to the date of payment thereof at the
rate per annum equal to the Class B Interest Rate; third, to the payment
to zero of the Class A Principal Balance; and fourth, to the payment to
zero of the Class B Principal Balance; provided that the Series 1999-1
Noteholders may allocate such payments for interest and principal at their
own discretion, except that no such allocation shall affect the allocation
of such amounts or future payments received by any other Series 1999-1
Noteholder;
fourth to the payment of amounts then due the Trustee hereunder; and
fifth to the Obligors or any other Person legally entitled thereto.
SECTION 4.07 Limitation on Suits. None of the Series 1999-1 Noteholders
shall have any right to institute any proceeding, judicial or otherwise, with
respect to the Master Agreement, this Series 1999-1 Supplement or the Series
1999-1 Notes, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Series 1999-1 Noteholder has previously given written
notice to the Trustee of a continuing Event of Default;
(ii) the holders of not less than 66-2/3% of the then Outstanding
Principal Balance of the Series 1999-1 Notes shall have made written
request to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(iii) such Series 1999-1 Noteholder or Series 1999-1 Noteholders
have offered to the Trustee adequate indemnity against the costs, expenses
and liabilities to be incurred in compliance with such request;
(iv) the Trustee for 30 days after its receipt of such notice,
request and offer of indemnity failed to institute any such proceeding;
and
(v) so long as any of the Series 1999-1 Notes remain Outstanding, no
direction inconsistent with such written request has been given to the
Trustee during such 30-day period by the holders of 66-2/3% of the then
Outstanding Principal Balance of the Series 1999-1 Notes; it being
understood and intended that no one or more Series 1999-1 Noteholders
shall have any right in any manner whatever by virtue of, or by availing
of, any provision of the Master Agreement, this Series 1999-1 Supplement
or the Series 1999-1 Notes to affect, disturb, or prejudice the rights of
any other Series 1999-1 Noteholders, or to obtain or to seek to obtain
priority or preference over any other Series 1999-1 Noteholders or to
enforce any right under the Master Agreement, this Series 1999-1
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Supplement or the Series 1999-1 Notes, except in the manner herein
provided and for the equal and ratable benefit of all the Series 1999-1
Noteholders. It is further understood and intended that so long as any
portion of the Series 1999-1 Notes remains Outstanding, ABS shall not have
any right to institute any proceeding, judicial or otherwise, with respect
to the Series 1999-1 Notes or for the appointment of a receiver or trustee
(including, without limitation, a proceeding under the Bankruptcy Code),
or for any other remedy hereunder. Nothing in this Section 4.07 shall be
construed as limiting the rights of otherwise qualified Series 1999-1
Noteholders to petition a court for the removal of a Trustee pursuant to
Section 11.09 of the Master Agreement.
SECTION 4.08 Unconditional Right of Series 1999-1 Noteholders to Receive
Principal and Interest. Notwithstanding any other provision in the Master
Agreement, this Series 1999-1 Supplement or the Series 1999-1 Notes other than
the provisions hereof limiting the right to recover amounts due on the Series
1999-1 Notes to recoveries from the property of the Series 1999-1 Trust Estate,
the holder of any Series 1999-1 Note shall have the absolute and unconditional
right to receive payment of the principal of and interest on such Series 1999-1
Note on the related stated maturity date thereof, and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Series 1999-1 Noteholder.
SECTION 4.09 Restoration of Rights and Remedies. If the Trustee or any
Series 1999-1 Noteholder has instituted any proceeding to enforce any right or
remedy under the Master Agreement, this Series 1999-1 Supplement or the Series
1999-1 Notes and such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to such Series 1999-1
Noteholder, then and in every such case, subject to any determination in such
proceeding, the Obligors, the Trustee and the Series 1999-1 Noteholders shall be
restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Series 1999-1
Noteholders continue as though no such proceeding had been instituted.
SECTION 4.10 Rights and Remedies Cumulative. Except as otherwise provided
with respect to the replacement or payment of mutilated, destroyed, lost, or
stolen Series 1999-1 Notes, no right or remedy herein conferred upon or reserved
to the Trustee or to the Series 1999-1 Noteholders is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise.
The assertion or employment of any right or remedy hereunder, or otherwise,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
SECTION 4.11 Delay or Omission Not Waiver. No delay or omission of the
Trustee or of any holder of any Series 1999-1 Note to exercise any right or
remedy accruing upon any Event of Default shall impair any such right or remedy
or constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Series 1999-1 Noteholders may be exercised from time to time, and as often as
may be deemed expedient, by the Trustee or by the Series 1999-1 Noteholders, as
the case may be.
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SECTION 4.12 Control by Series 1999-1 Noteholders. The Holders of a
majority of the then Outstanding Principal Balance shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Series 1999-1 Notes. Notwithstanding the foregoing:
(i) no such direction shall be in conflict with any rule of law or
with the Master Agreement, this Series 1999-1 Supplement or the Series
1999-1 Notes;
(ii) the Trustee shall not be required to follow any such direction
which the Trustee reasonably believes might result in any personal
liability on the part of the Trustee for which the Trustee is not
adequately indemnified; and
(iii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with any such direction; provided that
the Trustee shall give notice of any such action to each Noteholder.
SECTION 4.13 Waiver of Events of Default.
(a) The Holders of a majority of the then Outstanding Principal Balance
may, by one or more instruments in writing, waive any Event of Default hereunder
and its consequences, except a continuing Event of Default:
(i) in respect of the payment of the principal of or premium or
interest on any Series 1999-1 Note (which may only be waived by the holder
of such Note); or
(ii) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the holder of each Outstanding
Series 1999-1 Note affected (which only may be waived by the holders of
all Outstanding Series 1999-1 Notes affected).
(b) A copy of each waiver pursuant to subsection 4.13(a) shall be
furnished by the Obligors to the Trustee. Upon any such waiver, such Event of
Default shall cease to exist and shall be deemed to have been cured, for every
purpose of the Master Agreement, this Series 1999-1 Supplement or the Series
1999-1 Notes; but no such waiver shall extend to any subsequent or other Event
of Default or impair any right consequent thereon.
SECTION 4.14 Undertaking for Costs. All parties hereto agree (and each
Series 1999-1 Noteholder by its acceptance thereof shall be deemed to have
agreed) that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under the Master Agreement, this Series
1999-1 Supplement or the Series 1999-1 Notes, or in any suit against the Trustee
for any action taken, suffered or omitted by it as Trustee, the filing by any
party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit,
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having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Series 1999-1
Noteholder, or group of Series 1999-1 Noteholders, holding in the aggregate more
than 10% of the then Outstanding Principal Balance of the Series 1999-1 Notes,
or to any suit instituted by any Series 1999-1 Noteholder for the enforcement of
the payment of the principal of or interest on any Series 1999-1 Note on or
after the maturity date for such payments.
SECTION 4.15 Waiver of Stay or Extension Laws. The Obligors covenant (to
the extent that they may lawfully do so) that they will not at any time insist
upon, or plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the performance of the
Master Agreement, this Series 1999-1 Supplement or the Series 1999-1 Notes, and
the Originator (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
SECTION 4.16 Sale of Series 1999-1 Trust Estate.
(a) The power to effect any sale of any portion of the Series 1999-1 Trust
Estate pursuant to Section 4.03 shall not be exhausted by any one or more sales
as to any portion of the Series 1999-1 Trust Estate remaining unsold, but shall
continue unimpaired until the entire Series 1999-1 Trust Estate shall have been
sold or all amounts payable on the Series 1999-1 Notes shall have been paid. The
Trustee may from time to time, upon directions in accordance with Section 4.12,
postpone any public sale by public announcement made at the time and place of
such sale. For any public sale of the Series 1999-1 Trust Estate, the Trustee
shall have provided each Series 1999-1 Noteholder with notice of such sale at
least two weeks in advance of such sale which notice shall specify the date,
time and location of such sale.
(b) To the extent permitted by applicable law, the Trustee shall not in
any private sale sell to a third party the Series 1999-1 Trust Estate, or any
portion thereof unless,
(i) the holders of 66-2/3% of the then Outstanding Principal Balance
consent to or direct the Trustee in writing to make such sale; or
(ii) the proceeds of such sale would be not less than the sum of all
amounts due to the Trustee hereunder and the entire Outstanding Principal
Balance and interest due or to become due thereon on the Payment Date next
succeeding the date of such sale.
The foregoing provisions shall not preclude or limit the ability of the Trustee
to purchase all or any portion of the Series 1999-1 Trust Estate at a private
sale.
(c) In connection with a sale of all or any portion of the Series 1999-1
Trust Estate:
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(i) any one or more Series 1999-1 Noteholders may bid for and
purchase the property offered for sale, and upon compliance with the terms
of sale may hold, retain, and possess and dispose of such property,
without further accountability, and any Series 1999-1 Noteholder may, in
paying the purchase money therefore, deliver in lieu of cash any
Outstanding Series 1999-1 Notes or claims for interest thereon for credit
in the amount that shall, upon distribution of the net proceeds of such
sale, be payable thereon, and the Series 1999-1 Notes, in case the amounts
so payable thereon shall be less than the amount due thereon, shall be
returned to the Series 1999-1 Noteholders after being appropriately
stamped to show such partial payment;
(ii) the Trustee shall execute and deliver an appropriate instrument
of conveyance transferring its interest in any portion of the Series
1999-1 Trust Estate in connection with a sale thereof;
(iii) the Trustee is hereby irrevocably appointed the agent and
attorney-in-fact of the Originator to transfer and convey its interest in
any portion of the Series 1999-1 Trust Estate in connection with a sale
thereof, and to take all action necessary to effect such sale; and
(iv) no purchaser or transferee at such a sale shall be bound to
ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(d) The method, manner, time, place and terms of any sale of all or any
portion of the Series 1999-1 Trust Estate shall be commercially reasonable.
ARTICLE V
PREPAYMENT AND REDEMPTION
SECTION 5.01 Optional "Clean-up Call" Redemption of Series 1999-1 Notes.
On any Payment Date following any Calculation Date as of which the Aggregate
Contract Principal Balance is less than ten percent (10.00%) of the Initial
Aggregate Contract Principal Balance, the Servicer shall have the option to
cause the redemption of the Series 1999-1 Notes by depositing with the Trustee
the sum of (i) the Class A Principal Balance and the Class B Principal Balance
as of such Payment Date (after giving effect to the payment of any principal on
such Payment Date) and (ii) the Class A Note Interest and Class B Note Interest
due on such Payment Date. Upon receipt of such amounts and all amounts then owed
to the Trustee, the Trustee shall (x) make the final payment in full to the
Series 1999-1 Noteholders and (y) release any remaining Series 1999-1 Trust
Estate to the Obligors, as the holder of the Residual Interest.
