<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 30, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANTA EQUIPMENT RECEIVABLES
LIMITED LIABILITY COMPANIES
(ISSUER OF SECURITIES)
ADVANTA BANK CORP.
(TRANSFEROR TO THE LIMITED LIABILITY COMPANIES)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
UTAH 23-2591173
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
11850 SOUTH ELECTION ROAD
DRAPER, UTAH 84020
(801) 523-0858
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES OF REGISTRANT)
------------------------
COLE SILVER, ESQ.
C/O ADVANTA BANK 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:
CAMERON L. COWAN, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
3050 K STREET, N.W.
WASHINGTON, D.C. 20007
(202) 339-8488
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. []
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED
TITLE OF AMOUNT TO BE AGGREGATE PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment Receivables Asset-Backed
Notes............................. $1,000,000 100% $1,000,000 $264
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
AMENDED. WE MAY NOT SELL THESE SECURITIES UNTIL WE DELIVER A FINAL
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS PERMITTED.
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 2000
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000- LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-
$[ ] CLASS A-1 NOTES
$[ ] CLASS A-2 NOTES
$[ ] CLASS A-3 NOTES
$[ ] CLASS A-4 NOTES
$[ ] CLASS B NOTES
$[ ] CLASS C NOTES
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-6 IN THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 4 IN THE PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying contracts
or receivables are insured or guaranteed by any governmental agency.
The notes offered in this prospectus supplement and the accompanying
prospectus are obligations of the issuer only. They are payable only from a
limited pool of assets. The notes are not obligations of Advanta Bank Corp.,
Advanta Corp. or any of their affiliates.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS
INTEREST PUBLIC DISCOUNT TO ISSUER
CLASS RATE PER NOTE PER NOTE PER NOTE
- ----- -------- -------- ------------ ---------
<S> <C> <C> <C> <C>
A-1................................ [ %] [ %] [ %] [ %]
A-2................................ [ %] [ %] [ %] [ %]
A-3................................ [ %] [ %] [ %] [ %]
A-4................................ [ %] [ %] [ %] [ %]
B.................................. [ %] [ %] [ %] [ %]
C.................................. [ %] [ %] [ %] [ %]
</TABLE>
The total price to public is [$ ,] the total amount of the
underwriting discount is [$ ,] and the total amount of proceeds before
deduction of expenses is [$ .]
CREDIT ENHANCEMENT
The Class B notes are subordinated to, and provide credit enhancement for,
the Class A notes. [The Class C notes are subordinated to, and provide credit
enhancement for, the Class A and the Class B notes.] The issuer also is issuing
[$ ] of [ %] [Class D] asset-backed notes. [The Class D notes are
subordinated to, and provide credit enhancement for, the Class A notes, the
Class B notes and the Class C 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.
[UNDERWRITERS]
, 2000
<PAGE> 3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate documents:
(a) the accompanying prospectus, which provides general information, some of
which may not apply to your series of notes and (b) this prospectus supplement,
which describes the specific terms of your series of notes.
If the terms of your series of notes as described in this prospectus
supplement vary from the terms described in the accompanying prospectus, you
should rely on the information in this prospectus supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
------------------------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms...................... S-1
Issuer................................ S-1
Limited Obligations................. S-1
Originator and Servicer............. S-1
Trustee............................. S-1
The Pledged Assets.................. S-1
The Contracts....................... S-1
The Notes........................... S-2
Payment Date........................ S-2
Issuance Date....................... S-2
Interest Payments................... S-2
Principal Payments.................. S-2
Stated Maturity..................... S-3
Subordination....................... S-3
Reserve Account..................... S-3
Flow of Funds....................... S-4
Optional Redemption................. S-4
Class A-4 Special Redemption........ S-4
Limited Ability to Remove Defaulted
Contracts........................ S-5
Federal Income Tax Status........... S-5
ERISA Considerations................ S-5
Ratings............................. S-5
Risk Factors.......................... S-6
You May Not Be Able to Sell Your
Notes............................ S-6
Security Interest in Most Equipment
Has Not Been Perfected........... S-6
Geographic Concentration of the
Contract Portfolio Causes
Increased Risk From Local
Economic Conditions and Natural
Disasters........................ S-6
Introduction.......................... S-7
The Issuer............................ S-7
Capitalization of the Issuer........ S-7
Management's Discussion and Analysis
of Financial Condition.............. S-8
Use Of Proceeds....................... S-8
The Pledged Assets.................... S-8
General............................. S-8
Trust Estate........................ S-9
The Contracts....................... S-9
Statistical Information............... S-9
Servicing Portfolio Delinquency and
Default Information................. S-16
Historical Delinquency
Information...................... S-16
Historical Default Experience....... S-16
Description of the Notes.............. S-17
General............................. S-17
Payment Dates, Business Days and
Stated Maturity Date............. S-17
Determination Date and Collection
Periods.......................... S-17
Interest Payments................... S-17
Principal Payments.................. S-18
Flow of Funds....................... S-20
Optional Redemption................. S-21
Class A-4 Special Redemption........ S-22
Subordination Provisions............ S-22
Reserve Account..................... S-22
Reports to Noteholders.............. S-23
Payments Subsequent to an Event of
Default.......................... S-24
Prepayment and Yield Considerations... S-25
[Legal Investment].................... S-31
Underwriting.......................... S-32
Ratings of the Notes.................. S-33
Legal Matters......................... S-34
Reports to Noteholders................ S-34
Where You Can Find More Information... S-34
INDEX OF TERMS........................ S-35
Appendix A: Global Clearance,
Settlement and Tax Documentation
Procedures.......................... A-1
</TABLE>
i
<PAGE> 5
SUMMARY OF TERMS
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 SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS.
TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, CAREFULLY READ THIS
ENTIRE DOCUMENT AND THE PROSPECTUS.
ISSUER
Advanta Equipment Receivables Series 2000-
LLC will issue the notes.
The issuer is a Delaware limited liability company. Its principal place of
business is , . Its telephone number is ( )
- .
The issuer is a newly created limited liability company. The sole managing
member of the issuer is Advanta Bank Corp.
References in this prospectus supplement to "we" or to "our" are statements made
by the issuer or by Advanta Bank Corp.
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 Bank Corp. originated or acquired the contracts or acquired interests in
the contracts. Advanta Bank Corp. will transfer its interest in the scheduled
payments arising under the contracts to the issuer.
Advanta Bank Corp. or its successor will service the contracts for the issuer.
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.
Advanta Bank Corp. is a Utah industrial loan corporation. Its principal place of
business is 11850 South Election Road, Draper, Utah 84020. Its telephone number
is (801) 523-0858.
The transfer and servicing agreement will permit Advanta Bank Corp. to assign
its rights and obligations as servicer to any affiliate of Advanta Corp. if the
rating agency condition is satisfied. Advanta Bank Corp. will service the
contracts through a subservicing arrangement with Advanta Business Services
Corp.
TRUSTEE
The trustee is . The trustee's address is .
Its telephone number is ( ) - .
THE PLEDGED ASSETS
We will pledge to the trustee, as security for the notes:
- the contracts listed on a schedule delivered to the trustee;
- the right to payments made on the contracts, except the excluded payments;
- the security interest, if any, in the underlying equipment;
- amounts held in the series accounts and earnings on the series accounts;
- recoveries on insurance policies and disposition of repossessed equipment;
- [credit enhancement for this series];
- our rights in the transfer and servicing agreement.
THE CONTRACTS
We will use the proceeds from the sale of the notes (i) to buy from Advanta Bank
Corp., a portfolio of contracts and related interests, [(ii) to make the initial
deposit to the reserve account] and (iii) to pay costs and expenses incurred in
issuing the notes.
The contracts are primarily leases of small-ticket equipment.
S-1
<PAGE> 6
The contracts include leases and loan agreements. Approximately [ %] 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 the 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
supplement, however, are calculated as of [ ], [ ],
using a statistical discount rate of [ %].
The contracts had the following characteristics as of ,
:
- statistical aggregate contract principal balance: [$ ]
- statistical average contract principal balance: [$ ]
- number of contracts: [ ]
We expect some variance between this information and the portfolio on the day we
issue the notes. The characteristics of the portfolio on the date of issuance
will not vary by more than 5% from the information listed in the previous
paragraph.
We will make payments on the notes from collections on the contracts.
THE NOTES
In this document, we are offering [ ] classes of notes:
- [ %] Class A-1 notes with an initial principal balance of [$ ];
- [ %] Class A-2 notes with an initial principal balance of [$ ];
- [ %] Class A-3 notes with an initial principal balance of [$ ];
- [ %] Class A-4 notes with an initial principal balance of [$ ];
- [ %] Class B notes with an initial principal balance of [$ ]; and
- [ %] Class C notes with an initial principal balance of [$ ].
We also will issue [$ ] of [ %] [Class D] notes at the same time as
the offered notes. We are not offering the [Class D] notes by this document.
We will issue the notes under an indenture dated as of , .
The terms of the notes will be contained in the indenture.
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.
, will be the first payment date.
ISSUANCE DATE
We will issue the notes on or about , .
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 on the cover page
and in this prospectus supplement summary under "Summary of Terms -- The Notes"
and under "Description of the Notes -- Interest Payments."
[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,
Class A-4 notes, Class B notes, Class C notes and Class D 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 trustee fees and expenses, servicing fees
and interest on all the Class A notes, the [Class B notes, the Class C and the
Class D] 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
S-2
<PAGE> 7
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; then to pay Class A-3 until it is paid in full and finally to
pay Class A-4 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);
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class C principal payment amount to Class C until Class C is
paid in full (subject to the maintenance of certain credit enhancement
levels for the Class A notes);
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class D principal payment amount to Class D until Class D is
paid in full (subject to the maintenance of certain credit enhancement
levels for the Class A notes); and
- [if the Class B floor exceeds the Class B target investor principal amount,
the Class C floor exceeds the Class C target investor principal amount or
the Class D floor exceeds the Class D target investor principal amount, the
difference between the monthly principal amount and the sum of the Class A
principal payment amount, Class B principal payment amount, Class C
principal payment amount and the Class D principal payment amount will be
paid sequentially to Class A-2, Class A-3, Class A-4, Class B notes, Class C
notes and Class D notes.]
We refer you to "Description of the Notes -- Flow of Funds" in this prospectus
supplement 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, Class A-4 notes, Class B notes, Class C notes and Class D notes in full
on their respective stated maturity dates.
The stated maturity dates are:
<TABLE>
<CAPTION>
STATED
CLASS MATURITY DATE
- ----- -------------
<S> <C>
A-1......................
A-2......................
A-3......................
A-4......................
[B....................... ]
[C....................... ]
[D....................... ]
</TABLE>
We expect that payment on the notes of each class will be made before the
payment date shown in the table above.
SUBORDINATION
The Class B notes will be subordinated to the Class A notes; the Class C notes
will be subordinated to the Class A notes and the Class B notes; and the Class D
notes will be subordinated to the Class A notes, the Class B notes and the Class
C notes.
- On each payment date, the trustee will use available funds to pay interest
on the Class A notes, then interest on the Class B notes, then interest on
the Class C notes [and finally interest on the Class D notes]; and
- On each payment date, the trustee will use the available funds to pay
principal on the Class A notes, then principal on the Class B notes, then
principal on the Class C notes and finally principal on the Class D notes.
We refer you to "Description of the Notes -- Subordination Provisions" in this
prospectus supplement for a more complete description of the subordination of
the Class B notes, the Class C notes and the Class D notes.
RESERVE ACCOUNT
The trustee will establish a reserve account. On the closing date, the issuer
will deposit into the reserve account an amount equal to [ %] of the initial
S-3
<PAGE> 8
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 [ %] of the initial aggregate
contract principal balance and [ %] of the outstanding principal balance of
the notes.] The required reserve amount will not, however, exceed the
outstanding amount of the notes.
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 reserve account. The
trustee will make payments in the following order of priority:
- first, to the trustee to pay fees and expenses in an amount not exceed
$ for any payment date;
- then, 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 to the Class C noteholders to pay Class C note interest;
- [then to the Class D noteholders to pay Class D 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 and finally to pay principal of
the Class A-4 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, a portion of the monthly principal amount
equal to the Class C principal payment amount to pay principal of the Class
C notes and a portion of the monthly principal amount equal to the Class D
principal payment amount to pay principal of the Class D notes;
- then [if the Class B floor is greater than the Class B target investor
principal amount, the Class C floor is greater than the Class C target
investor principal amount or the Class D floor is greater than the Class D
target investor principal amount,] the difference between the monthly
principal amount and the sum of the Class A principal payment amount, the
Class B principal payment amount, the Class C principal payment amount and
the Class D principal payment amount to pay principal sequentially to Class
A-2, Class A-3, Class A-4, Class B, Class C and Class D;
- then, to the reserve account in the amount needed to increase the amount in
the reserve account to the required reserve amount;
- finally, to the issuer, 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 [ %] 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 A-4 SPECIAL REDEMPTION
The Class A-4 notes may be redeemed on any payment date, at a price equal to the
Class A-4 principal balance on that payment date, including any accrued and
unpaid interest, plus the Class A-4 special redemption premium. The Class A-4
special
S-4
<PAGE> 9
redemption premium is payable only to the holders of the Class A-4 notes if the
issuer exercises the Class A-4 special redemption; it is not payable in the
event of an optional redemption as described in the immediately preceding
paragraph. If the Class A-4 special redemption occurs, it will be treated as a
purchase of the Class A-4 notes by the issuer and payments on those notes will
be made to the issuer.
LIMITED ABILITY TO REMOVE DEFAULTED CONTRACTS
The issuer may, but has no obligation to, remove defaulted contracts from the
Series 2000- trust estate. The issuer may remove contracts with a contract
principal balance, calculated as if the contracts were not defaulted, in the
aggregate amount up to [ %] of the initial aggregate contract principal
balance. Upon removal of a contract, the issuer must deposit the prepayment
amount for a removed contract into the collection account.
FEDERAL INCOME TAX STATUS
In the opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel to the
issuer, under existing law, [the Class A-1 notes, Class A-2 notes, the Class A-3
notes, the Class A-4 notes, the Class B notes and the Class C Notes] will be
characterized as indebtedness 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 the prospectus for additional information about the
application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
the prospectus, [the Class A-1 notes, the Class A-2 notes, the Class A-3 notes,
the Class A-4 notes, the Class B notes and the Class C 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>
[RATING [RATING
CLASS AGENCY] AGENCY]
- ----- ------- -------
<S> <C> <C>
A-1................... [ ] [ ]
A-2................... [ ] [ ]
A-3................... [ ] [ ]
A-4................... [ ] [ ]
B..................... [ ] [ ]
C..................... [ ] [ ]
D..................... [ ] [ ]
</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.
S-5
<PAGE> 10
RISK FACTORS
You should carefully consider the following risk factors and the risk factors
included in the prospectus before deciding to invest in the notes offered by
this prospectus supplement.
YOU MAY NOT BE ABLE TO SELL If no public market develops, you, as a
YOUR NOTES 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.
SECURITY INTEREST IN MOST Financing statements in favor of Advanta Bank
EQUIPMENT HAS NOT BEEN Corp. have been filed only for equipment with
PERFECTED an original cost of $25,000 or more; such
equipment represents only approximately
[ %] of the statistical aggregate contract
principal balance. As a result, the security
interest in equipment that represents
approximately [ %] of the statistical
aggregate contract principal balance has not
and will not be perfected in favor of Advanta
Bank Corp., the issuer or the trustee.
GEOGRAPHIC CONCENTRATION OF As of the statistical calculation date,
THE CONTRACT PORTFOLIO approximately [ %], [ %], [ %],
CAUSES INCREASED RISK [ %] and [ %] of the contracts (based
FROM LOCAL ECONOMIC on the statistical aggregate contract principal
CONDITIONS AND NATURAL balance) were located in ,
DISASTERS , ,
and ,
respectively. No other state accounts for more
than % of the statistical aggregate
contract principal balance. Accordingly,
adverse economic conditions, natural disasters
or other factors particularly affecting any of
these states could have a disproportionate
affect on the performance of the portfolio.
S-6
<PAGE> 11
INTRODUCTION
On or about , , the "CLOSING DATE", Advanta Equipment
Receivables Series 2000-
LLC will issue [$ ] of its equipment receivables asset-backed notes,
Series 2000- in [four] classes of [Class A notes, Class A-1, Class
A-2, Class A-3 and Class A-4] and [one class each of Class B, Class C and Class
D notes.] Only the [Class A-1, Class A-2, Class A-3, Class A-4, Class B and
Class C] notes are being offered by this prospectus supplement. [The issuer will
place the Class D notes privately.] The [Class A-1 notes, the Class A-2 notes,
the Class A-3 notes, the Class A-4 notes, the Class B notes, the Class C notes
and the Class D] notes are collectively the "NOTES." Capitalized terms used in
this prospectus supplement are defined on the pages indicated in the table
entitled "Index of Terms" at the back of this prospectus supplement. Terms used
in this prospectus supplement and not defined in this document have the meaning
assigned to those terms in the prospectus.
The notes will be issued under the terms of the indenture, dated as of the
date of issuance of the notes between Advanta Equipment Receivables Series
2000- LLC, as the issuer, Advanta Bank Corp., as servicer, and
, as trustee. The specific terms of the notes will be set forth
in the indenture.
Advanta Equipment Receivables Series 2000- LLC will enter into a
transfer and servicing agreement dated the date of issuance of the notes with
Advanta Bank Corp., as transferor. Pursuant to the transfer and servicing
agreement, Advanta Equipment Receivables Series 2000- LLC will acquire
Advanta Bank Corp.'s right, title and interest in the pledged assets.
THE ISSUER
The issuer is Advanta Equipment Receivables Series 2000- LLC.
Advanta Equipment Receivables Series 2000- LLC is a [single-member]
limited liability company formed under the laws of Delaware. The [sole member
and managing member of the issuer is Advanta Bank Corp.] The issuer will be
operated under the terms of a certificate of formation filed in the Delaware
Secretary of State's office on , 2000 and a limited liability
company agreement dated , 2000. The principal office of the issuer
is located at .
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the issuer as of the
closing date:
<TABLE>
<S> <C>
Class A-1 notes.............................................
Class A-2 notes.............................................
Class A-3 notes.............................................
Class A-4 notes.............................................
Class B notes...............................................
Class C notes...............................................
Class D notes...............................................
----------
$
==========
</TABLE>
S-7
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this prospectus supplement, the issuer does not have an
operating history. The proceeds of the sale of the notes will be used by the
issuer to acquire the contracts or Advanta Bank Corp.'s rights to the contracts,
to pay any costs and expenses and to make the initial deposit to the reserve
account. See "Use of Proceeds." The issuer is prohibited by its certificate of
formation from engaging in any other business other than (i) the purchase of
equipment leases and lease receivables (including equipment), loan agreements
and other financing agreements from Advanta Bank Corp. 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 the law
of the state of [Delaware]. The issuer's ability to incur, assume or guaranty
indebtedness for borrowed money is also restricted by its limited liability
company agreement.
USE OF PROCEEDS
The issuer will apply the proceeds from the sale of the notes in the
following manner:
- to make the initial deposit to the reserve account, in the amount of
$ (equal to [ %] of the initial aggregate contract principal
balance);
- to acquire the portfolio of contracts (or interests in the contracts)
from Advanta Bank Corp.; and
- to pay costs and expenses.
To the extent that the value of the contracts and other rights and
interests acquired from Advanta Bank Corp. exceeds the amount of proceeds of the
notes available to purchase the assets, Advanta Bank Corp. will contribute the
balance of such assets to the capital of the issuer.
Advanta Bank Corp. has previously transferred finance contracts to
affiliates and the affiliates have transferred the contracts to commercial paper
conduits in return for cash or have pledged the contracts as security for or a
source of payment for notes issued by the affiliates. The issuer will use
proceeds from the sale of the notes to acquire contracts from Advanta Bank Corp.
and Advanta Bank Corp. will use proceeds from the sale of the contracts in part
to acquire the contracts from the current owners. All of the finance contracts
to be included in the portfolio are contracts originated or acquired by Advanta
Bank Corp.
THE PLEDGED ASSETS
GENERAL
The assets pledged ("PLEDGED ASSETS") by the issuer to the trustee to
secure the notes will consist of the issuer's right, title and interest in:
- leases and loans included on a list delivered to the trustee on the
closing date; the contracts provide financing for the purchase or lease
of a variety of small-ticket equipment items for businesses, including
office equipment, such as computers, copy machines, facsimile machines,
printers and telephones, telecommunications equipment, automotive repair
equipment, surveillance equipment and furniture;
- all monies due or to become due on the contracts after the opening of
business on , except the excluded payments, and all related
security;
- all amounts in the collection account and the reserve account and
earnings on those accounts;
- all of the issuer's rights in the transfer and servicing agreement; and
- recoveries on insurance policies and disposition of repossessed
equipment;
- proceeds of each of the above, but not including the right to any
excluded payments;
S-8
<PAGE> 13
- "EXCLUDED PAYMENTS" are those amounts received by the servicer from the
users to pay insurance premiums, taxes, late charge fees for those
contracts for which a servicer advance has been made, any initial unpaid
amounts and various other incidental amounts.
TRUST ESTATE
Under the indenture, the issuer 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. The trustee's interest will be known 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, [ %], measured by the statistical aggregate contract
principal balance, are leases and the remaining [ %] 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.
Approximately [ %] of the statistical aggregate contract principal
balance, Advanta Bank Corp. has acquired from vendors or other lease financing
entities and transferred to Advanta Equipment Receivables Series 2000- LLC only
a right to receive 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 Bank Corp. is required to reassign the equipment to the vendor or
other lease financing entity.
Statistical information concerning the contracts is included in this
prospectus supplement under the caption "Statistical Information."
STATISTICAL INFORMATION
The statistical information presented in this prospectus supplement
concerning the contracts reflects those cashflows from , and
onward related to the portfolio of contracts as of the opening of business on
, , and has been calculated using an assumed discount rate of
[ %] per year. The "AGGREGATE CONTRACT PRINCIPAL BALANCE" of the contracts as
of the statistical calculation date is $ using the statistical discount
rate. The aggregate contract principal balance of the contracts as of
, is $ using the applicable discount rate. 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,
the Class A-4 notes, the Class B notes, the Class C notes and the Class D
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 % conditional prepayment rate prepayment and no loss
scenario, as applicable, and (b) the servicing fee of % per annum. As of the
cut-off date, the total number of contracts in the final pool was .
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 supplement, because payments have been made on some contracts
and some contracts may be determined not to meet the eligibility requirements
for the final pool. During the period from the statistical calculation date to
the cut-off date, some contracts may have been added to the contracts included
in the pool.
The variance in the aggregate contract principal balance, average contract
principal balance and number of contracts of the final pool will not be greater
than [ %] (plus or minus) compared to the characteristics that are described in
this prospectus supplement. The statistical characterization of the final pool
will be filed with the SEC on a current report on form 8-K.
S-9
<PAGE> 14
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 supplement are measured by the statistical aggregate contract
principal balance. Furthermore, in all instances in this prospectus supplement
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.
The following is statistical information relating to the contracts
calculated as of the statistical calculation date.
SUMMARY INFORMATION CONCERNING CONTRACTS
(As of , )
<TABLE>
<S> <C>
Number of Contracts.........................................
Statistical Aggregate Contract Principal Balance............ $
Statistical Average Contract Principal Balance.............. $
Statistical Minimum Contract Principal Balance.............. $
Statistical Maximum Contract Principal Balance.............. $
Aggregate Original Equipment Cost........................... $
Average Original Equipment Cost............................. $
Minimum Original Equipment Cost............................. $
Maximum Original Equipment Cost............................. $
Weighted Average Original Term in Months....................
Minimum Original Term in Months.............................
Maximum Original Term in Months.............................
Weighted Average Remaining Term in Months...................
Minimum Remaining Term in Months............................
Maximum Remaining Term in Months............................
Weighted Average Seasoning in Months........................
Largest User................................................ %
Loan Contracts.............................................. %
</TABLE>
S-10
<PAGE> 15
DISTRIBUTION OF CONTRACTS BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
STATE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----- --------- ------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama............................. % $ % $ %
Alaska..............................
Arizona.............................
Arkansas............................
California..........................
Colorado............................
Connecticut.........................
Delaware............................
District of Columbia................
Florida.............................
Georgia.............................
Hawaii..............................
Idaho...............................
Illinois............................
Indiana.............................
Iowa................................
Kansas..............................
Kentucky............................
Louisiana...........................
Maine...............................
Maryland............................
Massachusetts.......................
Michigan............................
Minnesota...........................
Mississippi.........................
Missouri............................
Montana.............................
Nebraska............................
Nevada..............................
New Hampshire.......................
New Jersey..........................
New Mexico..........................
New York............................
North Carolina......................
North Dakota........................
Ohio................................
Oklahoma............................
Oregon..............................
Pennsylvania........................
Puerto Rico.........................
Rhode Island........................
South Carolina......................
South Dakota........................
Tennessee...........................
Texas...............................
Utah................................
Vermont.............................
Virgin Islands......................
Virginia............................
Washington..........................
West Virginia.......................
Wisconsin...........................
Wyoming.............................
--- --- ---- --- --- ----
Total........................... % $ % $ %
=== === ==== === === ====
</TABLE>
S-11
<PAGE> 16
DISTRIBUTION OF CONTRACTS BY CONTRACT PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- -------------------------- --------- ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00 -- $ 100.00.... % $ % $ %
$ 100.01 -- $ 500.00....
$ 500.01 -- $ 1,000.00....
$ 1,000.01 -- $ 2,500.00....
$ 2,500.01 -- $ 5,000.00....
$ 5,000.01 -- $ 10,000.00....
$ 10,000.01 -- $ 25,000.00....
$ 25,000.01 -- $ 50,000.00....
$ 50,000.01 -- $100,000.00....
$100,000.01 -- $150,000.00....
Greater than $150,000.00......
--- --- -------- ---- --- ---
Total.................... % $ % $ %
=== === ======== ==== === ===
</TABLE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL EQUIPMENT COST
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL
AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL EQUIPMENT EQUIPMENT
ORIGINAL EQUIPMENT COST CONTRACTS CONTRACTS STATISTICAL BALANCE COST COST
- ----------------------- --------- ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 100.01 -- $ 500.00.... % $ % $ %
$ 500.01 -- $ 1,000.00....
$ 1,000.01 -- $ 2,500.00....
$ 2,500.01 -- $ 5,000.00....
$ 5,000.01 -- $ 10,000.00....
$ 10,000.01 -- $ 25,000.00....
$ 25,000.01 -- $ 50,000.00....
$ 50,000.01 -- $100,000.00....
$100,000.01 -- $150,000.00....
Greater than $150,000.00......
--- --- -------- ---- --- ---
Total.................... % $ % $ %
=== === ======== ==== === ===
</TABLE>
S-12
<PAGE> 17
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
REMAINING TERM (MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----------------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12.............. % $ % $ %
13 -- 24..............
25 -- 36..............
37 -- 48..............
49 -- 60..............
61 -- 72..............
------- ----- -------- ----- -------- ------
Total............ % $ % $ %
======= ===== ======== ===== ======== ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
ORIGINAL TERM (MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ---------------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12............. % $ % $ %
13 -- 24.............
25 -- 36.............
37 -- 48.............
49 -- 60.............
61 -- 72.............
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
DISTRIBUTION OF CONTRACTS BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
PAYMENT TYPE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ------------ --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Monthly.............. % $ % $ %
Non-monthly..........
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
S-13
<PAGE> 18
DISTRIBUTION OF CONTRACTS BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
PURCHASE OPTION CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- --------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout....... % $ % $ %
Fair Market Value....
Stated Residual......
Other(1).............
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) "Other" includes loans and contracts in which the issuer will obtain only
the right to scheduled payments.
S-14
<PAGE> 19
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
EQUIPMENT DESCRIPTION CONTRACTS OF CONTRACTS BALANCE BALANCE COST COST
- --------------------- --------- ------------ ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Microcomputers and Printers.... $ $ %
Copiers........................
Surveillance System............
Telephones.....................
Automotive Equipment...........
Medical Equipment..............
Security/Alarm System..........
Restaurant Equipment...........
Point of Sale Items............
Mailing Machines...............
A/V Equipment..................
Software.......................
Computer Peripherals...........
Heavy Machinery................
Furniture......................
Construction Equipment.........
Vending Equipment..............
Forklifts......................
Laundry Equipment..............
Welding Equipment..............
Commercial/Industrial
Cleaning.....................
Printing Press.................
Stenograph.....................
Photography Equipment..........
Landscaping Equipment..........
Cash Registers.................
Sewing and Embroidery..........
Freezer/Refrigerator/
Restaurant...................
Fax Machines...................
Ice Machine....................
Mobile Communications..........
Woodworking Equipment..........
Air Compressors................
Pressure Washers...............
Scales.........................
Signs/Display..................
Commercial Fitness Equipment...
Water Coolers..................
Theft Security.................
Safes..........................
Other..........................
-- -- --- -- --- --
Total..................... % % %
== == === == === ==
</TABLE>
S-15
<PAGE> 20
SERVICING PORTFOLIO DELINQUENCY AND DEFAULT INFORMATION
The following delinquency and default information relates to all equipment
financing contracts serviced by Advanta Bank Corp. or by Advanta Business
Services Corp. for the periods shown. Prior to October 1, 1998, Advanta Business
Services Corp. was in the business of originating and servicing equipment
leases. As of October 1, 1998 Advanta Bank Corp. assumed the origination of
equipment leases. Advanta Business Services continues to service the leases it
originated. Advanta Bank Corp. services the leases it originates through a
subservicing arrangement with Advanta Business Services. Therefore, the
following delinquency and default information, for periods prior to October 1,
1998 relates to the Advanta Business Services servicing portfolio and the
information from and after October 1, 1998 combines the servicing portfolios of
Advanta Business Services and Advanta Bank Corp.
HISTORICAL DELINQUENCY INFORMATION
Delinquency information for all equipment financing contracts in the
Advanta Bank Corp. and Advanta Business Services servicing portfolios is set
forth below.
HISTORICAL DELINQUENCY EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF
----------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997 1996
---------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Receivables Balance(1)..... $ -- $ -- $718,418 $674,570 $614,828
No. of Delinquent Days 31-60
Days........................... $ -- --% $ -- --% $ 36,522 5.08% $ 31,226 4.63% $ 34,521 5.61%
61-90 Days....................... -- --% -- --% 14,172 1.97 11,920 1.77 9,705 1.58
91 Days or more.................. -- --% -- --% 9,462 1.32 9,189 1.36 6,702 1.09
Total Delinquency............ $ -- --% $ -- --% $ 60,156 8.37% $ 52,335 7.76% $ 50,928 8.28%
</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 Advanta Bank
Corp. and Advanta Business Services servicing portfolios is set forth below.
HISTORICAL LOSS EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MONTHS YEAR ENDED
ENDED ------------------------------------------------------------
, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997 1996
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1)............. $ $ $676,817 $652,607 $551,645
Net Losses................... $ $ $ 16,217 $ 15,293 $ 10,356
Net Losses as a Percentage of
Average Receivables........ (2) % 2.40% 2.34% 1.88%
</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.
S-16
<PAGE> 21
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued pursuant to the indenture. The notes will be
available only in book-entry form. The holders of the notes 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 in the prospectus supplement, any references to actions
taken by noteholders or holders refer to actions taken by DTC from its
participants' instructions, and all references in this prospectus supplement to
distributions, notices, reports and statements to noteholders or holders shall
refer to distributions, notices, reports and statements to DTC or Cede & Co., as
the registered holder of the book-entry notes, as appropriate, for distribution
to the ultimate owners of interests in the notes pursuant 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 can 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 , , (each a
"PAYMENT DATE" to record holders on the calendar day immediately prior to each
payment date for any definitive note, the record date is the last day of the
immediately previous calendar month. The indenture defines a "BUSINESS DAY" to
be any day except a Saturday, a Sunday or a day on which banks in New York, New
York, Philadelphia, Pennsylvania, Voorhees, New Jersey or Wilmington, Delaware
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 . The stated maturity date for the Class A-2 notes will
be the payment date in . The stated maturity date for the
Class A-3 notes will be the payment date in . The stated
maturity date for the Class A-4 notes will be the payment date in
. The stated maturity date for the Class B notes will be the payment
date in . [The stated maturity date for the Class C notes
will be the payment date in .] [The stated maturity date for
the Class D notes will be the payment date in .] 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. The issuer expects 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 before each payment date, the servicer will
determine the amount of payments received on the contracts for the immediately
preceding calendar month and which will be available for distribution on the
payment date.
INTEREST PAYMENTS
On each payment date, the interest due on the Class A-1 notes, Class A-2
notes, Class A-3 notes, the Class A-4 notes, the Class B notes, [the Class C
notes and the Class D notes] will be the interest that has accrued since the
last payment date, or in the case of the , payment
date, since the closing date at the applicable interest rate. The applicable
interest rate will be applied to the unpaid principal amounts remaining after
the principal payments made on the preceding payment date. In each case, the
Class A-1 note interest, the Class A-2 note interest, the Class A-3 note
interest, the Class A-4 note interest, the Class B note interest, [the Class C
note interest and the Class D note] interest shall include any interest due on
each class on any preceding payment date and not paid plus interest on any
overdue amount.
- The interest rates applicable to the [seven] classes of notes are:
- The Class A-1 notes will bear interest at [ %] per annum.
S-17
<PAGE> 22
- The Class A-2 notes will bear interest at [ %] per annum.
- The Class A-3 notes will bear interest at [ %] per annum.
- The Class A-4 notes will bear interest at [ %] per annum.
- The Class B notes will bear interest at [ %] per annum.
[- The Class C notes will bear interest at [ %] per annum.]
[- The Class D notes will bear interest at [ %] per annum.]
[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, Class
A-4 notes, Class B notes, Class C notes and Class D 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 prior
payment date and after taking into account payments made on that 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. [On
subsequent payment dates, the remaining Class A, the Class B notes, the Class C
notes and Class D notes] will be entitled to receive payments of principal, to
the extent funds are available for them, in the priorities set forth in the
indenture and described below and under "Description of the Notes -- Flow of
Funds."
On each payment date, if sufficient funds are available, 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, the Class A-3 notes and the Class A-4 notes sequentially until
the Class A principal balance has been reduced to zero. No principal will
be paid on the Class A-2 notes, the Class A-3 and the Class A-4 notes until
the full amount of the Class A-1 notes has been paid, 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 and no principal will be paid to the
Class A-4 notes until the full amount of the Class A-1 notes, the Class A-2
notes and the Class A-3 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 Class C Floor exceeds the Class C
Target Investor Principal Amount or the Class D Floor exceeds the Class D
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 then to pay the Class A-4
notes until they are paid in full, then to pay Class B notes until they are
paid in full, then to pay Class C notes until they are paid in full and
finally to pay Class D 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 making 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, Class A-3 notes and the Class A-4 notes to the Class A Target Investor
Principal Amount; or (c) on any subsequent payment date, the amount necessary
S-18
<PAGE> 23
to reduce the sum of the outstanding principal amount of the Class A-2 notes,
Class A-3 notes and Class A-4 notes to the Class A Target Investor Principal
Amount.
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 each 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 C 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 C
notes to the greater of the Class C Target Investor Principal Amount and the
Class C Floor.