SECTION 5.02 Class B Special Redemption. The Class B Notes may be redeemed
("Class B Special Redemption) on any Payment Date at the option of the Obligors
at a price equal to the sum of (i) the then Class B Principal Balance, accrued
and unpaid interest thereon and (ii) the Class B Special Redemption Premium.
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<PAGE> 39
The Class B Special Redemption Premium will equal the excess, if any,
discounted as described below, of (i) the amount of interest that would accrue
on the aggregate outstanding principal balance of the Class B Notes at the Class
B Interest Rate during the period beginning on and including the Payment Date on
which such Class B Special Redemption Premium is required to be paid to the
Class B Noteholders to but excluding the Class B Maturity Date, over (ii) the
amount of interest that would have accrued on the aggregate outstanding Class B
Principal Balance over the same period at a per annum rate of interest equal to
the bond equivalent yield to maturity on the Determination Date preceding such
Payment Date of a United States Treasury security, which is trading in the
public securities market, maturing on a date closest to the date equal to the
remaining average life of the Class B Notes minus 0.5%. Such excess shall be
discounted to the present value to such Payment Date at the applicable yield
described in clause (ii) above. For purposes of this paragraph only, (i) the
Class B Principal Balance upon which interest will be deemed to accrue, and (ii)
the average weighted life of the Class B Notes, shall be determined based upon
the amortization of the Aggregate Contract Principal remaining at such Payment
Date at a rate of 6.0% conditional payment rate and no losses.
If the Class B Notes are redeemed pursuant to a Class B Special
Redemption, the Class B Notes will be deemed to have been repurchased by the
Obligors. In such an event, the Obligors will be entitled to receive payments of
principal and interest on the Class B Notes, and the Class B Principal Balance
will thereafter continue to amortize as provided in this Section.
SECTION 5.03 Notice of Redemption and Disposition of Funds.
(a) Notice of any termination pursuant to Section 5.01 shall be given to
the Trustee by the Obligors, and then, promptly by the Trustee, by letter to
Noteholders and to each Rating Agency mailed not earlier than the 10th day and
not later than the 30th day of the month immediately preceding the month of such
final Payment Date specifying (i) the Payment Date upon which final payment of
the Series 1999-1 Notes so called for redemption will be made, (ii) the
scheduled amount of any such final payment, (iii) that interest shall cease to
accrue on the Series 1999-1 Notes so called for redemption on such final Payment
Date and (iv) at the option of the Trustee, the address for presentation of the
Series 1999-1 Notes so called for redemption for final payment. On such final
Payment Date, the Trustee shall cause to be distributed to the Series 1999-1
Noteholders so called for redemption an amount equal to the amount deposited by
the Obligors pursuant to Section 5.01, as applicable. After such Payment Date,
interest on the Series 1999-1 Notes so redeemed shall cease to accrue. Each
Series 1999-1 Noteholder shall use reasonable efforts to present its redeemed
Series 1999-1 Note to the Trustee at the office, if any, specified in the notice
described in clause (iv) of this paragraph (a), or in any similar written
notice, within sixty (60) days of such Series 1999-1 Noteholder's receipt of the
final payment of its Series 1999-1 Note. Each Noteholder shall indemnify the
Trustee for any damages suffered by the Trustee as a result of the Noteholder's
failure to present its Series 1999-1 Note on or after the final Payment Date
thereof.
(b) Notice of any redemption of the Class B Notes pursuant to Section 5.02
shall be given to the Trustee by the Obligors, and then, promptly by the
Trustee, by letter to the Class B
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<PAGE> 40
Noteholders mailed not earlier than the 10th day and not later than the 30th day
of the month immediately preceding the month of such redemption specifying (i)
the Payment Date upon which the redemption of the Class B Notes will occur, (ii)
the scheduled amount of such redemption, (iii) that with respect to the then
holders of the Class B Notes, interest shall cease to accrue on the Class B
Notes so called for redemption and (iv) at the option of the Trustee, the
address for presentation of the Class B Notes so called for redemption for final
payment. On such final Payment Date, the Trustee shall cause to be distributed
to the holders of the Class B Notes so called for redemption an amount equal to
the amount deposited by the Obligors for such purpose. After such Payment Date,
interest on the Class B Notes so redeemed shall accrue to the benefit of the
Obligors. Each Class B Noteholder with respect to Class B Notes which have been
called for redemption shall use reasonable efforts to present its redeemed Class
B Notes to the Trustee at the office, if any, specified in the notice described
in clause (iv) of this paragraph (b), or in any similar written notice, within
sixty (60) days of such Class B Noteholder's receipt of the final payment of its
Class B Note. Each Noteholder shall indemnify the Trustee for any damages
suffered by the Trustee as a result of the Noteholder's failure to present its
Class B Note on or after the stated redemption date therefor.
(c) In the event that any amount due to any Series 1999-1 Noteholder
remains unclaimed after the final Payment Date or redemption date, the Servicer
shall, at its expense, cause to be published once, in the eastern edition of The
Wall Street Journal, notice that such money remains unclaimed. If, within the
period then specified in the escheat laws of the State of New York after such
publication, such amount remains unclaimed, the Obligors shall be entitled to
all unclaimed funds and other assets which remain subject hereto, and the
Trustee upon transfer of such funds shall be discharged of any responsibility
for such funds and, the Series 1999-1 Noteholders shall look to the Obligors for
payment.
ARTICLE VI
MATTERS RELATING TO THE CLASS B NOTES.
SECTION 6.01. Transfer Restrictions.
The Class B Notes may not be offered or sold except to a Person whom the
transferor of the Class B Notes reasonably believes is a Qualified Institutional
Buyer ("QIB") purchasing for its own account in accordance with Rule 144A under
the Securities Act. Prospective investors in the Class B Notes are hereby
notified that transferors of the Class B Notes are relying on the exemption from
the provisions of the Securities Act provided by Rule 144A. Each Class B
Noteholder and each beneficial owner of Class B Notes, by its acceptance thereof
or of such beneficial interest, will be deemed to have represented and agreed as
follows: (i) such Holder or owner understands that the Class B Notes have not
been and will not be registered under the Securities Act or any state or other
applicable securities law and may not be offered, sold or otherwise transferred
unless registered pursuant to, or exempt from registration under, the Securities
Act and any other applicable securities laws, (ii) such Holder or owner will not
offer, sell, pledge or otherwise transfer such Class B Notes or any interest
therein at any time except to the Seller or to a Person whom such transferor of
the Class B Notes reasonably believes is a QIB purchasing for its own account in
accordance with Rule 144A to whom notice is given that the reoffer, resale,
pledge or other transfer is being made in reliance on Rule 144A, (iii) such
Holder or owner is a QIB
40
<PAGE> 41
purchasing for its own account in accordance with Rule 144A under the Securities
Act and has received notice that the reoffer, resale, pledge or other transfer
is being made in reliance on Rule 144A, and (iv) such Holder or owner
acknowledges that confirmations of the issuance and transfer of the Class B
Notes will bear a legend as set forth in Exhibit __ hereto.
SECTION 6.02. Rule 144A Information. In order to preserve the exemption
for resales and other transfers under Rule 144A under the Securities Act of
1933, as amended, the Obligors shall provide to any Class B Noteholder and any
prospective purchaser or transfer designated by a Class B Noteholder, upon
request of the Class B Noteholder or prospective purchaser or transferee, the
information required by Rule 144A to enable resales of such Class B Notes to be
made pursuant to Rule 144A.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Ratification of Master Agreement. As supplemented by this
Series 1999-1 Supplement, the Master Agreement is in all respects ratified and
confirmed and the Master Agreement, as so supplemented by this Series 1999-1
Supplement shall be read, taken and construed as one and the same instrument.
SECTION 7.02 Counterparts. This Series 1999-1 may be executed in one or
more counterparts, each of which so executed shall be deemed to be an original,
but all of which shall together constitute but one and the same instrument.
SECTION 7.03 GOVERNING LAW. THIS SERIES 1999-1 SUPPLEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT TAKING INTO ACCOUNT THE CONFLICT
OF LAWS PRINCIPLES OF ANY JURISDICTION.
SECTION 7.04 Amendments and Waivers.
(a) Notwithstanding anything contained in the Master Agreement to the
contrary, no term or condition of this Series 1999-1 Supplement shall be
amended, modified, waived or terminated without the prior written consent of the
Obligors, the Servicer and the Trustee.
(b) No waiver with respect to any term or condition of the Master
Agreement or this Series 1999-1 Supplement shall extend to any subsequent or
other event, circumstance or default or impair any right consequent thereon
except to the extent expressly so waived.
SECTION 7.05 Non-petition Clause. Notwithstanding anything contained in
Section 4.07
41
<PAGE> 42
hereof, or elsewhere herein, the Trustee hereby, and by its acceptance of the
Series 1999-1 Note, each Series 1999-1 Noteholder shall be deemed to have agreed
that, prior to the date which is one year and one day after the termination of
the Master Agreement, such Person shall not acquiesce, petition or otherwise
invoke or cause either Obligor to invoke the process of any Governmental
Authority for the purpose of commencing or sustaining a case against such
Obligor under any Federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of or for such Obligor or any substantial part of its
property or ordering the winding-up or liquidation of the affairs of such
Obligor.
SECTION 7.06 Officer's Certificate and Opinion of Counsel as to Conditions
Precedent. Upon any request or application by the Obligors to the Trustee to
take any action under the Master Agreement or this Series 1999-1 Supplement, the
Obligors shall furnish to the Trustee:
(a) an Officer's Certificate stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in the Master
Agreement or this Series 1999-1 Supplement relating to the proposed action have
been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been complied with.
Each Officer's Certificate or Opinion of Counsel with respect to
compliance with a condition or covenant provided for in the Master Agreement or
this Series 1999-1 Supplement shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been complied with.
SECTION 7.07 Restriction on Further Indebtedness. Neither Obligor shall
issue any indebtedness, including any new Series of Notes, or execute and
deliver any guaranties, unless the Obligors shall have previously received
confirmation of the ratings then assigned to the Series 1999-1 Notes by each of
Moody's and Fitch.
SECTION 7.08 Special Covenants and Acknowledgements. With respect to the
Series 1999-1 Notes, each Obligor does hereby represent and warrant, as of the
Closing Date:
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<PAGE> 43
(i) "Pledged Property." The Pledged Property for Series 1999-1 is
the Series Trust Estate.
(ii) "Series Controlling Party." The parties hereto acknowledge that
the Trustee is the "Series Controlling Party" with respect to the Series
1999-1 Notes for purposes of the Master Agreement.
(iii) "Support Defaults." There are no "Support Default" events with
respect to the Series 1999-1 Notes.
(iv) "Series Trustee Secured Obligations." The "Series Trustee
Secured Obligations" and the "Series Secured Obligations" with respect to
the Series 1999-1 Notes shall mean, collectively (x) any amounts due to
the Series 1999-1 Noteholders hereunder, and (y) any fees and expenses due
to the Trustee with respect to the Series 1999-1 Notes.
(v) "Series Secured Parties." The "Series Secured Parties" with
respect to the Series 1999-1 Notes are the Trustee and the Series 1999-1
Noteholders.
(vi) "Original Servicer Fee Rate." The "Original Servicer Fee Rate"
with respect to the Series 1999-1 Notes is the Servicing Fee.
(vii) "Original Issue Date." The "Original Issue Date" with respect
to the Series 1999-1 Note is August __, 1999.
43
<PAGE> 44
IN WITNESS WHEREOF, the Obligors, ABS, in its individual capacity, as
Originator and as the Servicer and the Trustee have caused this Series 1999-1
Supplement to be fully executed by their respective officers as of the day and
year first above written.
ADVANTA BUSINESS SERVICES CORP.,
in its individual capacity and as
Servicer and Originator
By ___________________
Name:
Title:
ADVANTA LEASING RECEIVABLES CORP. VIII,
as an Obligor
By ___________________
Name:
Title:
ADVANTA LEASING RECEIVABLES CORP. IX,
as an Obligor
By ___________________
Name:
Title:
BANKERS TRUST COMPANY, as Trustee
By ___________________
Name:
Title:
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I.
CREATION OF THE SERIES 1999-1 NOTES
SECTION 1.01 Designation 1
SECTION 1.02 Pledge of Series 1999-1 Trust Estate 1
SECTION 1.03 Custody of the Series 1999-1 Trust Estate 2
SECTION 1.04 Conditions to Issuance of the Series 1999-1 Notes 2
SECTION 1.05 Acceptance by Trustee 3
SECTION 1.06 Liabilities of the Trustee and Parties to the Master
Agreement, this Series 1999-1 Supplement and the Series
1999-1 Notes; Limitations Thereon 3
SECTION 1.07 Forms of Notes 4
ARTICLE II
DEFINITIONS
SECTION 2.01 Definitions 4
ARTICLE III
SERIES ACCOUNTS; DISTRIBUTIONS AND STATEMENTS TO
SERIES 1999-1 NOTEHOLDERS; SERIES 1999-1 SPECIFIC COVENANTS
SECTION 3.01 Collection Account 17
SECTION 3.02 Reserve Account and Residual Account 19
SECTION 3.03 Investment of Monies Held in the Series 1999-1 Accounts;
Subaccounts 21
SECTION 3.04 Flow of Funds 21
SECTION 3.05 Statements to Series 1999-1 Noteholders 22
SECTION 3.06 Compliance With Withholding Requirements 24
SECTION 3.07 Servicer Advances 24
SECTION 3.08 Modifications of Contracts and Purchase of Contracts 25
SECTION 3.09 Servicer to Act as Custodian 25
ARTICLE IV
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
SERIES 1999-1 EVENTS OF DEFAULT
SECTION 4.01 Events of Default 26
SECTION 4.02 Acceleration of Maturity; Rescission and Annulment 27
SECTION 4.03 Remedies 28
SECTION 4.04 Trustee Shall File Proofs of Claim 29
SECTION 4.05 Trustee May Enforce Claims Without Possession of Series
1999-1 Notes 30
SECTION 4.06 Application of Money Collected 30
SECTION 4.07 Limitation on Suits 31
SECTION 4.08 Unconditional Right of Series 1999-1 Noteholders to
Receive Principal and Interest 32
SECTION 4.09 Restoration of Rights and Remedies 32
SECTION 4.10 Rights and Remedies Cumulative 32
SECTION 4.11 Delay or Omission Not Waiver 32
SECTION 4.12 Control by Series 1999-1 Noteholders 32
SECTION 4.13 Waiver of Events of Default 33
SECTION 4.14 Undertaking for Costs 33
SECTION 4.15 Waiver of Stay or Extension Laws 33
SECTION 4.16 Sale of Series 1999-1 Trust Estate 34
ARTICLE V
PREPAYMENT AND REDEMPTION
SECTION 5.01 Optional "Clean-up Call" Redemption of Series 1999-1 Notes 35
SECTION 5.02 Class B Special Redemption 35
SECTION 5.03 Notice of Redemption and Disposition of Funds 36
ARTICLE VI
MATTERS RELATING TO THE CLASS B NOTES
SECTION 6.01. Transfer Restrictions 37
SECTION 6.02. Rule 144A Information 37
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 Ratification of Master Agreement 38
SECTION 7.02 Counterparts 38
SECTION 7.03 GOVERNING LAW 38
SECTION 7.04 Amendments and Waivers 38
SECTION 7.05 Non-petition Clause 38
SECTION 7.06 Officer's Certificate and Opinion of Counsel as to
Conditions Precedent 38
SECTION 7.07 Restriction on Further Indebtedness 39
SECTION 7.08 Special Covenants and Acknowledgements 39
</TABLE>
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<PAGE> 48
<PAGE> 1
EXHIBIT 4.3
OH&S DRAFT
08/10/99
- -------------------------------------------------------------------------------
MASTER SALE AND CONTRIBUTION AGREEMENT
among
ADVANTA BUSINESS SERVICES CORP.,
as the Originator and Servicer,
ADVANTA LEASING RECEIVABLES CORP. VIII
and
ADVANTA LEASING RECEIVABLES CORP. IX,
as the Obligors
Dated as of
August __, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01 Terms Defined in the Master Agreement.........................1
SECTION 1.02 Additional Definitions........................................2
ARTICLE II
CONVEYANCE OF CONVEYED ASSETS
SECTION 2.01 Conveyance....................................................2
SECTION 2.02 Custody of Contract Files.....................................3
SECTION 2.03 Servicing of Conveyed Assets..................................4
SECTION 2.04 Conveyance of Conveyed Assets.................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.0l Representations and Warranties of ABS.........................4
SECTION 3.02 Representations and Warranties of the Obligors................6
SECTION 3.03 Repurchase Contracts and Equipment by ABS.....................7
ARTICLE IV
COVENANTS OF ABS AND THE OBLIGORS
SECTION 4.01 ABS Covenants..................................................8
SECTION 4.02 Covenants of Each Obligor....................................11
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to the Obligors' Obligations......................12
SECTION 5.02 Conditions to ABS's Obligations..............................12
ARTICLE VI
TERMINATION
SECTION 6.01 Termination..................................................13
SECTION 6.02 Effect of Termination........................................13
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 Amendment....................................................13
SECTION 7.02 Governing Law................................................13
SECTION 7.03 Notices......................................................13
SECTION 7.04 Severability of Provisions...................................14
SECTION 7.05 Assignment...................................................14
SECTION 7.06 Further Assurances...........................................14
SECTION 7.07 No Waiver; Cumulative Remedies...............................14
SECTION 7.08 Counterparts.................................................14
SECTION 7.09 Binding Effect...............................................14
SECTION 7.10 Merger and Integration.......................................14
SECTION 7.11 Headings.....................................................15
SECTION 7.12 Exhibit.......................................................15
SECTION 7.13 No Bankruptcy Petition Against any Obligor...................15
-vii-
<PAGE> 4
MASTER SALE AND CONTRIBUTION AGREEMENT
THIS MASTER SALE AND CONTRIBUTION AGREEMENT, dated as of
August __, 1999 (this "Master Sale Agreement"), is entered into among ADVANTA
BUSINESS SERVICES CORP., a Delaware corporation ("ABS"), as Originator and as
Servicer under the Master Agreement, ADVANTA LEASING RECEIVABLES CORP. VIII, a
Nevada corporation located at 639 Isbell Road, Suite 390-A, Reno, Nevada 89509
("ALRC VIII") and ADVANTA LEASING RECEIVABLES CORP. IX, a Nevada corporation
located at 639 Isbell Road, Suite 390-B, Reno, Nevada 89509 ("ALRC IX"), (ALRC
VIII and ALRC IX each individually, an "Obligor" and, together, the "Obligors")
as the purchasers or recipient of Conveyed Assets hereunder.
W I T N E S S E T H:
WHEREAS, ABS, in the ordinary course of its business has,
originated or acquired a portfolio of Contracts; and
WHEREAS, ABS desires to sell, contribute, transfer and assign
all of its right, title and interest in and to the Conveyed Assets (as defined
below) to the Obligors upon the terms and conditions set forth herein;
WHEREAS, the Obligors, ABS, in its capacity as Servicer, and
Bankers Trust Company, as Trustee, have heretofore entered into a Master
Facility Agreement, dated as of August __, 1999 (the "Master Agreement")
pursuant to which the Obligors will finance, in whole or in part, their purchase
and holding of the Conveyed Assets;
WHEREAS, it is contemplated that, following the purchase of
the Conveyed Assets by the Obligors, ABS, as Servicer or any successor thereto
as Servicer under the Master Agreement, will administer and service the Conveyed
Assets.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Terms Defined in the Master Agreement. For the
purposes of this Master Sale Agreement, capitalized terms used herein but not
otherwise defined shall have the respective meanings assigned to such terms in
the Master Agreement.
<PAGE> 5
SECTION 1.02 Additional Definitions. Whenever used in this
Master Sale Agreement, the following words and phrases shall have the following
meanings:
"ABS" shall mean Advanta Business Services Corp., a Delaware
corporation, and its successors and assigns.
"Conveyance" shall have the meaning set forth in Section 2.01
hereof.
"Conveyed Assets" shall mean (i) each Contract sold or
contributed by ABS and acquired by the Obligor(s) pursuant to this Master Sale
Agreement together with all amounts due or to become due thereunder, (ii) all
Collections after the related Cut-Off Date, (iii) Related Security associated
therewith, (iv) all balances, instruments, monies and other securities and
investments received or held from time to time by the Servicer and representing
Collections received after the related Cut-off Date, (v) the right, title and
interest of ABS in the Equipment, in each case associated with such Contracts,
and (vii) all proceeds of the foregoing, but excluding, any Insurance Premiums,
taxes, late charge fees and Initial Unpaid Amounts.