The "CLASS C TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class C Percentage and (b) the
aggregate contract principal balance as of the related calculation date.
The "CLASS D 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 D
notes to the greater of the Class D Target Investor Principal Amount and the
Class D Floor.
The "CLASS D TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class D 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) [ %] of
the initial aggregate contract principal balance, plus (b) the Cumulative Loss
Amount (as defined below) as of such payment date, minus (c) the sum of the
amounts on deposit in the reserve account after netting all payments and
withdrawals on any payment date.
The "CLASS C FLOOR" with respect to each payment date means (a) [ %] 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 after netting all payments and withdrawals on any payment
date.
The "CLASS D FLOOR" with respect to each payment date means (a) [ %] 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 after netting all payments and withdrawals on any 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
[ %].
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 [ %].
S-19
<PAGE> 24
The "CLASS C PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class C notes divided by (ii) the
initial aggregate contract principal balance minus the initial principal amount
of the Class A-1 notes, and being approximately [ %].
The "CLASS D PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class C notes divided by (ii) the
initial aggregate contract principal balance minus the initial principal amount
of the Class A-1 notes, and being approximately [ %].
The outstanding Class A-1 note principal balance for any payment date
equals the class A-1 initial principal balance less any principal payments
previously made on the Class A-1 notes; the outstanding Class A-2 note principal
balance for any payment date equals the Class A-2 initial principal balance less
any principal payments previously made on the Class A-2 notes; the outstanding
Class A-3 note principal balance for any payment date equals the Class A-3
initial principal balance less any principal payments previously made on the
Class A-3 notes; and the outstanding Class A-4 note principal balance for any
payment date equals the Class A-4 initial principal balance less any principal
payments previously made on the Class A-4 notes. 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 outstanding Class C note principal balance for any payment date shall
be equal to the Class C initial principal balance less any principal payments
previously made on the Class C Notes. The outstanding Class D note principal
balance for any payment date shall be equal to the Class D initial principal
balance less any principal payments previously made on the Class D notes. The
outstanding principal balance for any date is the sum of the Class A principal
balance, the Class B principal balance, the Class C principal balance and the
Class D principal balance as of the same date.
The "CLASS A-1 INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS A-2
INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS A-3 INITIAL PRINCIPAL
BALANCE" is [$ ]. The "CLASS A-4 INITIAL PRINCIPAL BALANCE" is
[$ ]. The "CLASS B INITIAL PRINCIPAL BALANCE" is [$ ]. The
"CLASS C INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS D INITIAL
PRINCIPAL BALANCE" is [$ ].
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.
FLOW OF FUNDS
The transfer and servicing agreement will require that the trustee
establish a collection account and that the servicer deposit to the collection
account, any 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:
- amounts collected during the immediately preceding calendar month for the
contracts, including scheduled payments, servicer advances, 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
- amounts transferred from the reserve account for that payment date and
deposited in the collection account.
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<PAGE> 25
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:
- to the servicer, any servicer advances which the servicer has determined
it will not be able to recover;
- to the trustee to pay trustees fees and expenses in an amount not to
exceed $ in any month;
- 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;
- to the holders of the Class A notes, accrued and unpaid Class A note
interest for the related interest accrual period, in equal amounts based
on interest due with respect to each class of Class A notes;
- to the holders of the Class B notes, accrued and unpaid Class B note
interest for the related interest accrual period;
- to the holders of the Class C notes, accrued and unpaid Class C note
interest for the related interest accrual period;
- to the holders of the Class D notes, accrued and unpaid Class D note
interest for the related interest accrual period;
- 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, to
the Class A-3 noteholders, the Class A principal payment amount; after
the Class A-1 principal balance, the Class A-2 principal balance and the
Class A-3 principal balance have been reduced to zero, then until the
Class A-4 principal balance has been reduced to zero, to the Class A-4
noteholders, the Class A principal payment amount;
- until the Class B principal balance has been reduced to zero, to the
Class B noteholders, the Class B principal payment amount;
- until the Class C principal balance has been reduced to zero, to the
Class C noteholders;
- until the Class D principal balance has been reduced to zero, to the
Class D noteholders;
- if on a payment date, the Class B Floor is greater than the Class B
Target Investor Principal Amount, the Class C Floor is greater than the
Class C Target Investor Principal Amount and the Class D Floor is greater
than the Class D Investor Principal Amount, an amount equal to the
additional principal to be paid in order to the Class A-2 noteholders,
Class A-3 noteholders Class A-4 noteholders, Class B noteholders, Class C
noteholders and Class D noteholders;
- to the reserve account, the amount needed to increase the amount in the
reserve account to the required reserve amount for any payment date;
- to the issuer, as owner of the pledged assets, any remaining available
funds on deposit in the collection account. This amount shall be the
"ISSUER'S 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 relevant calculation date is less
than or equal to [ %] of the initial aggregate contract principal balance.
The servicer will give notice of a redemption to the trustee at least 30 days
before the payment date fixed for the prepayment. When
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<PAGE> 26
funds are deposited to cover a redemption, the trustee will pay the outstanding
principal balances of the notes that were called for redemption and all accrued
and unpaid interest by the payment date set for redemption.
CLASS A-4 SPECIAL REDEMPTION
Pursuant to the indenture, the Class A-4 notes can be redeemed on a payment
date, at the option of the issuer at a price equal to the sum of (i) the then
Class A-4 principal balance and accrued and unpaid interest on the Class A-4
principal balance and (ii) the Class A-4 special redemption premium described in
the next paragraph.
The "CLASS A-4 SPECIAL REDEMPTION PREMIUM" will equal the excess, if any,
discounted as described below, of (i) the amount of interest that may accrue on
the aggregate outstanding principal balance of the Class A-4 notes at the Class
A-4 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 A-4
stated maturity date, over (ii) the amount of interest that would have accrued
on the aggregate outstanding Class A-4 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 A-4 notes
minus [ %]. Any excess shall be discounted to the present value to the
payment date at the applicable yield described in clause (ii) of the previous
sentence. For these purposes only, (i) the Class A-4 principal balance for which
interest will be deemed to accrue, and (ii) the average weighted life of the
Class A-4 notes, shall be determined based upon the amortization of the
aggregate contract principal balance remaining at such payment date at a rate of
[ %] CPR and no losses.
If the Class A-4 notes are redeemed pursuant to a Class A-4 special
redemption, the Class A-4 notes will be deemed to have been purchased by the
issuer. In a purchase, the issuer will be entitled to receive payments of
principal and interest on the Class A-4 notes, and the Class A-4 principal
balance will thereafter continue to amortize as described in this prospectus
supplement.
SUBORDINATION PROVISIONS
Credit enhancement for Class A noteholders is provided by the subordination
of the Class B notes, the Class C notes and the Class D notes and by the reserve
account.
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 D notes being paid only after the
interest on the Class A, Class B and Class C notes, (ii) interest on the Class C
notes being paid only after the interest on the Class A and Class B notes, (iii)
interest on the Class B notes being paid only after interest on the Class A
notes, (iv) principal on the Class B, Class C and Class D notes commencing only
after the Class A-1 notes are paid in full and (v) when the Class A-1 notes have
been paid in full, the Class D principal payment amount being paid in each month
only after the Class C principal payment amount, the Class B principal payment
amount and the Class A principal payment amount, the Class C principal payment
amount being paid in each month only after the Class B principal payment amount
and the Class A principal payment amount and the Class B principal payment
amount being paid in each month only after the Class A principal payment amount.
RESERVE ACCOUNT
The noteholders will have the benefit of funds on deposit in an account
called 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 [ %]
of the initial aggregate contract principal balance. [After the initial deposit,
additional deposits will be made to the reserve account on each payment date, if
the amount on deposit in the reserve account is less than the required reserve
amount. See "Flow of Funds" in this prospectus supplement. The "REQUIRED RESERVE
AMOUNT" on a payment date equals the lesser of (i) the greater of [ %] of
the initial aggregate contract principal balance and [ %] of the aggregate
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<PAGE> 27
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 issuer 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 and reserve account are greater than or equal to the sum of (i) the
remaining principal balance of the Class A notes, the Class B notes, the Class C
notes and the Class D 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 the reserve account will be deposited in the collection
account and used to repay in full the Class A notes, the Class B notes, the
Class C notes and the Class D notes.
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 for (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, Class A-4 principal payment amount, the Class B principal
payment amount, the Class C principal amount or the Class D principal
amount, as applicable;
(b) The amount of the payment allocable to that noteholder's portion
of Class A note interest, Class B note interest, Class C interest or Class
D 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 A-4 principal balance, the Class
B principal balance, the Class C principal balance, the Class D principal
balance, the Class A-1 Note Factor, the Class A-2 Note Factor, the Class
A-3 Note Factor, the Class A-4 Note Factor, the Class B Note Factor, the
Class C Note Factor, the Class D 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;
(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.
S-23
<PAGE> 28
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 A-4 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-4 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-4 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 "CLASS C 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 C 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 C initial principal balance.
The "CLASS D 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 D 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 D 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 , of each calendar year following
any year during which the notes are outstanding, commencing
, , 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.
PAYMENTS SUBSEQUENT TO AN EVENT OF DEFAULT
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:
First, to the trustee for 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 accrued and unpaid interest on the
outstanding principal balance of the Class A-1 notes, Class A-2 notes,
Class A-3 notes and Class A-4 notes in equal proportion to their interests
to the date of payment of the accrued and unpaid, 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, the Class A-3 interest rate and the Class A-4 interest rate,
respectively;
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<PAGE> 29
Third, 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;
Fourth, to the payment of all accrued and unpaid interest on the
outstanding principal balance of the Class C 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 C interest
rate;
Fifth, to the payment of all accrued and unpaid interest on the
outstanding principal balance of the Class D 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 D 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, Class A-3 notes and Class A-4 notes in equal proportion to
their interests 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 the outstanding principal balance of the
Class C notes to the date of payment when the balance is reduced to zero;
Tenth, to the payment of the outstanding principal balance of the
Class D notes to the date of payment when the balance is reduced to zero;
and
Eleventh, to the issuer.
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. Generally, 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 generally allow prepayments of leases. 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, Class A-4, Class B, Class C and
Class D notes which would be outstanding on the payment dates set forth below
assuming a CPR of [ %], [ %], [ %], [ %], [ %], [ %] and
[ %], respectively, and were calculated using the statistical discount rate
[ %]. The charts were calculated assuming no losses related to the
contracts. This information is hypothetical and is set forth for illustrative
purposes only.
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<PAGE> 30
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 or "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 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 [ %] of the initial aggregate contract principal balance and assumes
the closing date is , and the first payment date is
, . 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 INITIAL ASSUMED
CLASS PRINCIPAL AMOUNT INTEREST RATE
- ----- ---------------- -------------
<S> <C> <C>
A-1......................................................... $ %
A-2......................................................... $ %
A-3......................................................... $ %
A-4......................................................... $ %
B........................................................... $ %
C........................................................... $ %
D........................................................... $ %
</TABLE>
S-26
<PAGE> 31
<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% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</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> 32
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-3 NOTES BALANCE OF THE CLASS A-4 NOTES
------------------------------------ ------------------------------------
CPR CPR
------------------------------------ ------------------------------------
PAYMENT DATE 0% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</TABLE>
- ---------------
(1) The weighted average life of a Class A-3 note or a Class A-4 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.
S-28
<PAGE> 33
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS B NOTES BALANCE OF THE CLASS C NOTES
------------------------------------ ------------------------------------
CPR CPR
------------------------------------ ------------------------------------
PAYMENT DATE 0% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</TABLE>
- ---------------
(1) The weighted average life of a Class B note or a Class C 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.
S-29
<PAGE> 34
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS D NOTES
------------------------------------
CPR
------------------------------------
PAYMENT DATE 0% % % %
- ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Closing Date................................................ % % % %
Weighted Average Life(1) to Call (in years).................
Weighted Average Life(1) to Maturity (in years).............
</TABLE>
- ---------------
(1) The weighted average life of a Class D 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 Class D note.
S-30
<PAGE> 35
AGGREGATE MONTHLY SCHEDULED PAYMENTS
The following table sets forth the scheduled payments. For the purposes of
this table we have assumed there are no delinquencies, losses or prepayments on
the contracts. 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 supplement, as well as the information
under "Risk Factors" in this prospectus supplement and in the prospectus should
be reviewed together with the information set forth below.
<TABLE>
<CAPTION>
MONTH AGGREGATE SCHEDULED PAYMENTS
- ----- ----------------------------
<S> <C>
</TABLE>
[LEGAL INVESTMENT]
[The Class A-1 notes will be an "eligible security" under Rule 2a-7 enacted
pursuant to the Investment Company Act of 1940, as amended.]
S-31
<PAGE> 36
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the offered notes, Advanta Bank Corp. and the issuer
have agreed to sell and the underwriters named below have agreed to purchase the
offered notes as set forth below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-1 NOTES CLASS A-1 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-2 NOTES CLASS A-2 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-3 NOTES CLASS A-3 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-4 NOTES CLASS A-4 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS B NOTES CLASS B NOTES
- --------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS C NOTES CLASS C NOTES
- --------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
The issuer has been advised by , as representative of the
underwriters, 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 supplement, and to certain dealers at such price, less a
concession not in excess of [ %] per Class A-1 note, [ %] per Class A-2
note, [ %] per Class A-3 note, [ %] per Class A-4 note, [ %] per
Class B note and [ %] per Class C 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, [ %] per Class A-3 note,
[ %] per Class A-4 note, [ %] per Class B note and [ %] per Class C
note.
S-32
<PAGE> 37
<TABLE>
<CAPTION>
UNDERWRITERS'
DISCOUNTS AND AMOUNT PER $1,000
CLASS COMMISSIONS OF PRINCIPAL TOTAL AMOUNT
----- ------------- ----------------- ------------
<S> <C> <C> <C>
A-1.............................................. % $ $
A-2.............................................. % $ $
A-3.............................................. % $ $
A-4.............................................. % $ $
B................................................ % $ $
C................................................ % $ $
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; and
(c) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the offered notes to a person of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or persons to whom such document may otherwise lawfully be
issued, distributed or passed on.
(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 and the issuer have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the securities act. The
issuer has 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. 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 " ," the Class A-2 notes be rated at least " ," the Class
A-3 notes be rated at least " ," the Class A-4 notes be rated at least
" ," the Class B notes be rated at least " ," the Class C notes be rated
at least ' ," and the Class D notes be rated at least by and the Class
A-1 notes be rated at least " ," the Class A-2 notes be rated at least
" ," the Class A-3 notes be rated at least " ,"the Class A-4 notes be
rated at least ' ," the Class B notes be rated at least " ," the Class C
notes be rated at least " " and the Class D notes be rated at least " ,"
by , respectively.
S-33
<PAGE> 38
Each rating will reflect only the views of the particular rating agency and
will be based primarily on the amount of subordination, the availability of
funds on deposit in the reserve 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" in the prospectus.
LEGAL MATTERS
Legal matters relating to the validity of the issuance of the notes will be
passed upon for the issuer by Orrick, Herrington & Sutcliffe LLP, Washington,
D.C. Legal matters related to Delaware law will be passed upon for the issuer by
. Legal matters for the bank will be passed upon by
. Legal matters will be passed upon for the underwriters by
.
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).
S-34
<PAGE> 39
INDEX OF TERMS
<TABLE>
<S> <C>
A
aggregate contract principal
balance........................... S-9
available funds..................... S-20
B
business day........................ S-17
C
calculation date.................... S-20
Class A Percentage.................. S-19
Class A Principal Payment Amount.... S-18
Class A Target Investor Principal
Amount............................ S-19
Class A-1 initial principal
balance........................... S-20
Class A-1 Note Factor............... S-23
Class A-2 initial principal
balance........................... S-20
Class A-2 Note Factor............... S-24
Class A-3 initial principal
balance........................... S-20
Class A-3 Note Factor............... S-24
Class A-4 initial principal
balance........................... S-20
Class A-4 Note Factor............... S-24
Class A-4 special redemption
premium........................... S-22
Class B Floor....................... S-19
Class B initial principal balance... S-20
Class B Note Factor................. S-24
Class B Percentage.................. S-19
Class B Principal Payment Amount.... S-19
Class B Target Investor Principal
Amount............................ S-19
Class C Floor....................... S-19
Class C initial principal balance... S-20
Class C Note Factor................. S-24
Class C Percentage.................. S-20
Class C Principal Payment Amount.... S-19
Class C Target Investor Principal
Amount............................ S-19
Class D Floor....................... S-19
Class D initial principal balance... S-20
Class D Note Factor................. S-24
Class D Percentage.................. S-20
Class D Principal Payment Amount.... S-19
Class D Target Investor Principal
Amount............................ S-19
closing date........................ S-7
Collateral Factor................... S-24
CPR................................. S-26
Cumulative Loss Amount.............. S-20
E
excluded payments................... S-9
I
issuer's interest................... S-21
M
Monthly Principal Amount............ S-18
N
Notes............................... S-7
P
payment date........................ S-17
pledged assets...................... S-8
R
required reserve amount............. S-22
reserve account..................... S-22
T
trust estate........................ S-9
</TABLE>
S-35
<PAGE> 40
APPENDICES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
A Global Clearance, Settlement and Tax Documentation
Procedures.................................................. A-1
</TABLE>
S-36
<PAGE> 41
APPENDIX A:
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the globally offered Equipment Receivables
Asset-Backed Notes, Series 2000- or global securities will be available
only in book-entry form. Investors in the global securities may hold such global
securities through any of 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. and Morgan Guaranty Trust Company of New
York as depositories for Cedelbank and Euroclear) 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> 42
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) 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> 43
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.
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> 44
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000- LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-
$[ ] [ %] CLASS A-1 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-2 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-3 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-4 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS B EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS C EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
------------------------
PROSPECTUS SUPPLEMENT
------------------------
[UNDERWRITERS]
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with different information.