"Electronic Ledger" shall mean the Servicer's master
electronic record of all contracts serviced by it, including the Contracts.
"Insurance Premiums" shall mean any insurance premiums paid by
ABS with respect to the Contracts or the Equipment and which premiums are
returned to ABS as a refund of such amounts.
"Master Sale Agreement" shall mean this Master Sale and
Contribution Agreement and all amendments hereto.
"Purchase Date" shall mean each date on which a sale and/or
contribution of Conveyed Assets is to be effected, as set forth in the related
Sale Agreement Supplement.
"Sale Agreement Supplement" shall mean each Sale and
Contribution Agreement Supplement executed and delivered pursuant to this Master
Sale Agreement substantially in the form of Exhibit A.
"Substitute Contract" shall, with respect to any Series, have
the meaning specified in the related Series Supplement.
ARTICLE II
CONVEYANCE OF CONVEYED ASSETS
SECTION 2.01 Conveyance. (a) ABS hereby, on each Purchase
Date, as evidenced by the execution and delivery by ABS and the Obligors of a
Sale Agreement Supplement, sells, transfers, assigns, sets over, contributes,
quitclaims and otherwise conveys to the Obligors (collectively, the
"Conveyance") all of ABS's right, title and interest in, to and under the
related Conveyed Assets, whether in existence at the Purchase Date or thereafter
arising. The Conveyed Assets conveyed to each of the respective Obligors shall
be as set forth in the related Sale
2
<PAGE> 6
Agreement Supplement. Each such transfer of Conveyed Assets by ABS shall be
without representation, warranty or recourse except as expressly provided in
Section 3.01.
(b) The purchase price for the Conveyed Assets conveyed
pursuant to this Master Sale Agreement and the amount of such Conveyed Assets
which will be contributed to the Obligors shall be determined by ABS and the
Obligors at the time of the execution and delivery of such related Sale
Agreement Supplement. The amount paid to ABS for the Conveyed Assets sold on a
Purchase Date shall be paid by the Obligors to or at the direction of ABS as
provided in the related Sale Agreement Supplement.
(c) In connection with each such Conveyance, prior to each
related Purchase Date, ABS agrees to record and file, at its own expense,
financing statements (and thereafter timely continuation statements with respect
to such financing statements) with respect to the related Conveyed Assets,
meeting the requirements of applicable state law in such manner and in such
jurisdictions as are necessary or reasonably desirable to perfect and to
maintain the perfection of, the conveyance of the related Conveyed Assets from
ABS to the Obligors and the pledge of such related Conveyed Assets from the
Obligors to the Trustee, and to deliver a copy of such financing statements or
other evidence of such filings to the Obligors on or prior to the related
Purchase Date; provided, however, that except as required by the Master
Agreement, no financing statements will be recorded or filed with respect to the
sale or transfer of the Equipment owned by ABS unless (i) ABS, as Servicer shall
determine to file UCC-3 statements or similar statements with respect to such
Equipment in order to exercise remedies with respect to Defaulted Contracts to
which such Equipment relates or (ii) such Equipment has a value in excess of
$25,000; and provided further that the Contract Files will not be physically
delivered to the Obligors or to the Trustee, but instead will be held by the
Servicer (or its designated custodian) on behalf of the Trustee and the Contract
Files will be marked as required by the Master Agreement.
(d) In connection with each such Conveyance, ABS shall, at its
own expense, (i) cause its books and records to be marked to show that the
related Conveyed Assets have been transferred to the Obligors in accordance with
this Master Sale Agreement, and that the related Conveyed Assets have been
pledged to the Trustee in accordance with the Master Agreement on or prior to
the related Purchase Date and (ii) deliver to the Obligors the related List of
Contracts on the related Purchase Date. Each Obligor agrees (i) to mark its
books and records to show the acquisition of the Conveyed Assets and that such
Conveyed Assets have been pledged to the Trustee in accordance with the Master
Agreement and a specified Series Supplement and (ii) to deliver to the Trustee
the related List of Contracts on the related Purchase Date. In addition, the
Servicer, shall cause its Electronic Ledger to include the Conveyed Assets as
contracts serviced by the Servicer and shall mark its Electronic Ledger to show
that the related Conveyed Assets are owned by the Obligors in accordance with
this Master Sale Agreement and such Conveyed Assets have been pledged to the
Trustee in accordance with the Master Agreement and the Series Supplement on or
prior to the related Purchase Date.
SECTION 2.02 Custody of Contract Files. In connection with (a)
each Conveyance of Conveyed Assets to the Obligors, and (b) each pledge by such
Obligors to the Trustee for the benefit of the related Series Secured Parties,
pursuant to the Master Agreement, the Servicer will
3
<PAGE> 7
retain the Contract Files (provided that such Contract Files may be held by a
designated custodian of the Servicer) and any related evidence of insurance and
payments on behalf of the Trustee.
SECTION 2.03 Servicing of Conveyed Assets. In connection with
the Conveyance of the Conveyed Assets to the Obligors pursuant to this Master
Sale Agreement and pursuant to the related Sale Agreement Supplement and the
pledge thereof to the Trustee, ABS hereby agrees, until a successor servicer
accepts such duties and responsibilities, to service the Conveyed Assets for the
benefit of the Obligors (and their respective successors and assigns) and the
Trustee in accordance with the terms and conditions of the Master Agreement.
SECTION 2.04 Conveyance of Conveyed Assets. Each Conveyance of
Conveyed Assets shall be evidenced by the execution and delivery by the Obligors
and ABS of this Master Sale Agreement and the execution and delivery of a Sale
Agreement Supplement in the form of Exhibit A hereto, and all of the Obligors'
rights hereunder and thereunder shall similarly be pledged to the Trustee for
the benefit of the related Series Secured Parties as of the related Purchase
Date. Each such conveyance shall be effective as of the related Purchase Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.0l Representations and Warranties of ABS. ABS hereby
makes the following representations and warranties for the benefit of the
Obligors, the Trustee and the related Series Secured Parties. Such
representations and warranties speak, as to the Conveyed Assets conveyed as of
the related Purchase Date, unless otherwise indicated, but shall survive each
Conveyance of the Conveyed Assets to the Obligors and their successors and
assigns.
(a) As of the Purchase Date each, contract is an "Eligible
Contract" as such term is defined in the related Series Supplement and as
defined in the Sale Agreement Supplement.
(b) As to ABS:
(i) Organization and Good Standing. ABS is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, with full corporate power and
authority to own its properties and to conduct its business as
presently conducted, and ABS had at all relevant times, and now has,
power, authority, and legal right to acquire, own, contribute and sell
the Conveyed Assets;
(ii) Due Qualification. ABS is duly qualified to do
business as a foreign corporation and is in good standing, and has
obtained all necessary licenses and approvals, in all jurisdictions in
which its ownership or lease of property or the servicing of the
contracts or the conduct of its business requires such qualification,
license or approval, except to the extent that the failure to be so
qualified, or to obtain such licenses and approvals, would not, in the
aggregate, materially and adversely affect the ability of ABS to
perform its obligations under the Master Agreement and all supplements
thereto, this
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Master Sale Agreement, each Sale Agreement Supplement and each Series
Related Document to which ABS is a party;
(iii) Power and Authority. ABS has full corporate
power and authority to execute and deliver this Master Sale Agreement,
each Sale Agreement Supplement and each other Series Related Document
to which ABS is a party and to carry out their respective terms; ABS
has duly authorized the sale and contribution to the Obligor(s) of the
related Conveyed Assets by all necessary corporate action; and the
execution, delivery, and performance of all Series Related Documents
has been duly authorized by ABS by all necessary corporate action;
(iv) Valid Sale; Binding Obligations. Upon execution
and delivery of each Sale Agreement Supplement by ABS, such Sale
Agreement Supplement will constitute an absolute assignment to the
Obligors of all right, title and interest of ABS in the Conveyed Assets
transferred thereby, and the Conveyed Assets will thereafter be held by
the Obligors free and clear of Adverse Claims of ABS or any Person
claiming through or under ABS, except for Adverse Claims permitted
under, or to be created by, the Master Agreement and the Series
Supplement; this Master Sale Agreement and each Series Related Document
to which ABS is a party when duly executed and delivered, will each
constitute a legal, valid, and binding obligation of ABS, enforceable
against ABS in accordance with its terms, except that (A) such
enforcement may be subject to bankruptcy, insolvency, receivership,
conservatorship or other similar laws (whether statutory, regulatory or
decisional) now or hereafter in effect relating to creditors' rights
generally and (B) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to certain equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought whether a proceeding at law or in equity;
(v) No Violation. The consummation of the
transactions contemplated by and the fulfillment of the terms of the
Master Agreement, each Series Supplement, this Master Sale Agreement,
each Sale Agreement Supplement and each Series Related Document to
which ABS is a party will not conflict with, result in any breach of
any of the terms and provisions of, or constitute (with or without
notice or lapse of time) a default under, the certificate of
incorporation or bylaws of ABS, or any material term of any indenture,
agreement, mortgage, deed of trust, or other instrument to which ABS is
a party or by which it is bound, or result in the creation or
imposition of any Adverse Claim upon any of its properties pursuant to
the terms of any such indenture, agreement, mortgage, deed of trust, or
other instrument, other than this Master Sale Agreement, the Sale
Agreement Supplement, the Master Agreement and each Series Related
Document to which ABS is a party, or violate any law or any order,
writ, judgment award, injunction, decree, rule, or regulation
applicable to ABS or affecting it or its property, which would have a
material adverse effect on the Conveyed Assets, and no transaction
contemplated hereby requires compliance with any bulk sales act or
similar law;
(vi) No Proceedings. There are no proceedings or
investigations pending, or, to the knowledge of ABS, threatened, before
any court, regulatory body, administrative agency, or other tribunal or
governmental authority (A) asserting the invalidity of this
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Master Sale Agreement or the Master Agreement, (B) seeking to prevent
the consummation of the transactions contemplated by this Master Sale
Agreement, any Sale Agreement Supplement or the Master Agreement, or
(C) seeking any determination or ruling, that might (in the reasonable
judgement of ABS) materially and adversely affect the performance by
ABS of its obligations under, or the validity or enforceability of,
this Master Sale Agreement, any Sale Agreement Supplement or the Master
Agreement;
(vii) Insolvency. ABS is not insolvent and will not
be rendered insolvent by the transactions contemplated by this Master
Sale Agreement or the Master Agreement;
(viii) Principal Place of Business. Except to the
extent that notice of any change in such location or locations has been
given as provided in Section 4.01(e) of this Master Sale Agreement,
ABS's principal place of business, and chief executive office is
located at 1020 Laurel Oak Road, Voorhees, New Jersey 08043;
(ix) Valid Assignment. It is the intention of ABS
that each sale, contribution, transfer and assignment herein
contemplated constitute a valid assignment of the related Conveyed
Assets from ABS to the Obligors and that the beneficial interest in and
title to the Conveyed Assets not be part of the estate of ABS in the
event of any insolvency or receivership or conservatorship proceeding
with respect to ABS;
(x) Governmental Authorization. Other than the filing
of the financing statements required hereunder, no authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body, is required for the due
execution, delivery and performance by ABS of this Master Sale
Agreement or any Sale Agreement Supplement, except for such
authorizations, approvals, actions, notices and filings as have already
been obtained, taken or made in connection with Municipal Contracts;
(xi) Accuracy of Information. All information
heretofore furnished in writing by ABS to the Obligors or the Trustee
for purposes of or in connection with this Master Sale Agreement or any
transfer is true, accurate and complete in every material respect on
the date such information is stated or certified, and all such
information hereafter furnished by ABS to such Persons will be true,
accurate and complete in every material respect, on the date such
information is stated or certified; and
(xii) Names. ABS has not, in the past two years, used
any corporate names, trade names or assumed names other than the name
in which it has executed this Master Sale Agreement.
SECTION 3.02 Representations and Warranties of the Obligors.
Each Obligor hereby makes the following representations and warranties with
respect to itself and not with respect to any other Obligor. The following
representations and warranties are made to ABS in its individual capacity and as
Seller and as Servicer and to the Trustee and to each Series Secured Party. ABS
will rely and the Obligors acknowledge and agree that ABS will rely on the
following representations and warranties in agreeing to enter into this Master
Sale Agreement and sell and
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contribute Conveyed Assets hereunder. Such representations and warranties speak
as of each Purchase Date, and shall survive each sale, transfer and assignment
of the respective Conveyed Assets to the Obligors and their respective
successors and assigns.
(a) Organization and Good Standing. The Obligor is a legal
entity duly organized, validly existing and in good standing under the laws of
the State of its organization, with full corporate power and authority to own
its properties and to conduct its business as presently conducted;
(b) Due Qualification. The Obligor is duly qualified to do
business as a foreign corporation and is in good standing, and has obtained all
necessary licenses and approvals, in all jurisdictions in which its ownership or
lease of property or the conduct of its business requires such qualification,
license or approval, except to the extent that the failure to be so qualified,
or to obtain such license and approvals would not, in the aggregate, materially
and adversely affect the ability of the Obligor to comply with the terms of this
Master Sale Agreement, the Master Agreement and all Series Related Documents to
which the Obligor is a party;
(c) Power and Authority. The Obligor has the corporate power
and authority to execute and deliver this Master Sale Agreement, the Master
Agreement and all Series Related Documents to which it is a party and to carry
out their respective terms; and the execution, delivery, and performance of this
Master Sale Agreement, the Master Agreement and all Series Related Documents to
which the Obligor is a party have been duly authorized by the Obligor by all
necessary corporate action;
(d) Binding Obligations. This Master Sale Agreement, the
Master Agreement and each Series Related Document to which the Obligor is a
party, when executed and delivered, will constitute a legal, valid and binding
obligation of such Obligor enforceable against such Obligor in accordance with
its terms, except that (A) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws (whether statutory,
regulatory or decisional) now or hereafter in effect relating to creditors'
rights generally and (B) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to certain equitable defenses and
to the discretion of the court before which any proceeding therefor may be
brought whether a proceeding at law or in equity;
(e) No Violation. The consummation of the transactions
contemplated by and the fulfillment of the terms of this Master Sale Agreement,
the Master Agreement, the Series Supplement, each Sale Agreement Supplement to
which the Obligor is a party and all other Series Related Documents to which the
Obligor is a party will not conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of time)
a default under, the organizational documents of the Obligor, or any material
term of any agreement to which the Obligor is a party.
SECTION 3.03 Repurchase Contracts and Equipment by ABS. Upon
discovery by the Trustee, the Servicer or an Obligor of a breach of any of the
representations and warranties made pursuant to Section 3.01 above or in any
Sale Agreement Supplement that materially and adversely affects the interests of
the Obligors or their successors or assigns, including the Trustee
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or any Holder of Notes, in any of the Contracts, the Equipment or the Contract
File, the party discovering such breach shall give prompt written notice to the
others. Unless the breach shall have been cured by ABS or any successor thereto
or waived, ABS shall repurchase such Contract and the Equipment subject to such
Contract from appropriate Obligor or Obligors on the date such Contract is
removed from the Series Trust Estate and on such date pay the repurchase price
to the Trustee for the benefit of the Obligors and the Obligors shall direct the
Trustee to deposit such amount in the Collection Account created under the
appropriate Series Supplement. The repurchase price shall be equal to the
Prepayment Amount determined as provided under the terms of the Master
Agreement. The obligation of ABS as provided in this Section 3.03 to repurchase
any Contract and the Equipment subject to such Contract as to which a breach has
occurred and is continuing and to remit the Prepayment Amount shall constitute
the sole remedy against ABS for such breach available to the Obligors and the
Trustee. The representations and warranties set forth in Section 3.01 and the
Sale Agreement Supplements shall survive each sale, transfer and assignment of
the Conveyed Assets to the Obligors and their pledge to the Trustee.
ARTICLE IV
COVENANTS OF ABS AND THE OBLIGORS
SECTION 4.01 ABS Covenants. ABS hereby covenants and agrees
with the Obligors as follows:
(a) Merger of, Consolidation of, or Assumption of the
Obligations of, ABS. Any corporation (i) into which ABS may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which ABS shall be party, or (iii) succeeding to the business of ABS
substantially as a whole, which corporation in any of the foregoing cases
executes an agreement of assumption to perform every obligation of ABS under
this Master Sale Agreement and each Sale Agreement Supplement and under the
Master Agreement, each Series Supplement and all other Series Related Documents,
will be the successor to ABS under this Master Sale Agreement and each Sale
Agreement Supplement without the execution or filing of any document or the
taking of any further act on the part of any of the parties to this Master Sale
Agreement, anything in this Master Sale Agreement or any Sale Agreement
Supplement notwithstanding; provided, however, that immediately after giving
effect to such transaction, no representation or warranty made pursuant to
Section 3.01 shall have been breached.
(b) Limitation on Liability of ABS and Others. ABS and any
director or officer or employee or agent of ABS may rely in good faith on any
document of any kind, prima facie properly executed and submitted by any Person
respecting any matters arising under this Master Sale Agreement and each Sale
Agreement Supplement. ABS shall not be under any obligation to appear in,
prosecute, or defend any legal action that is not incidental to its obligations
as the seller of the Conveyed Assets under this Master Sale Agreement or any
Sale Agreement Supplement and that in its opinion may involve it in any expense
or liability.
(c) Preservation of Security Interest. ABS shall execute and
file such financing statements and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be
required by law fully to preserve, maintain, and protect the interest of the
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Obligors under this Master Sale Agreement and each Sale Agreement Supplement in
the Conveyed Assets and in the proceeds thereof; provided that no filings shall
be required on any Equipment owned by ABS except (i) as required by ABS's Credit
and Collection Policy and (ii) as otherwise required by any Sale Agreement
Supplement. ABS shall not be required to file financing statements with respect
to the Equipment owned by ABS except as otherwise required hereby.
(d) Preservation of Name, etc. ABS will not change its name,
identity or corporate structure in any manner that would, could, or might make
any financing statement or continuation statement filed by ABS in accordance
with paragraph (c) above or the Master Agreement seriously misleading within the
meaning of Section 9-402 (7) of the UCC, unless it shall have given the Obligors
and the Trustee at least 30 days prior written notice thereof.
(e) Preservation of Office. ABS will give the Obligors and the
Trustee at least 30 days prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable provisions
of the UCC would require the filing of any amendment of any previously filed
financing, or continuation statement or of any new financing statement filed
hereunder or pursuant to the terms of any conveyance agreement and will give the
Obligors and the Trustee at least 30 days prior written notice of any change in
location of the Contract Files.
(f) Making of Record. ABS, as transferor of the Contracts and
Equipment will, at its own cost and expense, (i) maintain a master record of the
Contracts and Equipment and (ii) mark its records to show that the Contracts and
Equipment have been conveyed to the Obligors and that they have been pledged and
assigned to the Trustee pursuant to the Master Agreement.
(g) Compliance with Law. ABS will comply, in all material
respects, with all acts, rules, regulations, orders, decrees and directions of
any governmental authority applicable to the Conveyed Assets or any part
thereof; provided, however, that ABS may contest any act, regulation, order,
decree or direction in any reasonable manner which shall not materially and
adversely affect the rights of the Obligors or the Trustee in the Conveyed
Assets.
(h) Conveyance of Conveyed Assets; Security Interests. Except
for the sales and conveyances under this Master Sale Agreement and under each
Sale Agreement Supplement and pursuant to the Master Agreement, ABS will not
sell, pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any Adverse Claim on any Asset, or any interest
therein and ABS shall defend the right, title, and interest of the Obligors and
their successors and assigns in, to and under the Conveyed Assets, against all
claims of third parties claiming through or under ABS; provided, however that
nothing in this subsection 4.01(h), shall prevent or be deemed to prohibit ABS
from suffering to exist upon any of the Conveyed Assets any Adverse Claim for
federal, state, municipal or other local taxes if such taxes shall not at the
time be due and payable or if ABS shall concurrently be contesting the validity
thereof in good faith by appropriate proceedings which act to stay enforcement
thereof and shall have set aside on its books adequate reserves with respect
thereto.
(i) Notification of Breach. ABS will advise each Obligor and
the Trustee promptly, in reasonable detail, of the occurrence of any breach by
ABS or other party hereto
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following discovery by ABS of such breach of any of its representations,
warranties and covenants contained herein.
(j) Further Assurances. ABS will make, execute or endorse,
acknowledge and file or deliver to the Obligors from time to time such
schedules, confirmatory assignments, conveyances, transfer endorsements, powers
of attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Conveyed Assets and other rights covered by
this Master Sale Agreement, as the Obligors or the Trustee may request and
reasonably require; provided, however, that, no UCC filing, will be required
with respect to the Equipment except as otherwise required hereby or by the
Master Agreement.
(k) Maintenance of Records. ABS agrees to maintain this Master
Sale Agreement and each Sale Agreement Supplement continuously from the time of
its execution.