We are not offering the Class A notes, the Class B notes and the Class C
notes in any state where the offer is not permitted.
Dealers will deliver a prospectus and prospectus supplement when acting as
underwriters of the Class A notes, the Class B notes and the Class C notes and
with respect to their unsold allotments or subscriptions. In addition, all
dealers selling the Class A notes, the Class B notes and the Class C notes will
deliver a prospectus and prospectus supplement until , .
<PAGE> 45
The information in this prospectus is not complete and may be amended. We
may not sell these securities until we deliver a final prospectus and
accompanying prospectus supplement. This prospectus is not an offer to
sell nor is it seeking an offer to buy these securities in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 30, 2000
PROSPECTUS
ADVANTA EQUIPMENT RECEIVABLES LIMITED LIABILITY COMPANIES
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 IN THIS PROSPECTUS.
<TABLE>
<S> <C>
A note is not a deposit and EACH ISSUER --
neither the notes nor the
contracts are insured or - will be a newly-created Delaware limited liability
guaranteed by the Federal company;
Deposit Insurance Corporation
or any other governmental - will issue only one series of notes; and
agency.
- will acquire from Advanta Bank Corp. a portfolio of assets
Each note is the obligation consisting
only of the limited liability primarily of equipment leases.
company which issued the note.
The notes do not represent EACH SERIES OF NOTES --
interests in or obligations of
Advanta Bank Corp. or any - will be an obligation only of the issuer created for that
affiliate, except the issuer. series;
This prospectus may be used to - will be secured by and payable only from the limited
offer and sell any series of assets of that issuer;
notes only if accompanied by
the prospectus supplement for - may have one or more forms of enhancement; and
that series.
- may include one or more classes of notes and enhancement.
THE NOTEHOLDERS --
- will receive interest and principal payments only from
collections on the contracts.
</TABLE>
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.
, 2000
<PAGE> 46
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to your series of notes and (b) the accompanying prospectus supplement,
which describes the specific terms of your series of notes.
If the terms of your series of notes vary between the accompanying
prospectus supplement and this prospectus, you should rely on the information in
the accompanying prospectus supplement.
We include cross-references in the accompanying prospectus supplement and
this prospectus to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
------------------------
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Series.............................. 1
Issuers............................. 1
Originator and Servicer............. 1
Trustee............................. 1
The Pledged Assets.................. 1
The Contracts....................... 2
The Notes........................... 2
Credit and Cash Flow Enhancement.... 2
Federal Income Tax Matters.......... 2
ERISA Considerations................ 2
Note Ratings........................ 2
Risk Factors.......................... 4
Prepayments on the Contracts May
Cause Early Payment of Notes and
You May Not Be Able to Reinvest
at a Comparable Rate............. 4
Subservicer's Possession of the
Contracts May Result in Delayed
Payments, Losses or Accelerated
payments......................... 4
State Laws and Other Factors May
Restrict or Delay Recovery
Efforts and Adversely Affect the
Recovery of the Full Amount Due
on the Contracts................. 5
Security Interests in Most Equipment
Are Not Perfected and Other
Creditors May Have Rights to the
Equipment........................ 5
If the Promissory Notes Are Not
Delivered to the Trustee, the
Security Interest in Loans Are
Not Perfected.................... 6
If the Transfer of Contracts Were
Held to Be Merely a Grant of a
Security Interest, Other
Interests May Have Priority Over
Your Notes....................... 6
If a Conservator or Receiver Is
Appointed for the Bank, Assets
Could Be Sold at a Loss, Payment
May Be Accelerated, Delayed or
Reduced and Protections Provided
to Noteholders May Be
Overridden....................... 6
Insolvency of Advanta Bank Corp. May
Result in an Inability to
Repurchase Contracts............. 7
Insolvency of the Issuer Could
Reduce or Delay Your Payments.... 8
Default or Insolvency of Users May
Reduce Payments to You........... 8
If the Pledged Assets Are Not
Sufficient, Defaults Will
Occur............................ 8
Technological Obsolescence of the
Equipment May Reduce the Value of
the Collateral................... 8
Book-Entry Registration Will Result
in Your Inability to Exercise
Directly Your Rights as a
Noteholder....................... 8
Limited Nature of Credit Ratings
Assigned to the Notes............ 8
Introduction.......................... 10
The Issuers........................... 10
The Originator and Servicer........... 10
The Pledged Assets.................... 11
Pledged Assets...................... 11
Excluded Payments................... 11
Residual Interest Retained by
Bank............................. 12
The Contracts....................... 12
Security Interest in the
Equipment........................ 14
Series Accounts..................... 14
Recoveries.......................... 14
Transfer and Administration
Agreement........................ 14
Advanta Bank Corp.'s Underwriting,
Origination and Servicing
Practices........................... 15
Contract Origination................ 15
Credit Review....................... 16
Collection/Servicing................ 16
Matters Related to Advanta Corp..... 17
Removal of Contracts.................. 17
Breach of Representations and
Warranties....................... 17
Defaulted Contracts................. 18
Weighted Average Life of the Notes.... 18
Use of Proceeds....................... 19
Description of the Notes.............. 19
General............................. 19
Interest Rates...................... 20
</TABLE>
i
<PAGE> 48
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Book-Entry Registration............. 20
Definitive Notes.................... 22
Credit and Cash Flow Enhancement.... 23
The Transaction Documents............. 24
Transfer and Servicing Agreement.... 24
Accounts............................ 27
Servicing Compensation.............. 28
Servicer Not to Resign.............. 29
Merger, Consolidation, or Assumption
of the Obligations of the
Servicer......................... 29
Events of Servicer Termination...... 29
Servicer Termination................ 30
The Indenture....................... 30
Note Ratings.......................... 32
Legal Matters Affecting the
Contracts........................... 33
Considerations Relating to the
Users............................ 33
Considerations Relating to Security
Interests in the Equipment....... 33
Considerations Relating to Ownership
Interests in the Equipment....... 33
Considerations Relating to Your
Interest in the Contracts and
Other Assets..................... 34
Considerations Relating to
Conservatorship, Receivership and
Bankruptcy....................... 35
Federal Income Tax Consequences....... 36
General............................. 36
Consequences to Holders of the
Offered Notes.................... 36
State Tax Consequences................ 39
ERISA Considerations.................. 39
Plan of Distribution.................. 41
Ratings............................... 41
Legal Opinions........................ 41
</TABLE>
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<PAGE> 49
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 OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, CAREFULLY READ THIS
ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
SERIES
The notes will be issued in series from time to time. Each series of notes will
be issued by a new limited liability company. The notes of each series will be
payable from a separate portfolio of contracts and interests in contracts
originated or acquired by Advanta Bank Corp. and transferred to the issuer.
ISSUERS
Each issuer will be a newly-formed Delaware limited liability company. Advanta
Bank Corp. will be the sole member of each issuer.
Each issuer's activities will be limited by the terms of its organizational
documents and the transaction documents. The activities will be limited to
acquiring, holding and managing the contracts and other rights and interests
received from Advanta Bank Corp., issuing and making payments on the notes and
related activities.
ORIGINATOR AND SERVICER
Advanta Bank Corp. will be the originator and servicer of the contracts.
For each series, Advanta Bank Corp. and the series issuer will enter into a
transfer and servicing agreement.
Advanta Bank Corp. will transfer its rights in the contracts to the issuer.
Advanta Bank Corp. will agree to service the assets transferred to the issuer.
In return for its services as servicer, Advanta Bank Corp. will receive a fee.
Advanta Bank Corp. will service the contracts through a subservicing arrangement
with Advanta Business Services Corp.
Advanta Bank Corp. is a Utah industrial loan corporation. Its principal place of
business is 11850 South Election Road, Draper, Utah 84020. Its telephone number
is (801) 523-0858.
Advanta Business Services Corp. is a Delaware corporation. Its principal place
of business is 1020 Laurel Oak Road, Voorhees, New Jersey 08043. Its telephone
number is (856) 782-7300.
TRUSTEE
The notes of each series will be issued under a separate indenture between the
issuer and a corporate trustee. The trustee for your series identified in the
related prospectus supplement.
THE PLEDGED ASSETS
At the time of issuance of each series of notes, we will transfer to the issuer
a portfolio of contracts and interests in contracts and our security interest,
if any, in the leased equipment. We will not transfer to the issuer any residual
interest which we may have in the equipment.
Each issuer will pledge its interest in the contracts and the security interests
received from us, except for excluded payments, to secure its series of notes.
The excluded payments will include such things as amounts paid by users to cover
taxes and insurance premiums.
Under each indenture the pledged assets will be:
- the contracts listed on a schedule we will deliver to the issuer and the
trustee;
- the right to payments made on the contracts, except the excluded payments;
- our security interest, if any, in the underlying equipment;
- amounts held in the accounts created under the indenture and earnings on the
accounts;
- recoveries on insurance policies and disposition of repossessed equipment;
- credit enhancement, if any, for the series; and
- the issuer's rights under the transfer and servicing agreement.
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<PAGE> 50
Additional assets may be pledged to secure a series of notes or a class of notes
of a series.
The pledged assets for your series will be specifically described in the
prospectus supplement prepared for your series.
THE CONTRACTS
We will transfer a portfolio of contracts and interests in contracts to each
issuer. The contracts will be primarily equipment leases but may also include
loan agreements for the financing of equipment.
The equipment leased or financed will include a wide variety of small-ticket
items. Typically the equipment will include office equipment, telecommunications
equipment, automotive repair equipment, surveillance equipment and furniture.
The users of the equipment and the obligors on the contracts 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.
The contracts which are pledged to your series of notes will be specifically
described in the related prospectus supplement.
THE NOTES
Each series of notes will be offered by a prospectus supplement which will set
forth the specific terms of the notes.
Each series will include two or more classes of notes.
The notes represent non-recourse asset-backed debt obligations of the issuer.
The notes of your series will be secured by and payable only from the portfolio
of contracts and other assets pledged to your series.
CREDIT AND CASH FLOW ENHANCEMENT
Credit enhancement, if any, for your series will be described in the related
prospectus supplement. Credit enhancement for a series or any class or classes
of notes may include any one or more of the following:
- subordination of one or more classes of notes to other classes of notes,
- reserve accounts,
- over-collateralization,
- letters of credit,
- credit or liquidity facilities,
- surety bonds,
- guaranteed investment contracts,
- swaps or other interest rate protection agreements,
- repurchase obligations,
- other agreements with respect to third party payments or other support, or
- cash deposits.
Any form of credit enhancement may have limitations and exclusions from
coverage, which will be described in the related prospectus supplement.
FEDERAL INCOME TAX MATTERS
Orrick, Herrington & Sutcliffe LLP, special tax counsel to Advanta Bank Corp.,
will issue an opinion with respect to federal income matters related to your
series of notes. The specific opinions to be delivered for your series are
described in the related prospectus supplement. For a discussion of federal tax
issues we refer you to "Federal Income Tax Consequences" in this prospectus.
ERISA CONSIDERATIONS
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. See "ERISA Considerations" in this prospectus and in the accompanying
prospectus supplement.
NOTE RATINGS
Any note offered by this prospectus and the accompanying prospectus supplement
will be rated in one
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<PAGE> 51
of the four highest rating categories by at least one nationally recognized
rating organization.
A rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn at any time by the assigning rating agency. See "Note
Ratings" in this prospectus.
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<PAGE> 52
RISK FACTORS
You should carefully consider the following risk factors and the risk factors in
the accompanying prospectus supplement before deciding to invest in the notes
offered by this prospectus and the accompanying prospectus supplement.
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 any series of
notes is unpredictable. The amount and timing
of principal payments on your notes will depend
on, among other things, the rate of payment on
the contracts pledged to your series. 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 defaulted
contracts;
- payments resulting from contracts
accelerated by the servicer;
- payments due to loss, theft, destruction
or other casualty; and
- repurchase of contracts 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
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
notes.
Be aware that you bear the risk of reinvesting
distributions resulting from payment of your
notes earlier than expected
SUBSERVICER'S POSSESSION OF
THE MAY
RESULT IN DELAYED CONTRACTS
PAYMENTS,
LOSSES OR ACCELERATED PAYMENTS Advanta Bank Corp. will service the Contracts
through a subservicing arrangement with our
affiliate, Advanta Business Services Corp.
Advanta Business Services will retain
possession of the contracts for each series.
The contracts will not be physically segregated
from other similar documents that are in the
possession of Advanta Business Services and
will not be stamped or otherwise marked to
reflect their transfer to the issuer or the
trustee.
If the subservicer, while in possession of the
contracts, sells or pledges and delivers them
to another party through fraud, negligence or
neglect and in violation of its agreements, the
transferee could acquire an interest in the
contracts and take priority over you. In such
an event, you may experience delays in payments
and losses on your investments.
Also, if the subservicer becomes insolvent or a
debtor in bankruptcy while in possession of the
contracts, competing claims to the
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<PAGE> 53
contracts may result. Even if unsuccessful,
these claims could result in losses to you or
result in an acceleration of the payment of
your 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 judgements. As a result,
the servicer may not be able to realize the
full amount due on the contracts.
Other factors that may affect the servicer's
ability to realize the full amount due on the
contracts include:
- for contracts relating to equipment that
originally cost $25,000 or less, no
financing statements will be filed to
perfect Advanta Bank Corp.'s security
interest or the issuer's or the trustee's
interest in the equipment against a user
who defaults in payment under the
contract; and
- for some contracts, Advanta Bank Corp. has
only -- and the issuer will acquire
only -- a contractual right to scheduled
payments under the contract. If the entity
that owns the rights in the contract not
acquired by Advanta Bank Corp. were to go
into bankruptcy, the timing or amount of
payments received by the issuer under that
contract could be adversely affected.
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 A user's obligation to make payments on a
contract is, in most cases, secured by a
security interest granted to Advanta Bank Corp.
in the related equipment. The security
interest, however, is not perfected unless a
UCC financing statement has been filed in the
appropriate state or local filing office.
Advanta Bank Corp. 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 most cases, been filed for
equipment that originally cost more than
$25,000
If the security interest is not perfected
another party (such as a creditor of the user)
may acquire rights in the equipment superior to
those of Advanta Bank Corp., your issuer and
the trustee for your series. This may adversely
affect the ability of the servicer to realize
on the equipment in the event of the user's
default, which may cause you to experience
delays in payments and losses on your
investment.
If any lease is a true lease, rather than a
financing lease, under applicable commercial
law, the originator rather than the user will
retain the ownership interest in the equipment.
This ownership interest and certain payments
made by a user relating to an ownership
interest in equipment will not be transferred
to your issuer or the trustee of your series.
If a conservator or receiver were appointed for
the originator, or if the originator were to
enter bankruptcy, the conservator or receiver
or the bankruptcy trustee
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<PAGE> 54
could exercise rights related to this ownership
interest that could terminate or otherwise
impair your rights in the related contracts. As
a result, you could experience delays in
payment or losses on your investment
IF THE PROMISSORY NOTES ARE
NOT
DELIVERED TO THE TRUSTEE, THE
SECURITY
INTEREST IN LOANS ARE NOT
PERFECTED The subservicer will hold any promissory notes
that could loans related to the contracts.
Because these promissory notes, will not be
held by the trustee, the issuer's 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.
IF THE TRANSFER OF CONTRACTS
WERE
HELD TO BE MERELY A GRANT OF A
SECURITY INTEREST, OTHER
INTERESTS MAY
HAVE PRIORITY OVER YOUR NOTES Advanta Bank Corp. will represent in each
transfer and servicing agreement that, except
with respect to excluded payments, the transfer
of the contracts to the issuer is either a sale
or the grant of a security interest in the
contracts. In order to protect the purchasers
of the notes, Advanta Bank Corp. has taken and
will take the necessary actions to ensure that,
if the transfer is determined by a court to be
a grant of a security interest and not an
absolute transfer to the series issuer, the
issuer will have a "first-priority perfected
security interest" in the contracts except for
liens permitted by the transfer and servicing
agreement. Regardless of these actions to
ensure the issuer a first-priority perfected
security interest, your interests could be
impaired:
- a tax, governmental or other nonconsensual
lien on Advanta Bank Corp.'s property
arising before the contracts and other
assets are transferred to the issuer may
have priority over the issuer's interests
in the contracts and other assets,
- if the FDIC were appointed as conservator
or receiver for Advanta Bank Corp., the
FDIC's administrative expenses may be paid
before you are paid,
- Advanta Bank Corp. and Advanta Business
Services Corp. each is permitted to
collect payments on contracts and other
assets and hold such collections for a
period of time before depositing such
amounts into the collection account; if
insolvency or similar proceedings were
commenced against Advanta Bank Corp. or
Advanta Business Services Corp.
or, in certain circumstances, if specified
time periods were to pass, the issuers may
not have a first-priority perfected
security interest in amounts held by
Advanta Bank Corp. or Advanta Business
Services Corp. and not deposited into the
collection account, which may result in a
loss to the noteholders.
See "Legal Matters Affecting the Contracts" in
this prospectus
IF A CONSERVATOR OR RECEIVER
IS
APPOINTED FOR THE BANK, ASSETS
COULD
BE SOLD AT A LOSS, PAYMENT MAY
BE
ACCELERATED, CORP. DELAYED OR
REDUCED AND PROTECTIONS
PROVIDED TO
NOTEHOLDERS MAY BE OVERRIDDEN The Federal Deposit Insurance Act, as amended
by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, provides that a
security interest granted by Advanta Bank in
the contracts and other assets would be
respected if:
- the transfer and servicing agreement
complies with the regulatory requirements
of the FDIA;
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<PAGE> 55
- the security interest granted under the
transfer and servicing agreement is
perfected before the FDIC is appointed as
conservator or receiver for Advanta Bank
Corp.; and
- the security interest is not taken in
contemplation of Advanta Bank Corp.'s
insolvency or with the intent to hinder,
delay or defraud Advanta Bank Corp. or its
creditors.
Opinions and policy statements issued by the
FDIC suggest that, because of the manner in
which these transactions are structured, the
FDIC would respect the security interest
granted by Advanta Bank Corp. in the contracts
and other assets. If the FDIC were to assert a
contrary position, however, payments of
principal and interest on the notes could be
delayed and possibly reduced. Furthermore, the
FDIC could:
- require the trustee to go through the
administrative claims procedure
established by the FDIC to obtain payments
on the notes;
- request a stay of any actions by the
trustee to enforce the transfer and
servicing agreement or the notes against
Advanta Bank Corp.; and
- repudiate the transfer and servicing
agreement and limit the claims of the
holders of the notes to their "actual
direct compensatory damages."
If the FDIC were to take any of these actions,
the amount payable to you could be lower than
the outstanding principal and accrued interest
on your notes thus resulting in losses to you.
The appointment of a conservator or receiver
for Advanta Bank Corp. could cause an early
payment of principal on your notes. Under the
terms of the indenture, the notes could be
accelerated, the trustee could be directed to
sell the contracts and other assets, and you
could have a loss if the sale of the assets
pledged for your series produced insufficient
amounts to pay the notes of your series in
full. However, the conservator or receiver for
Advanta Bank Corp. may have the power --
- regardless of the terms of the indenture,
(a) to delay any such procedures (b) to
prevent the acceleration of your notes or
(c) to prevent the early sale of the
pledged assets; or
- regardless of the trustee's decision or
the instructions of the noteholders to the
contrary, (a) to require the early sale of
the pledged assets or (b) to require
acceleration and prepayment of the notes.
In addition, if a conservator or receiver were
appointed for the servicer, the conservator or
receiver may have the power to prevent either
the trustee or the noteholders from appointing
a new servicer. See "Legal Matters Affecting
the Contracts."
INSOLVENCY OF ADVANTA BANK
CORP.
MAY RESULT IN AN INABILITY TO
REPURCHASE CONTRACTS We will make representations and warranties
regarding the contracts. In the event that a
representation or warranty concerning a
specific contract is breached and the breach is
not cured within a
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<PAGE> 56
specified time period and the value of the
contract is materially and adversely affected
by the breach, we will be required to
repurchase the contract from the series issuer.
If the FDIC were appointed as conservator or
receiver for Advanta Bank Corp., the trustee
may be unable to compel us to repurchase
contracts, and you could incur a loss on your
investment.
INSOLVENCY OF THE ISSUER COULD
REDUCE
OR DELAY YOUR PAYMENTS If the issuer were to become a debtor in a
bankruptcy case, delays in distributions to you
would be likely and you could incur a loss on
your investment. The issuer, however, has taken
steps to minimize the likelihood of its
bankruptcy.
DEFAULT OR INSOLVENCY OF USERS
MAY
REDUCE PAYMENTS TO YOU To the extent users default on the contracts,
including defaults resulting from 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 Your notes are debt of the issuer of your
series only. Your notes are secured by and
payable only from the assets pledged to your
series. If the contract payments and other
assets pledged to secure your notes are
insufficient to pay the notes of your series in
full, you have no rights to obtain payment from
Advanta Bank Corp. or any of its affiliates or
from any other issuer 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
satisfy amounts due on the contracts will be
the 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, we
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.
BOOK-ENTRY REGISTRATION WILL
RESULT
IN YOUR INABILITY TO EXERCISE
DIRECTLY
YOUR RIGHTS AS A NOTEHOLDER You will own only an indirect beneficial
interest in the notes. The notes will not be
registered in your name. 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 for your series, you will not be
recognized by the issuer 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. 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 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 principal will be
paid when expected or scheduled. These ratings
are based on the rating agencies' determination
of the value of the contracts, the
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<PAGE> 57
reliability of the payments on the contracts in
the portfolio and the credit enhancement, if
any.
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;
- 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.
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INTRODUCTION
Advanta Bank Corp. will, from time to time, create a new limited liability
company and transfer to the new limited liability company a portfolio of
contracts. The contracts will be primarily small-ticket equipment leases. Each
limited liability company will issue a series of notes payable from and secured
by the specific portfolio of contracts received from the bank.
Each series of notes will be issued with two or more classes of 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.
References in this prospectus to "we," "us" or "our" are references to
Advanta Bank Corp., the originator and servicer of the contracts.
Each series of notes will be issued under a separate indenture between the
issuer of that series to the trustee named for that series. The trustee for your
series will be named in the related prospectus supplement. The specific terms of
each series of notes will be set forth in the related indenture and described in
the related prospectus supplement.
In connection with the creation of each issuer and the preparation for the
issuance of a series of notes, the bank will enter into a transfer and servicing
agreement with the issuer. Under the transfer and servicing agreement the bank
will transfer the portfolio of contracts and associated rights to the issuer and
the bank will agree to service the portfolio on behalf of the issuer.
THE ISSUERS
Each issuer will be a single-member Delaware limited liability company.
Advanta Bank Corp. will be the sole member and the managing member of each
issuer.
Each issuer will operate under the terms of its certificate of formation
and its limited liability company agreement. The limited liability agreement
will limit the activities in which the issuer may engage. Under the agreement
the issuer will not engage in any activity other than:
- acquiring, holding and managing the contracts and other assets
transferred from Advanta Bank Corp.;
- issuing and making payments on the notes; and
- engaging in other activities that are necessary, suitable or convenient
to accomplish the above.
Each Issuer will be prohibited from incurring any debt, issuing any obligations,
incurring any liabilities, except in connection with the issuance of the notes
and will be prohibited from filing for bankruptcy without the approval of the
sole managing member [and the approval of an independent non-economic member.]
THE ORIGINATOR AND SERVICER
Advanta Bank Corp. is a Utah industrial loan corporation the deposits of
which are insured by the Federal Deposit Insurance Corporation. Advanta Bank
Corp. is a wholly-owned subsidiary of Advanta Corp. Advanta Corp. is a
publicly-traded company based in Spring House, Pennsylvania and listed on the
NASDAQ as ADVNA and ADVNB.
Advanta Bank Corp.'s principal office is located in Draper, Utah.
Advanta Bank Corp., on October 1, 1998, began the origination of equipment
leases and financing arrangements. Prior to that date, Advanta Business Services
Corp., a wholly-owned subsidiary of Advanta Leasing Holding Corp., had been the
entity within the Advanta corporate structure primarily involved in the
organization of equipment leases and financing arrangements. Advanta Leasing
Holding Corp. is also a wholly-owned subsidiary of Advanta Corp.
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Advanta Bank Corp., has since October 1, 1998, originated and acquired
equipment leases and other equipment financing arrangements and will, as part of
its securitization program, create each of the issuers and transfer to each
issuer a portfolio of contracts. The contracts and other rights will be
transferred to the issuers under the terms of a separate transfer and servicing
agreements. Under the transfer and servicing agreements, Advanta Bank Corp. will
agree to service the contracts transferred to the issuers.
Advanta Bank Corp. will be obligated to service the contracts transferred
to the various issuers. The bank will carry out its servicing responsibilities
through a subservicing arrangement with Advanta Business Services Corp.
THE PLEDGED ASSETS
PLEDGED ASSETS
The assets pledged by the issuer to the trustee to secure a series of notes
are the "PLEDGED ASSETS" and will consist of the issuer's right title and
interest in:
- contracts including leases and loans included on a list delivered to the
trustee and specifically described in the related prospectus supplement;
the contracts included in a portfolio for a series will provide financing
for the purchase or lease of a variety of small-ticket equipment items
for businesses; in most cases, the equipment will include office
equipment such as computers, copy machines, facsimile machines, printers
and telephones, and may include telecommunications equipment, automotive
repair equipment, surveillance equipment and furniture; we will not
transfer to the issuers our residual interest in the equipment and, the
assets pledged by the issuers will not include the residual interest in
the equipment;
- monies, other than excluded payments, due or to become due on the
contracts after the opening of business on the cut-off date for the
series;
- the security interest in the equipment, if any, granted by the user to
secure payment under the contract and any other security or collateral
given by the user to secure payment under the contract;
- all amounts in the accounts created under the indenture and the earnings
on amounts in the accounts; the accounts may vary from one series to
another, but, in most series, will include at least, a collection account
and a reserve account;
- recoveries of amounts following a default on a contract; such recoveries
may be the result of repossession and disposition of the equipment, the
foreclosure and realization on any other security provided for the
contract or the proceeds of insurance;
- credit enhancement, if any, provided for the series; and the
- the issuer's rights in the transfer and servicing agreement.
EXCLUDED PAYMENTS
The pledged assets will not include excluded payments made by the users.
"EXCLUDED PAYMENTS" are:
- late payment charges if the bank has made a servicer advance to cover the
late payment;
- payments to cover taxes;
- payments to cover insurance premiums;
- payments made to cover amounts which had become due but had not been paid
prior to the cut-off date for the series; and
- [other incidental amounts paid by the user.]
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RESIDUAL INTEREST RETAINED BY BANK
The bank will not transfer its residual interest in the equipment to the
issuer. Whether such residual interests arise or are created under the contracts
or otherwise, the bank will retain the residual interests and will not transfer
such interests to the issuers.
The term "RESIDUAL INTEREST" as used in this prospectus and in the
prospectus supplement means the residual receipts and the right to receive and
retain the residual receipts. The "RESIDUAL RECEIPTS" are all residual proceeds
received by the servicer, including proceeds of the sale or re-lease of the
equipment if the user does not purchase the equipment at the end of the
contract, any amounts collected by the servicer as judgments against a user or
others related to the failure to pay any required amounts under the 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 the
contract in accordance with the servicer's servicing standards.
THE CONTRACTS
General. The portfolios of contracts transferred to the issuers will
include leases and loans originated or acquired by the bank. Loans may include
installment sale contracts. The portion of the contracts in the portfolio
pledged to your notes which is leases and the portion which is loans will be
stated in the related prospectus supplement.
The equipment subject to the contracts will primarily be small-ticket
items. A detailed description of the equipment subject to the contracts pledged
to your series of notes will be contained in the related prospectus supplement.
The obligors under the contracts are referred to in this prospectus and the
prospectus supplement as the "USERS." The users are businesses and business
owners in the United States.
For some of the contracts, Advanta Bank Corp. does not own the entire
contract, but only the right to receive periodic payments under the contract. At
the end of the term of those contracts, so long as the amounts due under the
contract have been paid in full, Advanta Bank Corp. has no further rights under
the contract or in the equipment subject to that contract. With respect to those
contracts, when included in a portfolio transferred to an issuer, Advanta Bank
Corp. will transfer to the issuer only the limited rights it has in the
contract.
Characteristics. The contracts originated and acquired by Advanta Bank
Corp. are primarily in the form of leases; however, a small percentage of the
contracts are in the form of loans.
The contracts which are in the form of lease 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 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 equipment
vendor, or otherwise state that the lessor has no obligation regarding the
equipment and any problems with the equipment are the responsibility of the
user.
Contracts in the form of leases cannot be cancelled, at the option of the
user for any reason.
Some of the contracts which are in the form of loans do permit prepayment
at the option of the user.
Under the terms of the transfer and servicing agreement, the servicer may
allow prepayment of a contract, whether it is in the form of a lease or a loan,
provided the user pays an amount at least equal to the Prepayment Amount.
If a user requests an upgrade or trade-in of equipment, the servicer may
permit a prepayment of the lease, remove the contract from the pledged assets
and deposit the Prepayment Amount received from the user into the collection
account created under the indenture.
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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 in accordance with 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.
The "CONTRACT PRINCIPAL BALANCE" of any contract on any date means, the
present value of the scheduled payments to become due on the contract on and
after that date, excluding scheduled payments previously due and unpaid,
discounted monthly at one-twelfth of the applicable discount rate. A defaulted
contract has a Contract Principal Balance of $0. The applicable discount rate
for a series will be set forth in the related prospectus supplement.
The scheduled payments for any contract are the periodic rental or loan
payments, not including any insurance or tax amounts set forth, in the contract
and due from the user.
Some of the contracts permit the user to assign or sublease the equipment
if the servicer consents to the assignee or sublessee in accordance with the
terms of that contract. Despite any assignment or sublease, the original user
remains liable as the lessee under that contract and the contract remains part
of the pledged assets.
The leases are triple-net leases, meaning that the user assumes all
responsibility with respect to the equipment which secures the lease, including
the obligation to pay all costs relating to its operation, maintenance, repair
and insurance.
Purchase Options. 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. If a user under a
contract with a purchase option does not exercise its purchase option, the user
is required either to continue the lease of the equipment on a month-to-month
basis or to return the equipment to the service.
The purchase option payments are either (i) an option to purchase the
equipment at the end of the term of the lease for $1.00, (iii) an option to
purchase the equipment for fair market value at the end of the term of the lease
or (iii) an option to purchase the equipment for a stated amount. The prospectus
supplement for your series will contain a table showing the distribution of the
contracts by purchase option.
Amounts paid by the users to exercise the option to purchase the equipment
constitute residual receipts and will be retained by Advanta Bank Corp., will
not be transferred to the issuer and will not be available to pay the notes.
Likewise, if the user elects to retain the equipment and continue to make lease
payments on a month-to-month basis after the stated term of the lease, such
ongoing lease payments will constitute residual receipts and will not be
transferred to the issuer and will not be available to pay the notes.
Contract Files. Under the transfer and servicing agreement, we will
transfer to the issuer the contract files for each of the contracts transferred.
The contract files include the following documents:
- the executed original counterparts of the contract;
- a copy of any related agreement between the originator and a broker
pursuant to which the originator acquired the contracts;
- copies of any documents, which may be in imaging form or on the
servicer's computerized information system, 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 along with any amendments, assignments and continuations 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.
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To facilitate servicing, the contract files will not be delivered to the
issuer or to the trustee, but will be held by the subservicer. If the
subservicer, while in possession of the contracts, sells or pledges and delivers
them to another party, in violation of its agreements the other party could
acquire an interest in the contracts and take priority over you. Also, if the
subservicer become insolvent while in possession of the contracts, competing
claims to ownership or security interest in the contracts may result. See "Risk
Factors -- Subservicer's Possession of the contracts May result in Delayed
Payments, Losses or Accelerated Payments" in this prospectus.
SECURITY INTEREST IN THE EQUIPMENT
The bank will transfer to the issuer the security interest in the
equipment, if any, granted by the user to the bank to secure payment of amounts
due on the contract. The issuer will pledge the security interests to secure the
notes. If a user defaults in payment of amounts due on the contract, the
servicer may foreclose on the equipment and apply the proceeds to the amounts
due under the contract.
The bank does not file UCC financing statements to protect its security
interest in equipment unless the equipment has an original cost in excess of
$25,000. As a result, it is possible that another creditor of the user could
obtain a security interest in the equipment superior to the security interest
held by the issuer.
See the caption "Legal Matters Affecting the Contracts -- Security Interest
Considerations" in this prospectus.
SERIES ACCOUNTS
Each indenture will provide for the creation of accounts held by the
trustee for the benefit of the holders of the notes of that series. Each
indenture will provide for a collection account into which collections of
contract payments will be deposited and from which payments on the notes will be
made.
The series accounts may also include a reserve account and such other
accounts as are described in the related prospectus supplement.
RECOVERIES
All amounts received or recovered by the servicer to be applied against
amounts due on a defaulted contract are included in the pledged assets. The
recoveries may include:
- amounts received from the sale or other disposition of the equipment or
the sale of the defaulted contract;
- insurance proceeds received as a result of the damage or destruction of
equipment; or
- any other payments made by or on behalf of the defaulting user, including
any amounts paid from a security deposit applied by the servicer as a
recovery.
TRANSFER AND ADMINISTRATION AGREEMENT
We will enter into a separate transfer and servicing agreement for each
series of notes. Under the terms of the transfer and servicing agreement, we
will make representations concerning the contracts. A material breach of the
representations and warranties concerning a contract, may result in an
obligation on our part to repurchase that contract.
Under the transfer and servicing agreement, we will also agree to service
the contracts on behalf of the issuer.
The issuer will pledge its rights under the transfer and servicing
agreement to the trustee to secure payment of the notes. The rights pledged will
include the right to require us to repurchase contracts upon a material breach
of the representations and warranties.
See the caption "The Transaction Documents -- Transfer and Servicing
Agreement" in this prospectus.
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ADVANTA BANK CORP.'S
UNDERWRITING, ORIGINATION AND SERVICING PRACTICES
CONTRACT ORIGINATION
Prior to October 1, 1998, Advanta Business Services was in the business of
originating and servicing equipment leases. As of October 1, 1998, Advanta
Business Services ceased originating equipment leases and Advanta Bank Corp.
began originating equipment leases. Advanta Business Services continues to
service the leases which it originated.
Advanta Bank Corp. services the equipment leases which it originates or
acquires through a subservicing agreement with Advanta Business Services.
Advanta Business Services also provides origination services to the bank.
Contracts are either:
- originated in the name of Advanta Bank Corp. directly or through a vendor
or broker;
- originated with funding by Advanta Bank Corp. through a vendor or broker
which vendor or broker assigns the contract to Advanta Bank Corp. but
does not reveal the name of the originator to the user; or
- originated by another funding source and purchased by Advanta Bank Corp.
Advanta Bank Corp. originates leases through marketing programs, vendors,
brokers and bulk or portfolio purchases. Advanta Bank Corp. establishes both
formal and informal relationships with equipment vendors. As a result of
previous transactions with the bank or Advanta Business Services, vendors may
recommend that prospective customers make a credit application to Advanta Bank
Corp. for financing. A more formal program between Advanta Bank Corp. 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 Bank
Corp.