(l) Non-disclosure. ABS hereby covenants and agrees with the
Obligors not to disclose to any Person (except the Trustee, any rating agency
rating obligations issued by the Obligors and investors or potential investors
in such obligations) any of the information provided to the Servicer to be
included in the Electronic Ledger or any List of Contracts delivered on any
Purchase Dates pursuant to subsection 5.01(c) hereof or subsection 2(c) of the
Sale Agreement Supplement, except such disclosures as are required upon the
appointment of a successor Servicer under the Master Agreement or by law and
except that ABS consents to the disclosure of any material nonpublic information
with respect to it (i) to any other such party, (ii) to any prospective or
actual assignee or participant of any of them, (iii) by the Trustee to any
Rating Agency, commercial paper dealer or Support Provider, or any entity
organized for the purpose of purchasing or making loans secured by, financial
assets for which any Noteholders' Agent provides managerial services or acts as
the administrative agent and (iv) to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing. ABS hereby agrees to take
such measures as shall be reasonably requested by the Obligors or their duly
appointed agent or the Trustee to protect and maintain the security and
confidentiality of any of the information, and in connection therewith, shall
allow the Obligors or their duly appointed agent and the Trustee from time to
time during normal business hours and upon reasonable prior notice to inspect
the applicable security and confidentiality arrangements from time to time in
normal business hours. ABS shall give the Obligors and the Trustee five days
prior written notice of any disclosure pursuant to this Section 4.01(l).
(m) ABS understands that the Obligors intend to pledge the
Conveyed Assets and the Obligors' rights (but not their obligations) under this
Master Sale Agreement to the Trustee pursuant to the Master Agreement and hereby
consents to the assignment of all or any portion of this Master Sale Agreement
and the Sale Agreement Supplements by each Obligor to the Trustee. ABS agrees
that any such assignee of each Obligor may exercise the rights of such Obligor
hereunder and shall be entitled to all of the benefits of such Obligor hereunder
and to the extent provided for in the Master Agreement.
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SECTION 4.02 Covenants of Each Obligor. Each Obligor for
itself and not for any other Obligor, each hereby covenants and agrees with ABS
as follows:
(a) Non-disclosure; Inspection. Each Obligor hereby covenants
and agrees with ABS not to disclose to any Person (except the Servicer, the
Trustee, any rating agency rating obligations issued by the Obligors and
investors or potential investors in such obligations) any of the information
contained in the Electronic Ledger, or any List of Contracts delivered on any
Purchase Date to the Obligors pursuant to subsection 5.01(c) hereof and
subsection 2(c) of the Sale Agreement Supplement, except such disclosures as are
required upon appointment of a successor Servicer under the Master Agreement or
by law and except that the Obligor consents to the disclosure of any material
nonpublic information with respect to it (i) to any other such party, (ii) to
any prospective or actual assignee or participant of any of them, (iii) by the
Trustee to any Rating Agency, commercial paper dealer or a support provider or
any entity organized for the purpose of purchasing, or making loans secured by
financial assets for which any Noteholders' Agent provides managerial services
or acts as the administrative agent and (iv) to any officers, directors,
employees, outside accountants and attorneys of any of the foregoing. Each
Obligor agrees to take such measures as shall be reasonably requested by ABS to
protect and maintain the security and confidentiality of such information, and,
in connection therewith, shall allow ABS from time to time during normal
business hours and upon reasonable prior notice to inspect the applicable
security, and confidentiality arrangements. The Obligors shall give ABS five
days' prior written notice of any disclosure pursuant to this subsection
4.02(a).
(b) Reconveyance. Prior to each date as of which Contracts and
the Equipment subject to such Contracts are to be repurchased by ABS pursuant to
Section 3.03, the Obligors shall cause the Trustee, in accordance with Section
6.11 of the Master Agreement, to assign, on behalf of the Obligors, without
recourse, representation, or warranty, to ABS all of the Obligor's right, title,
and interest in and to such removed Contract, such purchased Equipment, and all
security and documents relating, thereto, such assignment being an assignment
outright and not for security; and upon payment of the Prepayment Amount, ABS
will thereupon own such Contract, such Equipment and all such security and
documents, free of any further obligation to the Obligor with respect thereto.
If in any enforcement suit or legal proceeding it is held that the Servicer may
not enforce a Contract on the ground that it is not a real party in interest or
holder entitled to enforce the Contract, the Obligors shall, at the Obligor's
expense, take such steps as the Obligors deem necessary to enforce the Contract,
including bringing suit in such Obligors' names.
(c) User's Quiet Enjoyment. Each Obligor hereby acknowledges
and agrees that its rights in the Equipment are expressly subject to the rights
of the related Users in such Equipment pursuant to the applicable Contract. Each
Obligor covenants and agrees that, so long as a User shall not be in default of
any of the provisions of the applicable Contract, no Obligor nor any assignee of
any of the Obligor will disturb the Obligor's quiet and peaceful possession of
the related Equipment and the User's unrestricted use thereof for its intended
purpose.
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ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01 Conditions to the Obligors' Obligations. The
obligations of an Obligor to enter into this Master Sale Agreement and each a
Sale Agreement Supplement and purchase or otherwise acquire Conveyed Assets on
the related Purchase Date shall be subject to the satisfaction of the following
conditions:
(a) All representations and warranties of ABS contained in
this Master Sale Agreement with respect to the Conveyed Assets conveyed on the
Purchase Date shall be true and correct on the related Purchase Date with the
same effect as though such representations and warranties had been made on such
date;
(b) All information concerning such Conveyed Assets provided
to such Obligor shall be true and correct as of the related Cut-Off Date in all
material respects;
(c) ABS shall have delivered to such Obligor a List of
Contracts as of the related Cut-Off Date and shall have substantially performed
all other obligations required to be performed by the provisions of this Master
Sale Agreement;
(d) ABS shall have recorded and filed, at its expense, any
financing statement with respect to such Conveyed Assets pursuant to this Master
Sale Agreement meeting the requirements of applicable state law in such manner
in such jurisdictions as are necessary to perfect the transfer of such Conveyed
Assets from ABS to such Obligor, and shall deliver a copy of such financing
statements or other evidence of such filings to the Obligors and the Trustee;
and
(e) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Master Sale Agreement
shall be satisfactory in form and substance to the Obligors and the Obligors
shall have received from ABS copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Obligors may reasonably have requested.
SECTION 5.02 Conditions to ABS's Obligations. The obligations
of ABS to enter into this Master Sale Agreement any Sale Agreement Supplement
and to sell, transfer, contribute and assign any Conveyed Assets on the related
Purchase Date shall be subject to the satisfaction of the following conditions:
(a) ABS and the Obligors shall have agreed on the value of the
Conveyed Assets. The combination of the purchase price paid and the value of the
Conveyed Assets contributed by ABS to the capital of one or more Obligors shall
not be less than the fair market value of the Conveyed Assets.
(b) All representations and warranties of the Obligors
contained in this Master Sale Agreement and in the related Sale Agreement
Supplement shall be true and correct with the same effect as though such
representations and warranties had been made on such date; and
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(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Master Sale Agreement
shall be satisfactory in form and substance to ABS, and ABS shall have received
from the Obligors copies of all documents (including, without limitation,
records of corporate proceedings) relevant to the transactions herein
contemplated as ABS may reasonably have requested.
ARTICLE VI
TERMINATION
SECTION 6.01 Termination. The respective obligations and
responsibilities of ABS and each Obligor created by this Master Sale Agreement
and any Sale Agreement Supplement shall terminate upon the earliest of (i) the
maturity or other liquidation of the last Contract and the disposition of any
amounts received upon disposition of any Defaulted Contracts or sale of the
Equipment; (ii) the distribution to all Obligors of all amounts required to be
paid to them pursuant to this Master Sale Agreement; and (iii) the termination
of the Master Sale Agreement.
SECTION 6.02 Effect of Termination. No termination nor
rejection or failure to assume the executory obligations of this Master Sale
Agreement in the bankruptcy, insolvency conservatorship or receivership of ABS,
or any Obligor shall be deemed to impair or affect the obligations pertaining to
any executed sale or executed obligations, including, without limitation,
pretermination breaches of representations and warranties by ABS or any Obligor.
ARTICLE VII
MISCELLANEOUS PROVISIONS
SECTION 7.01 Amendment. This Master Sale Agreement may be
amended from time to time by ABS and each of the Obligors, only with the prior
written consent of the Trustee.
SECTION 7.02 Governing Law. This Master Sale Agreement and any
amendment hereof pursuant to Section 7.01 shall be construed in accordance with
and governed by the substantive laws of the State of New York (without regard to
choice of law principles) applicable to agreements made and to be performed
therein and the obligations, rights, and remedies of the parties under this
Master Sale Agreement shall be determined in accordance with such laws.
SECTION 7.03 Notices. All demands, notices, and communications
under this Master Sale Agreement shall be in writing, and shall be deemed to
have been duly given, made and received (i) when delivered against receipt of
registered or certified mail or upon actual receipt of registered or certified
mail, postage prepaid, return receipt requested; (ii) when delivered by courier
with appropriate evidence of receipt; or (iii) upon transmission via facsimile
or telex with appropriate evidence of receipt (a) in the case of ABS, at the
following address: Advanta Business Services Corp., 1020 Laurel Oak Road,
Voorhees, New Jersey, 08043, attention: Treasury Department, (b) in the case of
Advanta Leasing Receivables Corp. VIII, to such Obligor at the following
address: Advanta Leasing Receivables Corp. VIII, 639 Isbell Road, Suite 390-A,
Reno, Nevada 89509, and (c) in the case of Advanta Leasing Receivables Corp. IX,
to such Obligor at the
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following address: Advanta Leasing Receivables Corp. IX, to such Obligor, at the
following address: 639 Isbell Road, Suite 390-B, Reno, Nevada 89509. Any party
may alter the address to which communications are to be sent by giving notice of
such change of address in conformity with the provisions of this Section 7.03
for giving notice and by otherwise complying with any applicable terms of this
Master Sale Agreement, including, but not limited to, subsections 4.01(d) and
(e).
SECTION 7.04 Severability of Provisions. If any one or more of
the covenants, agreements, provisions, or terms of this Master Sale Agreement
shall be for any reason whatsoever held invalid, then such covenants,
agreements, provisions, or terms shall be deemed severable from the remaining
covenants, agreements, provisions, or terms of this Master Sale Agreement and
shall in no way affect the validity or enforceability of the other provisions of
this Master Sale Agreement.
SECTION 7.05 Assignment. Notwithstanding, anything to the
contrary contained in this Master Sale Agreement, this Master Sale Agreement may
not be assigned by ABS, except (i) as provided in Section 4.01(a) and (ii) as
collateral security, granted to the Trustee, without the prior written consent
of each of the Obligors, and, except as provided in Section 4.03, this Master
Sale Agreement may not be assigned by any of the Obligors without the prior
written consent of ABS.
SECTION 7.06 Further Assurances. Each of ABS and each Obligor
agrees to do such further acts and to execute and deliver to the Trustee such
additional assigns, agreements, powers and instruments as are required by the
Trustee to carry into effect the purposes of this Master Sale Agreement or to
better assure and confirm unto the Trustee its rights, powers and remedies
hereunder.
SECTION 7.07 No Waiver; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of either Obligor or ABS, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privilege provided by law.
SECTION 7.08 Counterparts. This Master Sale Agreement 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 7.09 Binding Effect. This Master Sale Agreement, will
inure to the benefit of and be binding upon the parties hereto, the Trustee, the
Noteholders and their respective successors and permitted assigns.
SECTION 7.10 Merger and Integration. Except as specifically
stated otherwise herein, this Master Sale Agreement, the Sale Agreement
Supplements, the Master Agreement and all related Series Related Documents set
forth the entire understanding of the parties relating to the
14
<PAGE> 18
subject matter hereof, and all prior understandings, written or oral, are
superseded by, this Master Sale Agreement, the Sale Agreement Supplements, the
Master Agreement and the Series Related Documents. This Master Sale Agreement
may not be modified, amended, waived or supplemented except as provided herein.
SECTION 7.11 Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 7.12 Exhibit. The exhibit attached hereto and referred
to herein shall constitute a part of this Master Sale Agreement and is
incorporated into this Master Sale Agreement for all purposes.
SECTION 7.13 No Bankruptcy Petition Against any Obligor. Each
of ABS and each Obligor agrees that, prior to the date that is one year and one
day after the payment in full of the Notes, it will not institute against any
Obligor, or join any other Person in instituting against any Obligor, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings under the laws of the United States or any state of the
United States. This Section 7.13 shall survive the termination of this Master
Sale Agreement.
15
<PAGE> 19
IN WITNESS WHEREOF, ABS and the Obligors have caused this
Master Sale and Contribution Agreement to be duly executed by their respective
officers as of the day and year first above written.
ADVANTA BUSINESS SERVICES CORP.,
in its individual capacity and as
Originator and Servicer
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
ADVANTA LEASING RECEIVABLES CORP. VIII,
as an Obligor
By: ___________________________________
ADVANTA LEASING RECEIVABLES CORP. IX,
as an Obligor
By: ___________________________________
<PAGE> 20
EXHIBIT A
FORM OF SALE AND CONTRIBUTION AGREEMENT SUPPLEMENT
THIS SALE AND CONTRIBUTION AGREEMENT SUPPLEMENT (this "Sale Agreement
Supplement"), dated _________________ (the "Purchase Date") is entered into
among ADVANTA BUSINESS SERVICES CORP., ("ABS," in its capacity as "Originator"
and "Servicer"), a Delaware corporation located at 1020 Laurel Oak Road,
Voorhees, New Jersey 08043, ADVANTA LEASING RECEIVABLES CORP. VIII ("ALRC
VIII"), a Nevada corporation located at 639 Isbell Road, Suite 390-A, Reno,
Nevada 89509 and ADVANTA LEASING RECEIVABLES CORP. IX ("ALRC IX"), a Nevada
corporation located at 639 Isbell Road, Suite 390-B, Reno, Nevada 89509 (each of
ALRC VIII and ALRC IX is an "Obligor" and a purchaser or recipient of a
contribution hereunder).
W I T N E S S E T H:
Reference is hereby made to that certain Master Sale and
Contribution Agreement dated as of ______, 1999 (the "Master Sale Agreement"),
among ABS and the Obligors. Pursuant to the Master Sale Agreement ABS agrees to
sell, transfer, assign, set over, contribute, quitclaim and otherwise convey to
the Obligors and the Obligors agree to purchase, acquire or accept, from time to
time, Conveyed Assets (as defined below) and the Obligors agree to Pledge such
Conveyed Assets to the Trustee. The Master Sale Agreement provides that each
sale of Conveyed Assets be evidenced by the execution of delivery of a Sale and
Contribution Agreement Supplement (each a "Sale Agreement Supplement") such as
this Supplement.
The Conveyed Assets sold or contributed by ABS pursuant to
this Supplement consist of (i) the Contracts listed on the List of Contracts
delivered with this Sale Agreement Supplement, all amounts due or to become due
thereunder (ii) all Collections after the related Cut-Off Date, (iii) Related
Security associated therewith, (iv) all balances, instruments, monies and other
securities and investments received or held from time to time by the Servicer
and representing Collections received after the related Cut-Off Date; (v) the
right, title and interest of ABS in the Equipment associated with such
Contracts, and (vi) all proceeds of the foregoing, but excluding any Insurance
Premiums, taxes, late charge fees and Initial Unpaid Amounts.
The Cut-Off Date with respect to the Contracts is the close of
business on ___________. The Purchase Date is ___________ .
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 21
Section 1. Definitions. For the purposes of this Agreement,
capitalized terms used herein but not otherwise defined shall have the
respective meanings assigned to such terms in the Master Agreement or the Master
Sale Agreement.
Section 2. Conveyance. (a) (i) ABS hereby sells, transfers,
assigns, sets over contributes, quitclaims and otherwise conveys to ALRC VIII
all of ABS's right, title and interest in, to, and under all Conveyed Assets
consisting of ABS's Residual Interest in the Equipment, whether now existing or
hereafter arising. Each such transfer of the Residual Interest shall be without
representation, warranty or recourse except as set forth in Section 3 hereof.
(ii) ABS hereby sells, transfers, assigns, sets over
contributes, quitclaims and otherwise conveys to ALRC IX all of ABS's right,
title and interest in, to, and under all Conveyed Assets other than the Residual
Interest, whether now existing or hereafter arising. Each such transfer of
Conveyed Assets by ABS shall be without representation, warranty or recourse
except as set forth in Section 3 hereof.
(iii) Except to the extent such Conveyed Assets are
transferred as a contribution to the capital of the Obligor, the Obligors, in
consideration of the transfer of the Conveyed Assets to the Obligors, shall pay
to ABS on this Purchase Date the purchase price as specified below in subsection
(d) of this Section 2.
(b) In connection with such transfer, ABS has heretofore
recorded and filed, at its own expense, financing statements (and will hereafter
file timely continuation statements with respect to such financing statements)
with respect to the Conveyed Assets, meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
and to maintain the perfection of, the conveyance of the Conveyed Assets from
ABS to the Obligors and the pledge of the Conveyed Assets from the Obligors to
the Trustee, and delivered a copy of such financing statements or other evidence
of such filings to the Obligors; provided, however, that except as required by
the Master Agreement no financing statements have been or will be recorded or
filed with respect to the sale or transfer of the Equipment owned by ABS unless
(i) ABS as Servicer shall determine to file UCC-3 or similar statements with
respect to such Equipment in order to exercise remedies with respect to
Defaulted Contracts to which such Equipment relates or (ii) such Equipment has a
value in excess of $25,000; and provided further that the Contract Files will
not be physically delivered to the Obligors or to the Trustee but instead will
be held by the Servicer (or its designated custodian) on behalf of the Trustee
and the Contract Files will be marked as required by the Master Agreement.
(c) In connection with such transfer, ABS shall, at its
expense, (i) cause its books and records to be marked to show that the Conveyed
Assets have been transferred to the Obligors in accordance with the Master Sale
Agreement and this Sale Agreement Supplement and the Conveyed Assets have been
pledged to the Trustee in accordance with the Master Agreement on or prior to
the Purchase Date and (ii) deliver to the Obligors the related List of
Contracts. Each Obligor agrees (i) to mark its books and records to show the
acquisition of the Conveyed Assets and that such Conveyed Assets have been
pledged to the Trustee in accordance with the Master Agreement and this Sale
Agreement Supplement and (ii) to deliver to the Trustee the related List of
Contracts on the Purchase Date.
A-2
<PAGE> 22
(d) (i) With respect to the Conveyed Assets consisting of the
Residual Interest contributed to ALRC VIII under Section 2(a)(i) of this Sale
Agreement Supplement, ABS and ALRC VIII agree that ALRC VIII shall pay to ABS
the sum of $___________and the balance of the value of such Residual Interest
conveyed hereunder shall constitute a contribution to the capital of ALRC VIII
and shall be duly recorded in the books of ALRC VIII. The amount, if any, to be
paid by ALRC VIII to ABS as set forth in this subsection 2(d)(i) shall be paid
to ABS on the date hereof in immediately available funds.
(ii) With respect to the Conveyed Assets sold and contributed
to ALRC IX under Section 2(a)(ii) of this Sale Agreement Supplement, ABS and
ALRC IX agree that ALRC IX shall pay to ABS the sum of $___________ and the
balance of the value of the Conveyed Assets conveyed to ALRC IX hereunder shall
constitute a contribution to the capital of ALRC IX and shall be duly recorded
in the books of ALRC VIII. The amount, if any, to be paid by ALRC IX to ABS as
set forth in this subsection 2(d)(ii) shall be paid to ABS on the date hereof in
immediately available funds.
Section 3. Representations and Warranties. (a) ABS hereby (i)
confirms the accuracy, as of the Purchase Date, of the representations and
warranties of ABS set forth in Section 3.01 of the Master Sale Agreement with
respect to the Contracts conveyed on the Purchase Date and (ii) represents and
warrants that, as of the Purchase Date, each Contract is an "Eligible Contract"
as such term is defined in the Series ____ Supplement dated as of ____, ___.
Such representations and warranties are made for the benefit of the Obligors and
the Trustee, and the Obligor are relying on such representations and warranties
in purchasing the Conveyed Assets. Such representations and warranties speak as
of the Purchase Date, unless otherwise indicated, but shall survive the transfer
of the respective Conveyed Assets to the Obligor and its successors and assigns
and the Pledge by the Obligor to the Trustee.
(b) Each Obligor hereby confirms the accuracy as of the
Purchase Date of the representations and warranties set forth in Section 3.02 of
the Master Sale Agreement.
Section 4. Amendment. This Sale Agreement Supplement may be
amended from time to time by ABS and the Obligors only with the prior written
consent of the Trustee.