Advanta Bank Corp. also originates contracts through the use of brokers. In
a typical broker transaction, the broker refers potential customers to the bank,
and the broker is paid a referral fee. Contracts originated under the broker
program are reviewed in a manner consistent with Advanta Bank Corp.'s
then-existing policies and procedures.
In a majority of these programs, the equipment is leased by Advanta Bank
Corp. and the bank bills the user and collects payments in its own name.
For some select vendor and broker programs, Advanta Bank Corp. bills and
collects payments in the vendor's name or the broker's name so that the user is
not aware that Advanta Bank Corp. is a party to the transaction. Under this
program, once a contract becomes 61 days past due, Advanta Bank Corp. is then
immediately identified to the user.
Vendors or brokers may choose to use Advanta Bank Corp.'s standard contract
or they may use their own contract. In either case, the credit approval remains
with Advanta Bank Corp. Contract documents for all programs are either identical
to Advanta Bank Corp.'s standard lease documents or are reviewed by the legal
staff of Advanta Bank Corp. to insure substantial compliance with the bank's
standard terms.
In instances where Advanta Bank Corp. originates a contract or acquires a
contract but does not own the equipment, it will, if the initial value of the
equipment exceeds $25,000, obtain a perfected security interest in the
equipment.
Advanta Bank Corp. also purchases 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 contracts to be acquired are reviewed and approved by the
Advanta Bank Corp. using pre-determined guidelines. For each potential bulk or
portfolio purchase, Advanta Bank Corp. is able to accept or reject individual
contracts.
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CREDIT REVIEW
In connection with the origination or acquisition of contracts, Advanta
Bank Corp. 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 a 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 Bank Corp., 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 for Advanta Bank Corp. 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 of the bank. The overall credit due diligence process is supported by
a comprehensive set of policies and procedures that outline Advanta Bank Corp.'s
credit processes and philosophies.
Advanta Bank Corp.'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 bank's credit department has staff dedicated to perform
reviews of potential new vendors and brokers to ensure compliance with the
bank's overall credit policies and procedures. In reviewing new relationships
with vendors and brokers, Advanta Bank Corp. considers, among other things,
length of 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
the bank through its subservicing arrangement with Advanta Business Services.
The Advanta Business Services servicing staff is located in Voorhees, New
Jersey.
Each contract has a provision for assessing late charges in the event that
a user fails to make a payment on the contract on the due date. Telephone
contact is normally initiated when an account is twenty days past due. All
collection activity is entered into a computerized collection system. Collectors
input 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 Bank Corp. 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 Bank Corp. 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 Bank Corp. as a
party to the transaction, in those situations, the vendor is notified).
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- 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, the servicer 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 taking into consideration the equipment value and the
current financial strength of the user.
If collection activities do not rectify the account, the bank typically
charges off the account at 121 days past due. An account may be charged off
prior to 121 days if it is determined that there will be no further payments
made.
At the time of charge-off, the account is turned over to an 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 files for bankruptcy, procedures are implemented to
follow up with the user to determine whether the user intends to assume or
reject the contract. In addition, the bank 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.
MATTERS RELATED TO ADVANTA CORP.
On January 22, 1999, Fleet Financial Group, Inc. and some of its affiliates
filed a lawsuit 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 lawsuit focuses on 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., Advanta Bank
Corp. or Advanta Business Services.
The ability of Advanta Corp.'s subsidiaries, including Advanta Bank Corp.,
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 pledged assets and the notes, primarily consist of Advanta Bank
Corp.'s obligation to repurchase contracts if there has been a material breach
of the representations and warranties of the bank set forth in the transfer and
servicing agreement as well as the obligations of the bank to service the
contracts. 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.
REMOVAL OF CONTRACTS
BREACH OF REPRESENTATIONS AND WARRANTIES
Under the terms of the transfer and servicing agreement and the indenture,
upon discovery by the issuer, the trustee or the servicer of a breach of any of
the representations or warranties of the originator set forth in the transfer
and servicing agreement, including, primarily, that the contracts, as of the
closing date are not eligible contracts, the party discovering a breach shall
give prompt written notice to the other parties. As of the
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last day of the calendar month in which the breach was discovered or, if later,
the last day of the calendar month in which the servicer received the notice of
the breach, or, at the servicer's and the issuer's election, any earlier date,
unless the breach has been waived or cured prior to such time, the issuer shall
remove the contract which is the subject of the breach from the trust estate. In
consideration for the removal of such contract, the issuer will be obligated to
deposit the prepayment amount for a contract which is the subject of a breach
into the collection account prior to the next payment date. Under the transfer
and servicing agreement, the originator will be obligated to repurchase from the
issuer a contract which is the subject of a breach. See the caption "The
Transaction Documents -- Transfer and Servicing Agreement" in this prospectus.
DEFAULTED CONTRACTS
In addition, the issuer may, at its option, remove defaulted contracts from
the trust estate. The aggregate amount of defaulted contracts which the issuer
may remove from the trust estate for any series shall not, however, exceed
[ %] of the initial aggregate Contract Principal Balance for that series.
The issuer shall have no obligation to remove any defaulted contract. In
determining the amount of a defaulted contract which is removed, the amount of a
defaulted contract will equal the Contract Principal Balance of the defaulted
contract calculated immediately before the classification as a defaulted
contract. Upon removal of a defaulted contract from the trust estate, the issuer
shall pay the Prepayment Amount to the servicer for deposit into the collection
account.
With respect to contracts that are defaulted contracts, at the request of
the issuer, the trustee will release the lien of the indenture with respect to
the defaulted contracts. The issuer may then sell the contracts provided that
any proceeds of the sale on any defaulted contract will be treated as recoveries
and deposited into the collection account.
A contract is determined to be a "DEFAULTED CONTRACT" when:
- the user is contractually delinquent for 121 days or more with respect to
a scheduled payment or any part of a scheduled payment, without regard to
any servicer advances or the application of any security deposit or
- as to which the servicer has determined in accordance with its customary
servicing practices that eventual payment of the remaining scheduled
payment under the contract is unlikely or
- the contract has been rejected in a bankruptcy proceeding.
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 minimal, it will
dispose of the equipment in accordance with its standard procedures.
UPGRADES AND TRADE-INS
In the event that a user requests an upgrade or trade-in of equipment, the
issuer may remove the equipment and the related contract from the trust estate
during any month by remitting the applicable Prepayment Amount received from the
user to the trustee for deposit in the collection account on or prior to the
payment in the next month date relating to such collection period.
WEIGHTED AVERAGE LIFE OF THE NOTES
The weighted average life of the notes of any series will generally be
influenced by the rate at which the principal balances of the related contracts
are paid and the rate at which such payments are paid to the noteholders. For
this purpose, the prepayments includes prepayments in full, partial prepayments,
liquidations
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due to default and receipts of proceeds from physical damage and term life
insurance policies and the reacquisition of contracts by the bank.
Some contracts in the form of loans are prepayable. Contracts in the form
of leases are not prepayable at the option of the user, however, the servicer
may allow a prepayment. Each prepayment will shorten the weighted average
remaining term of the contracts and the weighted average life of the related
notes.
The rate of prepayments on the contracts is influenced by a variety of
economic, financial, climatic and other factors. In addition, under certain
circumstances, the bank will be obligated to reacquire contracts pursuant to the
related transfer and servicing agreement, as a result of breaches of
representations and warranties, and the servicer will be obligated to purchase
contracts pursuant to the related transfer and servicing agreement, as a result
of breaches of certain covenants. See "Description of the Transaction
Documents -- Transfer and Servicing Agreement." On the other hand, the payment
schedule under a contract may be extended or revised by the servicer under
certain circumstances. An extension or revision may lengthen the weighted
average life of the notes.
In light of the above considerations, there can be no assurance as to the
amount of principal payments to be made on the notes on a given series on a
given distribution date. The amount will depend, in part, on the amount of
principal collected on the related contracts during the applicable collection
period. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of contracts will be borne entirely by the noteholders of a given
series. Such reinvestment risks may include the risk that interest rates are
lower at the time the holders receive payments on the notes than interest rates
would otherwise have been had the prepayments not been made or had the
prepayments been made at a different time.
The related prospectus supplement may set forth additional information
about the maturity and prepayment considerations applicable to the particular
contracts and any class of notes of the related series.
USE OF PROCEEDS
The net proceeds from the sale of the notes of a series will be applied by
the issuer (i) to pay expenses related to the series, (ii) to acquire contracts
from the bank and (iii) to make the initial deposit, if any, into the reserve
account.
DESCRIPTION OF THE NOTES
GENERAL
Each series of notes will be issued pursuant to an indenture. The indenture
will be substantively in the form of the indenture filed as an exhibit to the
registration statement of which this prospectus is a part.
Each series will be issued with two or more classes of notes and each class
may be divided into one or more subclasses each with its own payment terms and
priority.
The notes of each series will be available only in book-entry form. The
registered owners of the notes are those entities registered as the owner on the
registration books maintained by the trustee. Unless and until definitive notes
are issued under the limited circumstances described in the prospectus
supplement, any references to actions taken by noteholders or holders refer to
actions taken by The Depositary Trust Company from its participants'
instructions, and all references in this prospectus or the prospectus supplement
to distributions, notices, reports and statements to noteholders or holders
shall refer to distributions, notices, reports and statements to DTC or its
designee Cede & Co., as the registered holder of the book-entry notes.
The notes of each series 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 can be issued in another denomination.
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INTEREST RATES
Each class of notes may bear interest at a fixed rate per annum or at a
variable or adjustable rate per annum, as described in the prospectus
supplement.
Each class of fixed rate notes will bear interest at the applicable per
annum interest rate specified in the related prospectus supplement. Interest on
each class of fixed rate notes will be computed on the basis of a 360-day year
of twelve 30-day months or such other basis as may be set forth in the
prospectus supplement.
Each class of floating rate notes will bear interest for each interest
period at a rate per annum determined by reference to an interest rate basis,
plus or minus the spread, if any, or multiplied by a spread multiplier, if any,
in each case as specified in the related prospectus supplement. The spread is
the number of basis points that may be specified in the each prospectus
supplement as being applicable to a class. The spread multiplier is the
percentage that may be specified in the prospectus supplement as being
applicable to a class. Interest on each class of floating rate notes will be
computed on the basis of a actual days elapsed and a year of 360 days.
BOOK-ENTRY REGISTRATION
The beneficial owners of the notes may hold their interests in the United
States through DTC or in Europe through Cedelbank or Euroclear if they are
participants of such systems, or indirectly through organizations that are
participants in the systems.
Cede & Co., 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, 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 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
DTC participant, either directly or indirectly.
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 ISSUER MAKES
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 in this
prospectus) and Euroclear participants (as defined in this prospectus) 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 European time deadlines. 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.
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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 each 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 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 issuer that it will take any action permitted to be
taken by a holder under an indenture only at the direction of one or more
participants to whose account with DTC the notes are credited. Additionally, DTC
has advised the issuer 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, is incorporated under the laws of Luxembourg as
a professional depository. Cedelbank holds securities for its participating
organizations and facilitates the clearance and settlement of securities
transactions between Cedelbank customers through electronic book-entry changes
in accounts of Cedelbank customers, thus 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.
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Euroclear was created in 1968 to hold securities for participants of the
Euroclear System 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 is operated by the Brussels, Belgium
office of Morgan Guaranty Trust Company of New York as the Euroclear Operator,
under contract with Euroclear Clearance System S.C., a Belgian cooperative
corporation. 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 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.
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 on 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 an
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.
DEFINITIVE NOTES
The notes of a series will be issued in fully registered, authenticated
form to beneficial owners or their nominees, rather than to DTC or its nominee,
only if
- the issuer advises the trustee in writing that DTC is no longer willing
or able to discharge properly its responsibilities as depository, and the
trustee or the issuer are unable to locate a qualified successor or
- the issuer at its option elects to terminate the book-entry system
through DTC.
If one of the events described in the immediately preceding paragraph
occurs, the trustee will be required to notify all beneficial owners through DTC
of the availability of definitive notes. Upon surrender by DTC of the
certificate representing the notes of that series and instructions for
re-registration, the trustee will issue the definitive notes. The trustee will
recognize the holders of the definitive notes as holders under each indenture.
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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.
If definitive notes are distributed to beneficial owners, 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 each
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, the final payment on any note, whether the definitive
notes or the note for the class registered in the name of Cede & Co. 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.
CREDIT AND CASH FLOW ENHANCEMENT
The amounts and types of credit enhancement arrangements, if any, and the
provider of an enhancement, if applicable, with respect to a class of notes of a
series will be set forth in the related prospectus supplement. If and to the
extent provided in the prospectus supplement, credit enhancement may be in the
form of:
- subordination of one or more classes of notes,
- reserve accounts,
- over-collateralization,
- letters of credit,
- credit or liquidity facilities,
- surety bonds,
- guaranteed investment contracts,
- swaps or other interest rate protection agreements,
- repurchase obligations,
- other agreements with respect to third party payments or other support or
- cash deposits.
If specified in the prospectus supplement, credit enhancement for a class of
notes may cover one or more other classes of notes of the same series, and
credit enhancement for a series of notes may cover one or more other series of
notes. In addition, if specified in a prospectus supplement, credit enhancement
for one or more classes of notes of a series may cover all or a portion of the
outstanding amount of the classes or may cover losses incurred from all or a
portion of the related contracts.
The presence of a reserve account and other forms of credit enhancement for
the benefit of all or any portion of any class or series of notes is intended to
enhance the likelihood of receipt by the noteholders of a class or series of the
full amount of principal and interest due thereon and to decrease the likelihood
that the noteholders will experience losses. The credit enhancement will not
provide protection against all risks of loss and will not guarantee repayment of
the entire principal balance and interest thereon. If losses occur which exceed
the amount covered by any credit enhancement or which are not covered by any
credit enhancement, noteholders of any class or series will bear their allocable
share of deficiencies. In addition, if a form of credit enhancement covers more
than one series of notes, noteholders of any series will be subject to the risk
that credit enhancement will be exhausted by the claims of noteholders of
another series.
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If provided in the prospectus supplement, the issuer may replace the credit
enhancement for any class of notes with another form of credit enhancement
without the consent of noteholders, provided the applicable rating agencies
confirm in writing that substitution will not result in the reduction or
withdrawal of the rating of a class of notes or any other class of notes of the
series.
THE TRANSACTION DOCUMENTS
The transaction documents for each series will include:
- the transfer and servicing agreement which will be between the bank as
originator and servicer and the issuer for that series and
- the indenture which will be between the issuer as issuer of the notes and
the trustee for the series.
The trustee for a series will be named and described in the related
prospectus supplement.
A form of the transfer and servicing agreement and a form of the indenture
have been filed as exhibits to the registration statement of which this
prospectus forms a part. The following summaries do not purport to be complete
and are subject to and are qualified in their entirety by reference to the
applicable provisions of the transaction documents.
TRANSFER AND SERVICING AGREEMENT
Transfer to the Issuer. Under the transfer and servicing agreement, the
bank will transfer, assign, set over, contribute, quitclaim and otherwise convey
to the issuer all of the bank's right, title and interest in, to and under all
of the conveyed assets and all monies due or to become due in respect of the
conveyed assets.
The conveyed assets as described in the transfer and servicing agreement
will be all accounts, general intangibles, instruments, chattel paper,
documents, money, letters of credit, advices of credit, deposit accounts,
certificates of deposit, investment property, goods and other property
consisting of, arising from or related to any of the following: (i) the
contracts listed on a list of contracts delivered to the trustee and all amounts
due or to become due thereunder but excluding the bank's residual interests in
the equipment subject to such contracts, (ii) all collections and proceeds of
the contracts and related security after the cut-off date for the series
including scheduled payments under the contracts, prepayments, recoveries,
investment earnings on accounts held by the trustee and insurance proceeds
received by the servicer, the trustee or the issuer, (iii) all of the bank's
right, title and interest in, to and under the security associated with the
contracts, (iv) all balances, instruments, monies, securities, investment
property or other property received or held from time to time by the servicer
and representing collections on the contracts received after the series cut-off
date and (vii) all proceeds of the foregoing.
The transfer and servicing agreement will provide that the assets conveyed
to the issuer do not include the bank's residual interest in the equipment.
Representations Concerning the Contracts. In each transfer and servicing
agreement, the bank, as originator of the contracts, will represent and warrant,
that for each contract transferred under that agreement, on the closing date for
that series or, where indicated, the cut-off date for that series, the following
are true:
- The contract is with an obligor whose billing address is in the United
States or its territories and possessions and requires all payments under
the contract are 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
possessions or any political subdivision of the United States and has its
chief executive office in the United States or its territories or
possessions;
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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 Bank Corp. and has not been restructured at
any time when the 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 violate any applicable federal, state and local
laws, and regulations under any laws;
- The contract satisfies in all material respects all applicable
requirements of the credit and collection policy of Advanta Bank Corp.;
- As of each 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-cancelable;
- 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,
for such purposes, adverse claims do not include claims for federal,
state, municipal or other local taxes if the taxes are not at the time be
due and payable or if the originator shall concurrently be contesting the
validity of the claim in good faith by appropriate proceedings that have
stayed enforcement of the claim and shall have set aside on its books
adequate reserves;
- 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 Bank Corp.;
- The contract is in substantially the form of one of the standard form
contracts that Advanta Bank Corp. uses or a form reviewed and accepted by
Advanta Bank Corp.;
- 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 in the contract 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;
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- 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 relates to a piece of equipment which is located in the
United States of America, its territories or possessions;
- As of each cut-off date, the contract, when aggregated with the sum of
the Contract Principal Balances of all contracts in the portfolio for
that series and acquired by the originator or its affiliates from the
same single broker or vendor, shall not exceed [ %] of the aggregate
contract principal balance of that series at that time;
- The contract is not a consumer lease;
- No adverse selection was used in selecting the contract for transfer to
the issuer;
- 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 an interest in the contract) to the issuer and the pledge to
the trustee have been made in all appropriate jurisdictions.
Additional representations, if any, relating to the contracts transferred
for a series will be described in the related prospectus supplement.
If the originator breaches any of the representations and warranties listed
above and such breach has not been cured by the last day of the second -- or if
the originator elects, the first-month following the discovery by or notice to
the originator of such breach, the originator will reacquire any contract
materially and adversely affect by such breach from the related issuer. The
originator will reacquire the affected contract at the Prepayment Amount. The
reacquisition obligation will constitute the sole remedy available to the
noteholders, the trustee and issuer for a breach of the originator's
representations and warranties.
Servicing. Under the transfer and servicing agreement, the servicer, as
agent for the issuer, will manage, service, administer and make collections on
the contracts with reasonable care, using that degree of skill and attention
that the servicer exercises with respect to all comparable receivables that it
services for itself or others. The servicer's duties will include calculating,
billing, collection and posting of all payments, responding to inquiries of
users, investigating delinquencies, accounting for collections, and furnishing
monthly and annual statements to the trustee.
The transfer and servicing agreement will provide that the servicer shall
follow its customary standards, policies and procedures in performing its duties
as servicer. Without limiting the generality of the foregoing, the servicer will
be authorized and empowered to execute and deliver, on behalf of itself, the
issuer, the trustee and the noteholders or any of them, any and all instruments
of satisfaction or cancellation, or partial or full release or discharge, and
all other comparable instruments, with respect to the contracts or the related
equipment. If the servicer commences a legal proceeding to enforce the terms of
a contract, the issuer shall be deemed to have automatically assigned, solely
for the purpose of collection, such contract to the servicer. If in any
enforcement suit or legal proceeding it shall be held that the servicer may not
enforce a contract on the ground that it shall not be a real party in interest
or a holder entitled to enforce the contract, the issuer shall, at the
servicer's expense and direction, take steps to enforce the contract, including
bringing suit in its name or the name of the trustee or the noteholders.
The servicer will agree to make reasonable efforts to collect all payments
called for under the terms and provisions of the contracts as and when the
payments become due and will agree to follow such collection procedures as it
follows with respect to all comparable receivables that it services for itself
or others.
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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.
If the servicer makes a servicer advance, the indenture provides that, in
the event that the servicer determines that any servicer advance previously made
is nonrecoverable, the trustee shall draw on the collection account to repay the
servicer advance to the servicer as a first priority and before payment is made
to noteholders.
Rebates, Refunds, Modifications, Payments from Third Parties. The servicer
will be permitted to 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.
However, 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 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 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.
ACCOUNTS
For each series, the servicer will establish and maintain at the office of
the trustee one or more accounts, designated as the collection account or
collection accounts for that series. The collection accounts shall be in the
name of the trustee on behalf of the noteholders of that series and payments
received on the contracts, to the extent of the collections pledged to pay the
notes, will be deposited by the servicer into the collection account.
Other series accounts may also be established for any series and will be
described in the related prospectus supplement.
Funds in the collection account and in any other series accounts described
in the transfer and servicing agreement shall be invested as provided in the
transfer and servicing agreement in eligible investments described in the
transfer and servicing agreement. Eligible investments are generally limited to
investments acceptable to the rating agencies rating the series of notes as
being consistent with the ratings of the notes of that series. Except as
described below, eligible investments are limited to obligations or securities
that mature on or before the business day preceding the next payment date on the
notes of that series. Funds on deposit in the series accounts may be invested in
eligible investment of the trustee which mature so that the funds are available
on the next payment date. Also, to the extent permitted by the rating agencies
and provided in the transfer and servicing agreement, fund in any series account
may be invested in eligible investment that will not mature prior to the next
payment date and will not be sold to meet any shortfalls. As a result, the
amount of cash in any series account at any time available for withdrawal may be
less than the balance of such series account at the time. If the amount required
to be withdrawn from any series account for a distribution date , as described
in the related prospectus supplement, exceeds the amount of cash in that
account, a temporary shortfall in the amounts distributed to the noteholders
could result, which could, in turn, increase the average life of the related
notes. Investment earnings on funds deposited in the series accounts, net of
losses and investment expenses will be deposited in the related collection
account on each payment date and be treated as collection of interest on the
related contracts.
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The series accounts will be maintained as Eligible Deposit Accounts.
"ELIGIBLE DEPOSIT ACCOUNT" means either
- a segregated account with an eligible institution or
- a segregated trust account with the corporate trust department of a
depository institution organized under the laws of the United States or
any one of the states thereof or the District of Columbia or any domestic
branch of a foreign bank, having corporate trust powers and acting as
trustee for funds deposited in the account, so long as any of the
securities of the depository institution has an investment grade credit
rating.
An eligible institution is
- the corporate trust department of the trustee, so long as it is a paying
agent under the indenture,
- another institution acceptable to the credit rating agencies maintaining
a rating on the series of notes issued under the indenture, or
- a depository institution, other than the servicer and its affiliates
organized under the laws of the United States or any one of the states
thereof or the District of Columbia or any domestic branch of a foreign
bank
(i)(A) which has either a long-term unsecured debt rating of in the
highest rating category of the rating agencies rating the notes of the
series or a short-term unsecured debt rating or a certificate of deposit
rating in the highest rating category of the rating agencies rating the
notes of the series or any other long-term, short-term or certificate of
deposit rating acceptable to the rating agencies rating the notes of the
series and (B) whose deposits are insured by the FDIC or
(ii)(A) the parent of which has a long-term or short-term unsecured
debt rating acceptable to the rating agencies rating the notes of the
series and (B) whose deposits are insured by the FDIC.
SERVICING COMPENSATION
On each payment date, for each series of notes, for its servicing of the
contracts, the servicer will be entitled to receive (a) a "MONTHLY SERVICING
FEE" equal to the product of one-twelfth of [ ]% and the aggregate Contract
Principal Balance of all contracts in the portfolio pledged to that series as of
the beginning of the preceding month, payable out of the collection account.
The servicing fee 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. 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 annual audited and
quarterly unaudited financial statements of Advanta Corp.
Each indenture will provide that the servicer, upon request of the trustee,
and to the extent such information can be generated by the servicer's existing
data processing system, will furnish to the trustee the underlying data
necessary for performing the trustee's duties under the indenture or for
enforcement actions.
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SERVICER NOT TO RESIGN
Generally, the transfer and servicing agreement will provide that the
servicer may not resign from its obligations and duties as servicer under the
transfer and servicing agreement. However, the servicer may determine that its
performance of its duties is no longer permissible under applicable law. 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
If the servicer merges into or consolidates into another entity or another
entity succeeds to the business of the servicer, the surviving, resulting or
succeeding entity shall be the successor to the servicer under the transfer and
servicing agreement. The successor shall be required to execute an agreement of
assumption. The successor shall agree to perform every obligation of the
servicer under the transfer and servicing agreement. Any entity 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 Bank Corp. or an affiliate of Advanta Bank Corp., the
servicer may transfer all of its duties, obligations, rights and privileges as
servicer under the transfer and servicing agreement to any affiliate of Advanta
Bank Corp. provided that
- the new 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 agreeing to perform every obligation of the
servicer under the indenture; and
- the entity assuming the servicer position shall deliver to the trustee
written evidence that the credit ratings then assigned to the notes then
outstanding will not be reduced or withdrawn as a result of the transfer.
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 transfer and
servicing agreement.
EVENTS OF SERVICER TERMINATION
The following events and conditions are defined in each indenture as
"EVENTS OF SERVICER TERMINATION":
- failure on the part of the servicer to remit to the trustee within five
calendar days following the receipt of any monies received by the
servicer required to be remitted to the trustee under the indenture;
- 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;
- 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. 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
that the material breach of any representation or warranty made by
Advanta Bank Corp. in the contribution agreement regarding the contracts
or the equipment subject to the indenture will not constitute an event of
servicer termination if Advanta Bank Corp. or a successor to it
repurchases the contract and equipment pursuant to the contribution
agreement as provided in the contribution agreement; and
- events of voluntary or involuntary insolvency or bankruptcy relating to
the servicer.
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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 regarding a contract or
equipment will cease and the trustee may exercise authority and power (or other
successor servicer) pursuant to the indenture.
THE INDENTURE
Pledge to Secure the Notes. Under the indenture, the issuer will grant to
the trustee for the benefit of the holders of the notes of that series, all of
the issuer's right, title and interest in, to and under all accounts, money,
chattel paper, securities, instruments, documents, deposit accounts,
certificates of deposit, letters of credit, advices of credit, banker's
acceptances, uncertificated securities, general intangibles, contract rights,
goods and other property consisting of, arising from or relating to
- the contracts for that series and all obligations of the users under the
contracts, including all moneys, and including accrued interest due or to
become due thereon on or after the series cut-off date;
- the issuer's security interest in the related equipment;
- any proceeds with respect to the contracts from claims on any physical
damage, credit life and/or disability insurance policies covering the
equipment or the users;
- all rights, remedies, powers, privileges and claims of the issuer under
or with respect to the transfer and servicing agreement, including the
rights of the issuer to enforce the transfer and servicing agreement, to
cause the originator to repurchase a contract or contracts upon a breach
of the representations and warranties related to the contract and to give
or withhold any and all consents, requests, notices, directions,
approvals, extensions or waivers to the same extent as the issuer could;
- all money, securities, investments, documents and other property on
deposit from time to time in or related to the series accounts and in all
interest, dividends, earnings, income and other distributions from time
to time received, receivable or otherwise distributed to or in respect
thereto; and
- all present and future claims, demands, causes and chose in action in
respect of any or all of the foregoing and all payments on or under and
all proceeds of every kind and nature whatsoever in respect of any or all
of the foregoing.
The property and rights described above which are granted to the trustee
constitute the "trust estate" for the series of notes.
Events of Default and Remedies. Each of the following events will
constitute an event of default under the terms of the indenture:
- default for five calendar days or more in making interest payments on the
notes when due and payable;
- the outstanding principal balance of any class of notes is not reduced to
zero by that class's stated maturity date;
- default in the observance or performance of any other covenant of the
issuer in the indenture, and continuance of the default or breach for a
period of 30 days after the earliest of (i) the trustee's giving written
notice of a breach to the issuer or (ii) the holders of a majority of the
then outstanding principal balance of the notes giving written notice to
the issuer and the trustee; or
- voluntary or involuntary insolvency or bankruptcy events relating to the
issuer.
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If the issuer files for or is caused to enter bankruptcy or insolvency,
whether voluntary or involuntary, the unpaid principal amount of all outstanding
notes shall automatically become due and payable together with all accrued and
unpaid interest thereon.
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, declare the unpaid principal amount of all the
notes to be due and payable immediately, together with all accrued and unpaid
interest thereon.
At any time after a declaration of acceleration of maturity has been made
and before a judgment or decree for payment of the money due has been obtained
by the trustee, the holders of notes representing not less than a majority of
the outstanding amount of the notes of the series may rescind and annul the
declaration and its consequences if:
- the issuer has paid or deposited with the trustee an amount sufficient to
pay all amounts of principal of and interest on all notes of the series
and all other amounts that would then be due on the series of notes if
the event of default giving rise to the acceleration had not occurred;
and
- all sums paid or advanced by the trustee under the indenture and the
reasonable compensation, expenses, disbursements and advances of the
trustee and its agents and counsel; and
- all events of default, other than the nonpayment of the principal of the
notes that has become due solely because of the acceleration, have been
cured or waived.
If an event of default occurs and is continuing, the trustee may proceed to
protect and enforce its rights and the rights of the noteholders, by such
appropriate proceedings as the trustee shall deem most effective to protect and
enforce its rights, whether for the specific enforcement of any covenant or
agreement or in aid of the exercise of any power granted in the indenture, or to
enforce any other proper remedy or legal or equitable right vested in the
trustee by the indenture or by law.
In the event that all the notes of a series have been declared due and
payable, the trustee shall, except as described in the next paragraph, have the
right to sell the trust estate or any portion thereof or rights or interest
therein, at one or more public or private sales called and conducted in any
manner permitted by law.
The trustee may not sell or otherwise liquidate the trust estate following
an event of default, other than an event of default involving a failure to pay
interest on the notes or to pay principal on the stated maturity date unless
- the holders of 100% of the outstanding amount of the notes consent to the
sale,
- the trustee determines that the proceeds of the sale or liquidation
distributable to the noteholders are sufficient to discharge in full all
amounts then due and unpaid upon the notes for principal and interest or
- the trustee determines that the trust estate will not continue to provide
sufficient funds for the payment of principal of and interest 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 the holders of at
least 66 2/3% of the outstanding amount of the notes of the series. In
determining such sufficiency or insufficiency with respect to the matters
described above, 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 the proposed action and as to the
sufficiency of the trust estate for that purpose.
If the trustee collects any money or property following the acceleration of
the maturities of the notes it shall pay out the money or property (other than
unpaid servicing fees and unpaid) in the following order:
First: to the trustee for amounts due to the trustee;
Second: to the holders of the notes in accordance with the provisions
specified for the series; and
Third: to the issuer.
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Limited Rights of Holders to Institute Proceedings. No holder of any note
shall have any right to institute any proceeding, judicial or otherwise, under
the indenture, or for the appointment of a receiver or trustee, or for any other
remedy, unless:
- the holder has previously given written notice to the trustee of a
continuing event of default;
- the holders of not less than 25% of the outstanding amount of the notes
of that series have made written request to the trustee to institute the
proceeding in its own name as trustee;
- a holder or holders have offered to the trustee an indemnity against the
costs, expenses and liabilities to be incurred in complying with the
request in form and substance satisfactory to the trustee;
- the trustee for 60 days after its receipt of such notice, request and
offer of indemnity has failed to institute proceedings; and
- no direction inconsistent with the written request has been given to the
trustee during the 60-day period by the holders of a majority of the
outstanding amount of the notes.
Amendment of an Indenture. Supplements to or amendments of the indenture
may be executed without the consent of the holders of the notes to
- authorize the issuance of one or more series of notes (if the rating
agency condition is satisfied),
- evidence the succession, in compliance with the terms of the indenture,
of another corporation to the issuer and the assumption by the successor
of the issuer's covenants,
- add covenants for the benefit of the holders or to surrender any right
conferred upon the issuer,
- permit the issuance of notes in bearer form,
- modify the restrictions and procedures for transfers of the notes to
reflect changes in law or practice;
- provide for acceptance of appointment by a successor trustee or to
provide for more than one trustee,
- modify provisions necessary to qualify, requalify or continue the
qualification of the indenture under the Trust Indenture Act of 1939, as
amended;
- cure any ambiguity, correct or supplement any provision which is
inconsistent with another provision; or
- 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 issuer and the rights of the noteholders under the indenture may not be
modified by the issuer without (i) the consent of the holders of not less than
66 2/3% in outstanding principal balance of the notes (not including any notes
held by Advanta Bank Corp. or any of its affiliates) and (ii) satisfaction of
the rating agency condition concerning 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.
NOTE RATINGS
Any rating of a series or class of notes by a rating agency will indicate:
- the rating agency's view on the likelihood that noteholders will receive
required interest and principal payments; and
- the rating agency's evaluation of the assets pledged to secure the notes
and the availability of any credit enhancement for the notes.
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Among the things a rating will not indicate are:
- the likelihood that principal payments will be paid on a scheduled date;
- the likelihood that a United States withholding tax will be imposed on
non-U.S. noteholders;
- the marketability of the notes;
- the market price of the notes; or
- whether the notes are an appropriate investment for any purchaser.
A rating will not be recommendation to buy, sell or hold the notes. A
rating may be lowered or withdrawn at any time by a rating agency.
We, on behalf of the issuer, will, for each series, request ratings of the
notes offered by this prospectus and the accompanying prospectus supplement from
at least one rating agency. Rating agencies other than those requested could
assign a rating to the notes and such a rating could be lower than any rating
assigned by a rating agency chosen by us.
LEGAL MATTERS AFFECTING THE CONTRACTS
CONSIDERATIONS RELATING TO THE USERS
Payments on the notes will be made from collections on the contracts and
other assets. If a user were to breach a contract, the issuer's remedies
generally would include the right to seek specific performance of the contract
or to recover damages from the user for the default. These remedies, however,
may be limited if the user were to enter bankruptcy or if Article 2A of the UCC
were to apply. In particular, though giving parties to a commercial lease
significant freedom to agree to their own contract terms, Article 2A may limit
the enforceability of any provision deemed unconscionable. In addition,
applicable state law may limit the servicer's ability to foreclose upon the
equipment or obtain a deficiency judgment against the user. In any of these
instances, you could experience delays in payment and losses on your investment.
CONSIDERATIONS RELATING TO SECURITY INTERESTS IN THE EQUIPMENT
Under each contract, the originator has either an ownership interest or a
security interest in the related equipment. A security interest in equipment
generally is not perfected unless a UCC financing statement has been filed in
the appropriate state or local filing office.
Advanta Bank Corp. has taken steps to perfect its security interest only in
equipment with an original cost in excess of $25,000. As a consequence, security
interests transferred to your issuer and the trustee of your series in equipment
with an original cost of $25,000 or less will not be perfected, and another
creditor of the user may acquire rights in this equipment superior to those of
your issue or trustee. This may adversely affect the ability of the servicer or
the subservicer to foreclose upon the equipment in the event of a user's
default. This may cause you to experience delays in payments and losses on your
investment.
Even if Advanta Bank Corp. has a perfected security interest, moreover,
neither the issuer nor the trustee will become the secured party of record for
that equipment Therefore, through the fraud, negligence or neglect of Advanta
Bank Corp., your interests in the equipment could be impaired and losses on your
investment could result.