Section 5. Governing Law. This Sale Agreement Supplement and
any amendment hereof pursuant to Section 4 shall be construed in accordance with
and governed by the substantive laws of the State of New York (without regard to
choice of law principles) applicable to agreements made and to be performed
therein and the obligations, rights, and remedies of the parties under this Sale
Agreement Supplement shall be determined in accordance with such laws.
Section 6. Counterparts. This Sale Agreement Supplement 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.
A-3
<PAGE> 23
Section 7. Binding Effect: Third-Party Beneficiaries. This
Sale Agreement Supplement will inure to the benefit of and be binding upon the
parties hereto, the Trustee and their respective successors and permitted
assigns.
Section 8. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
A-4
<PAGE> 24
IN WITNESS WHEREOF, ABS and the Obligors have caused this Sale
and Contribution Agreement Supplement to be duly executed by their respective
officers as of the day and year first above written.
ADVANTA BUSINESS SERVICES CORP.,
in its individual capacity and as
Seller and Servicer
By: ________________________________
Name: __________________________
Title: _________________________
By: ________________________________
Name: __________________________
Title: _________________________
ADVANTA LEASING RECEIVABLES VIII,
as an Obligor
By: ________________________________
Name: __________________________
Title: _________________________
ADVANTA LEASING RECEIVABLES IX,
as an Obligor
By: ________________________________
Name: __________________________
Title: _________________________
<PAGE> 1
EXHIBIT 4.4
OH&S DRAFT
8/10/99
SALE AND CONTRIBUTION AGREEMENT SUPPLEMENT
THIS SALE AND CONTRIBUTION AGREEMENT SUPPLEMENT (this "Sale Agreement
Supplement"), dated August __, 1999 (the "Purchase Date") is entered into among
ADVANTA BUSINESS SERVICES CORP. ("ABS," in its capacity as "Originator" and
"Servicer"), a Delaware corporation located at 1020 Laurel Oak Road, Voorhees,
New Jersey 08043, ADVANTA LEASING RECEIVABLES CORP. VIII ("ALRC VIII"), a Nevada
corporation located at 639 Isbell Road, Suite 390-A, Reno, Nevada 89509 and
ADVANTA LEASING RECEIVABLES CORP. IX ("ALRC IX"), a Nevada corporation located
at 639 Isbell Road, Suite 390-B, Reno, Nevada 89509 (each of ALRC VIII and ALRC
IX is an "Obligor" and a purchaser or recipient of a contribution hereunder).
W I T N E S S E T H:
Reference is hereby made to that certain Master Sale and
Contribution Agreement, dated as of August __, 1999 (the "Master Sale
Agreement"), between ABS and the Obligors. Pursuant to the Master Sale Agreement
ABS agrees to sell, transfer, assign, set over, contribute, quitclaim and
otherwise convey to the Obligors and the Obligors agree to purchase, acquire or
accept, from time to time, Conveyed Assets (as defined below) and the Obligors
agree to Pledge such Conveyed Assets to the Trustee. The Master Sale Agreement
provides that each sale of Conveyed Assets be evidenced by the execution of
delivery of a Sale and Contribution Agreement Supplement (each, a "Sale
Agreement Supplement") such as this Supplement.
The Conveyed Assets sold or contributed by ABS pursuant to
this Supplement consist of (i) the Contracts listed on the List of Contracts
delivered with this Sale Agreement Supplement, all amounts due or to become due
thereunder (ii) all Collections after the related Cut-Off Date, (iii) Related
Security associated therewith, (iv) all balances, instruments, monies and other
securities and investments received or held from time to time by the Servicer
and representing Collections received after the related Cut-Off Date; (v) the
right, title and interest of ABS in the Equipment associated with such
Contracts, and (vi) all proceeds of the foregoing, but excluding any Insurance
Premiums, taxes, late charge fees and Initial Unpaid Amounts.
The Cut-Off Date with respect to the Contracts is the close of
business on July 31, 1999. The Purchase Date is August __, 1999.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
<PAGE> 2
Section 1. Definitions. For the purposes of this Agreement,
capitalized terms used herein but not otherwise defined shall have the
respective meanings assigned to such terms in the Master Agreement or the Master
Sale Agreement.
Section 2. Conveyance. (a) (i) ABS hereby sells, transfers,
assigns, sets over contributes, quitclaims and otherwise conveys to ALRC VIII
all of ABS's right, title and interest in, to, and under all Conveyed Assets
consisting of ABS's Residual Interest in the Equipment, whether now existing or
hereafter arising. Each such transfer of the Residual Interest shall be without
representation, warranty or recourse except as set forth in Section 3 hereof.
(ii) ABS hereby sells, transfers, assigns, sets over
contributes, quitclaims and otherwise conveys to ALRC IX all of ABS's right,
title and interest in, to, and under all Conveyed Assets other than the Residual
Interest, whether now existing or hereafter arising. Each such transfer of
Conveyed Assets by ABS shall be without representation, warranty or recourse
except as set forth in Section 3 hereof.
(iii) Except to the extent such Conveyed Assets are
transferred as a contribution to the capital of the Obligor, the Obligors, in
consideration of the transfer of the Conveyed Assets to the Obligors, shall pay
to ABS on this Purchase Date the purchase price as specified below in subsection
(d) of this Section 2.
(b) In connection with such transfer, ABS has heretofore
recorded and filed, at its own expense, financing statements (and will hereafter
file timely continuation statements with respect to such financing statements)
with respect to the Conveyed Assets, meeting the requirements of applicable
state law in such manner and in such jurisdictions as are necessary to perfect
and to maintain the perfection of, the conveyance of the Conveyed Assets from
ABS to the Obligors and the pledge of the Conveyed Assets from the Obligors to
the Trustee, and delivered a copy of such financing statements or other evidence
of such filings to the Obligors; provided, however, that except as required by
the Master Agreement no financing statements have been or will be recorded or
filed with respect to the sale or transfer of the Equipment owned by ABS unless
(i) ABS as Servicer shall determine to file UCC-3 or similar statements with
respect to such Equipment in order to exercise remedies with respect to
Defaulted Contracts to which such Equipment relates or (ii) such Equipment has a
value in excess of $25,000; and provided further that the Contract Files will
not be physically delivered to the Obligors or to the Trustee but instead will
be held by the Servicer (or its designated custodian) on behalf of the Trustee
and the Contract Files will be marked as required by the Master Agreement.
(c) In connection with such transfer, ABS shall, at its
expense, (i) cause its books and records to be marked to show that the Conveyed
Assets have been transferred to the Obligors in accordance with the Master Sale
Agreement and this Sale Agreement Supplement and the Conveyed Assets have been
pledged to the Trustee in accordance with the Master Agreement on or prior to
the Purchase Date and (ii) deliver to the Obligors the related List of
Contracts. Each Obligor agrees (i) to mark its books and records to show the
acquisition of the Conveyed Assets and that such Conveyed Assets have been
pledged to the Trustee in accordance with the Master Agreement and this Sale
Agreement Supplement and (ii) to deliver to the Trustee the related List of
Contracts on the Purchase Date.
2
<PAGE> 3
(d) (i) With respect to the Conveyed Assets consisting of the
Residual Interest contributed to ALRC VIII under Section 2(a)(i) of this Sale
Agreement Supplement, ABS and ALRC VIII agree that ALRC VIII shall pay to ABS
the sum of $___________and the balance of the value of such Residual Interest
conveyed hereunder shall constitute a contribution to the capital of ALRC VIII
and shall be duly recorded in the books of ALRC VIII. The amount, if any, to be
paid by ALRC VIII to ABS as set forth in this subsection 2(d)(i) shall be paid
to ABS on the date hereof in immediately available funds.
(ii) With respect to the Conveyed Assets sold and contributed
to ALRC IX under Section 2(a)(ii) of this Sale Agreement Supplement, ABS and
ALRC IX agree that ALRC IX shall pay to ABS the sum of $___________ and the
balance of the value of the Conveyed Assets conveyed to ALRC IX hereunder shall
constitute a contribution to the capital of ALRC IX and shall be duly recorded
in the books of ALRC VIII. The amount, if any, to be paid by ALRC IX to ABS as
set forth in this subsection 2(d)(ii) shall be paid to ABS on the date hereof in
immediately available funds.
Section 3. Representations and Warranties. (a) ABS hereby (i)
confirms the accuracy, as of the Purchase Date, of the representations and
warranties of ABS set forth in Section 3.01 of the Master Sale Agreement with
respect to the Contracts conveyed on the Purchase Date and (ii) represents and
warrants that, as of the Purchase Date, each Contract is an "Eligible Contract"
as such term is defined in the Series 1999-1 Supplement, dated as of August __,
1999. Such representations and warranties are made for the benefit of the
Obligors and the Trustee, and the Obligor are relying on such representations
and warranties in purchasing the Conveyed Assets. Such representations and
warranties speak as of the Purchase Date, unless otherwise indicated, but shall
survive the transfer of the respective Conveyed Assets to the Obligor and its
successors and assigns and the Pledge by the Obligor to the Trustee.
(b) Each Obligor hereby confirms the accuracy as of the
Purchase Date of the representations and warranties set forth in Section 3.02 of
the Master Sale Agreement.
Section 4. Amendment. This Sale Agreement Supplement may be
amended from time to time by ABS and the Obligors only with the prior written
consent of the Trustee.
Section 5. Governing Law. This Sale Agreement Supplement and
any amendment hereof pursuant to Section 4 shall be construed in accordance with
and governed by the substantive laws of the State of New York (without regard to
choice of law principles) applicable to agreements made and to be performed
therein and the obligations, rights, and remedies of the parties under this Sale
Agreement Supplement shall be determined in accordance with such laws.
Section 6. Counterparts. This Sale Agreement Supplement 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.
3
<PAGE> 4
Section 7. Binding Effect: Third-Party Beneficiaries. This
Sale Agreement Supplement will inure to the benefit of and be binding upon the
parties hereto, the Trustee and their respective successors and permitted
assigns.
Section 8. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
4
<PAGE> 5
IN WITNESS WHEREOF, ABS and the Obligors have caused this Sale
and Contribution Agreement Supplement to be duly executed by their respective
officers as of the day and year first above written.
ADVANTA BUSINESS SERVICES CORP.,
in its individual capacity and as
Seller and Servicer
By: ________________________________
Name: __________________________
Title: _______________________
By: ________________________________
Name: __________________________
Title: _______________________
ADVANTA LEASING RECEIVABLES VIII,
as an Obligor
By: ________________________________
Name: __________________________
Title: _______________________
ADVANTA LEASING RECEIVABLES IX,
as an Obligor
By: ________________________________
Name: __________________________
Title: _______________________