CONSIDERATIONS RELATING TO OWNERSHIP INTERESTS IN THE EQUIPMENT
Advanta Bank Corp. has not originated all of the contracts. If any of these
contracts constitute true leases rather than financing leases then, under
applicable commercial law, the originator will have retained the ownership
interest in the related equipment.
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Some of the contracts originated by Advanta Bank Corp. may be true leases
as well. In these instances, Advanta Bank Corp. holds the ownership interest in
the related equipment. Advanta Bank Corp. will not transfer any ownership
interest in equipment or certain payments made by a user relating to an
ownership interest in the equipment to an issuer.
If a conservator or receiver were appointed for Advanta Bank Corp. or an
originator, or if an originator were to become the debtor in a bankruptcy case,
the conservator or receiver or a bankruptcy trustee could exercise rights
related to these ownership interests and excluded payments that could terminate
or otherwise impair your rights under the related contracts. As a consequence,
you could experience delays in payment or losses on your investment.
CONSIDERATIONS RELATING TO YOUR INTEREST IN THE CONTRACTS AND OTHER ASSETS
Advanta Bank Corp., in its capacity as servicer, will engage its affiliate
Advanta Business Services Corp. to subservice the contracts. The subservicer,
however, will not segregate the contracts from similar documents in its
possession, and the contracts will not be stamped or otherwise marked to reflect
their transfer to your issuer or the trustee of your series. Therefore, if the
subservicer were to sell or pledge the contracts in its possession through
fraud, negligence or neglect, the transferee could acquire an interest in these
contracts superior to those of your issuer and trustee. In such an event, you
could experience delays in payments and losses on your investment. In addition,
if the subservicer were to become insolvent or enter bankruptcy, competing
claims to the contracts in its possession could arise. Even if unsuccessful,
these claims could result in delays in payments or losses to you.
Certain contracts are not leases but rather are loans evidenced by
promissory notes. The subservicer will hold these promissory notes instead of
delivering them to your issuer or the trustee of your series. As a result,
neither your issuer nor your trustee will have a perfected security interest in
the promissory notes, and as a result, you could suffer delays in payments or
losses on your investment.
Contracts that do not constitute loans evidenced by promissory notes are
"accounts," "general intangibles," or "chattel paper" under the UCC. Both the
sale of accounts and chattel paper and the transfer of accounts and chattel
paper as security for an obligation are subject to the provisions of Article 9
of the UCC. In addition, a transfer of general intangibles as security for an
obligation is subject to the provisions of Article 9 of the UCC. Therefore,
Advanta Bank Corp. will file appropriate UCC financing statements to perfect
your issuer's security interest in the contracts. Article 9 of the UCC, however,
does not apply to the sale of general intangibles. As a consequence, some other
action under applicable state law may be required in order to perfect the sale
against the interests of third parties.
Under some contracts Advanta Bank Corp. has obtained from the originator,
and will transfer to your issuer, only a right to scheduled payments. If a
conservator or receiver were appointed for the originator or if the originator
were to become a debtor in a bankruptcy case, the conservator or receiver or a
bankruptcy trustee could exercise rights under these contracts that could
terminate or otherwise impair the interests of your issuer or the trustee of
your series. In particular, under the United States Bankruptcy Code, the
bankruptcy trustee could elect to breach the originator's obligations under the
contracts or to dispose of all rights under the contracts including the right to
scheduled payments acquired by Advanta Bank Corp. and transferred to your
issuer. In such an event, the amount received under the contracts could be less
than the scheduled payments, this could result in losses to you.
Advanta Bank Corp. will represent and warrant in the transfer and servicing
agreement that, except for excluded payments, its transfer of the contracts is
either a sale of all of its right, title and interest in and to the contracts to
the issuer or the grant of a first-priority perfected security interest in its
rights in the contracts to the issuer, in either case free and clear of all
liens arising from or through Advanta Bank Corp. except for certain permitted
liens.
There are limited circumstances in which a prior or subsequent transferee
of contracts or other assets acquired by Advanta Bank Corp. after your series is
issued could have an interest in those contracts with priority over your
trustee's interest. Under the transfer and servicing agreement, however, Advanta
Bank Corp.
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will represent and warrant that it has transferred the contracts to the issuer
free and clear of the lien of any third party other than your trustee except for
liens permitted by the transfer and servicing agreement. In addition, Advanta
Bank Corp. will covenant not to sell, pledge, assign, transfer or grant any lien
on any contract or any interest in any contract other than to your issuer or the
trustee of your series. Nevertheless, a tax, governmental or other nonconsensual
lien on property of Advanta Bank Corp. arising before a contract or other asset
is transferred to the issuer may have priority over your trustee's interest.
Furthermore, if the FDIC were appointed as conservator or receiver for Advanta
Bank Corp., administrative expenses of the FDIC may have priority over the
interest of your trustee in the contracts and other assets.
In addition, while Advanta Bank Corp. is the servicer or Advanta Business
Services Corp. is the subservicer, cash collections held by Advanta Bank Corp.
or Advanta Business Services Corp. may be commingled and used for its benefit
prior to the deposit of the collections into the collection account. If
insolvency or similar proceedings were commenced by or against Advanta Bank
Corp. or Advanta Business Services Corp. or, in certain circumstances, if
certain time periods were to pass, the trust may not have a first-priority
perfected security interest in those collections. If this were to occur, the
amount payable to you could be lower than the outstanding principal and accrued
interest on the notes, thus resulting in losses to you.
CONSIDERATIONS RELATING TO CONSERVATORSHIP, RECEIVERSHIP AND BANKRUPTCY
Your issuer has been structured such that the filing of a voluntary or
involuntary petition for relief by or against your issuer under the Bankruptcy
Code is unlikely. Nevertheless, if your issuer were to become a debtor in a
bankruptcy case, delays in payment and losses on your investment could occur.
Advanta Bank Corp. is organized as a Utah corporation and is regulated and
supervised by the [Utah Bank Regulatory Agency] which is authorized to appoint
the FDIC as conservator or receiver for Advanta Bank Corp. if specified events
occur relating to Advanta Bank Corp.'s financial condition or the propriety of
its actions. In addition, the FDIC could appoint itself as conservator or
receiver for Advanta Bank Corp.
If
(1) the transfer and servicing agreement complies with the regulatory
requirements of the FDIA,
(2) the security interest granted under the transfer and servicing
agreement was perfected before the FDIC is appointed as conservator or
receiver for Advanta Bank Corp., and
(3) the security interest was not taken in contemplation of Advanta
Bank Corp.'s insolvency or with the intent to hinder, delay or defraud
Advanta Bank Corp. or its creditors,
then the FDIA provides that the security interest should be respected. In
addition, opinions and policy statements issued by the FDIC suggest that,
because of the manner in which these transactions are structured, the FDIC would
respect the security interest granted by Advanta Bank Corp. in the contracts and
other assets. Nevertheless, if the FDIC were to asset a contrary position, or
were to require the trustee to go through the administrative claims procedure
established by the FDIC to obtain payments on the notes, or were to request a
stay of any actions by the trustee to enforce the transfer and servicing
agreement or the notes against Advanta Bank Corp., delays or reductions in
payments on your notes could occur.
In addition, the FDIC as conservator or receiver for Advanta Bank Corp.
could repudiate the transfer and servicing agreement. The FDIA would limit the
damages for a repudiation to the trust's "actual direct compensatory damages"
determined as of the date that the FDIC is appointed as conservator or receiver.
The FDIC, moreover, could delay its decision whether to repudiate the transfer
and servicing agreement for a reasonable period following its appointment as
conservator or receiver for Advanta Bank Corp. Therefore, if the FDIC as
conservator or receiver for Advanta Bank Corp. were to repudiate the transfer
and servicing agreement, the amount payable to you could be lower than the
outstanding principal and accrued interest on your notes, thus resulting in
losses to you.
Each indenture will provide that, if a conservator or receiver is appointed
for Advanta Bank Corp., an event of default will occur. In such an event, the
notes may be declared due and payable immediately, and the trustee may foreclose
upon the contracts and other assets pledged to secure those notes. Regardless of
the
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terms of the indenture, however, the FDIC as conservator or receiver for Advanta
Bank Corp. may have the power to delay this procedure, to prevent the
acceleration of your notes, and to prevent or limit the early liquidation of the
contracts and other assets. Regardless of the trustee's determination not to
accelerate the notes or not to liquidate the assets or of the noteholders'
instructions, the FDIC as conservator or receiver for Advanta Bank Corp. may
have the power to require the acceleration and prepayment of the notes and the
early liquidation of the trust estate.
The FDIC as conservator or receiver for Advanta Bank Corp. also may have
the power to prevent either the trustee or the noteholders from appointing a
successor servicer under the transfer and servicing agreement. In addition, if
the FDIC were appointed as conservator or receiver for Advanta Bank Corp., the
trustee of your series may be precluded from compelling Advanta Bank Corp. to
repurchase contracts and other assets transferred in breach of its
representations and warranties, and therefore, you could experience delays in
payment or losses on your investment.
FEDERAL INCOME TAX CONSEQUENCES
GENERAL
The following summary generally describes 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 Advanta Bank Corp. The summary is based on the Internal
Revenue Code of 1986, as amended, or 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. 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 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 regarding 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 offered by this
prospectus will be characterized as debt for United States federal income tax
purposes. Additionally, the issuer 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 the
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.
36
<PAGE> 85
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 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. Also noteholders might not be entitled to any dividends
received deduction regarding 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. Generally, 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 or 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 upheld, such treatment should not significantly affect tax
liabilities for most holders of the notes, but potential noteholders should
consult their own tax advisors concerning the impact to them in their particular
circumstances. The issuer intends to take the position that interest on the
notes constitutes "qualified stated interest" and that the above consequences do
not apply.
[One ore more classes of notes of a series] 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
37
<PAGE> 86
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.
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 issuer 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 the issuer, (b) a "controlled
foreign corporation" with respect to which the 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 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
38
<PAGE> 87
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.
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 issuer, as a Delaware LLC, is
not subject to income or franchise taxes imposed by the state of Delaware, but
the issuer 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. PURCHASERS OF NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE STATE AND LOCAL TAX CONSEQUENCES OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF ANY NOTES.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended, or
"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 -- all called "Plans", that are subject to
the fiduciary responsibility provisions of ERISA and/or section 4975 of the
Code, and on persons who are fiduciaries with respect to plans, in connection
with the investment of plan assets of any plan. 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 who have certain specified relationships to
a plan or its plan assets -- called "parties in interest" , 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 and except to the extent
otherwise specified in the accompanying prospectus supplement, Advanta Bank
Corp. anticipates that the notes offered by this prospectus and the accompanying
prospectus supplement 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 a purchase is
consistent with its fiduciary duties and whether a 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 issuer, 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.
39
<PAGE> 88
If the originator, the issuer or the servicer is a party in interest with
respect to the prospective 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 -- or DOL -- Prohibited Transaction Class Exemption- or 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 the transaction.
In addition, under DOL regulation section 2510.3-101, the purchase with
plan assets of equity interests in the trust estate could sometimes cause the
contracts and other property and rights included in the trust estate to be
considered plan assets of the investing plan which would then subject the issuer
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"), 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 issuer, the servicer, the
trustee or any of their affiliates:
- has investment or administrative discretion with respect to the plan
assets used to effect such purchase;
- has authority or responsibility to give, or regularly gives, investment
advice regarding 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
- 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 supplement 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
for 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 those 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.
40
<PAGE> 89
PLAN OF DISTRIBUTION
The notes of each series may be sold to or through underwriters by a
negotiated firm commitment underwriting and public reoffering by the
underwriters or by any other underwriting arrangement as may be specified in the
related prospectus supplement or may be placed either directly or through
agents. The bank intends that the notes will be offered through such various
methods from time to time and that offerings may be made concurrently through
more than one of such methods or that an offering of a particular series of
notes may be made through a combination of such methods.
Each prospectus supplement will set forth the price at which each class of
notes being offered thereby will be offered to the public and any concessions
that may be offered to dealers participating in the offering of the notes. After
the initial public offering of a series of notes, the public offering prices and
the concession may be changed.
Each underwriting agreement will provide that the bank will indemnify the
related underwriters against certain civil liabilities, including liabilities
under the Securities Act, or contribute to payments the several underwriters may
be required to make.
Each issuer may, from time to time, invest the funds in its series accounts
in eligible investments acquired from the underwriters.
Pursuant to each of the underwriting agreements for a series of notes, the
closing of the sale of each class of notes will be contingent on the closing of
the sale of all other such classes.
RATINGS
Each class of notes of a series offered pursuant to this prospectus and a
related prospectus supplement will be rated at its initial issuance in one of
the four highest categories by at least one nationally recognized statistical
rating organization.
A security rating is not a recommendation to buy, sell or hold notes and
may be subject to revision or withdrawal at any time by the assigning rating
agency. No person is obligated to maintain the rating on any note, and,
accordingly, there can be no assurance that the ratings assigned to a note upon
initial issuance will not be lowered or withdrawn by a rating agency at any time
thereafter. In general, ratings address credit risk and do not represent any
assessment of the likelihood of rate of principal prepayments.
LEGAL OPINIONS
Legal matters relating to the validity of the notes will be passed upon for
the issuers by Orrick Herrington & Sutcliffe LLP, Washington, D.C. and for
matters of Delaware law will be passed upon for each issuer by , for
the bank by Van Cott, Bagley, Cornwwall & McCarthy, Salt Lake City, Utah and
with respect to certain federal tax matters, by Orrick, Herrington & Sutcliffe
LLP, Washington, D.C.
41
<PAGE> 90
INDEX OF TERMS
C
<TABLE>
<S> <C>
Code.................................... 36
Contract Principal Balance.............. 13
</TABLE>
D
<TABLE>
<S> <C>
defaulted contract...................... 18
</TABLE>
E
<TABLE>
<S> <C>
Eligible Deposit Account................ 28
events of servicer termination.......... 29
excluded payments....................... 11
</TABLE>
M
<TABLE>
<S> <C>
monthly servicing fee................. 28
</TABLE>
P
<TABLE>
<S> <C>
pledged assets........................ 11
Prepayment Amount..................... 13
</TABLE>
R
<TABLE>
<S> <C>
residual interest..................... 12
residual receipts..................... 12
</TABLE>
U
<TABLE>
<S> <C>
users................................. 12
</TABLE>
42
<PAGE> 91
PART II
ITEM 14. Other Expenses of Issuance and Distribution.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Statement Fee.................................. $264
Printing and Engraving Expenses............................. *
Trustee's Fees and Expenses................................. *
Legal Fees and Expenses..................................... *
Blue Sky Fees and Expenses.................................. *
Accountants' Fees and Expenses.............................. *
Rating Agency Fees.......................................... *
Miscellaneous Fees and Expenses............................. *
Total....................................................... $ *
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 15. Indemnification of Directors and Officers.
Indemnification. Under the laws which govern the organization of the
registrant, the registrant has 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 Bank 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.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that Advanta Bank 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, the Prospectus or the Prospectus
Supplement. In addition, the Underwriting Agreement provides that the
underwriter(s) will similarly indemnify and reimburse Advanta Bank Corp. and the
issuer of the respective series of notes with respect to certain material
misstatements or omissions in the Registration Statement which are based on
certain written information furnished by the underwriter(s) for use in the
Registration Statement, the Prospectus or the Prospectus Supplement.
Insurance. As permitted under the laws which govern the organization of
Advanta Bank Corp., the by-laws of Advanta Bank Corp. 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.
II-1
<PAGE> 92
ITEM 16. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes
4.1 Form of Indenture
4.2 Form of Transfer and Servicing Agreement*
4.3 Form of Limited Liability Company 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*
24.1 Powers of Attorney for Advanta Bank Corp. (included in page
II-5)
25.1 Statement of Eligibility of Trustee (Form T-1)*
</TABLE>
- ---------------
* To be filed by amendment
ITEM 17. Undertakings.
The undersigned Advanta Bank Corp., on behalf of each of the Limited
Liability Companies, hereby undertakes as follows:
(a) 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 Registrant has 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 Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of 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.
(b) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (b)(1)(i) and (b)(1)(ii)
will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this Registration Statement.
(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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
II-2
<PAGE> 93
(c) 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.
(d) To file an application for the purpose of determining the
eligibility of the Trustee for each issue of notes to act under subsection
(a) of Section 310 of the Trust Indenture Act of 1939 in accordance with
the rules and regulations prescribed by the Securities and Exchange
Commission under Section 305(b)(2) of such act.
II-3
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Advanta Bank Corp., on behalf of each of the Limited Liability Companies,
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, reasonably believes that the security
rating requirement contained in Transaction Requirement B.5 of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Draper, State of Utah, on December
30, 1999.
ADVANTA BANK CORP.,
as Registrant
By: /s/ MARK HALES
------------------------------------
Name: Mark Hales
Title: Chief Executive Officer and
Chief Financial Officer
II-4
<PAGE> 95
KNOW ALL MEN BY THESE PRESENTS; that each person whose signature appears
below constitutes and appoints Mark Hales, Philip M. Browne, and Michael Coco,
each of them his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for and in his name, place and stead, in any
and all capacities to sign any or all amendments (including posteffective
amendments) to this Registration Statement and any or all other documents in
connection therewith, and to file the same, with all exhibits thereto, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as might or could be done in person, hereby ratifying
and confirming all said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on December 30, 1999 below by the
following persons in the capacities with respect to Advanta Bank Corp.
indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MARK HALES President and Director
- ----------------------------------------------------- (Principal Executive Officer and Principal
Mark Hales Accounting Officer)
/s/ PHILIP M. BROWNE Director
- -----------------------------------------------------
Philip M. Browne
/s/ DENNIS ALTER Chairman of the Board and Director
- -----------------------------------------------------
Dennis Alter
/s/ WILLIAM WIRTHLIN Director
- -----------------------------------------------------
William Wirthlin
/s/ FRED P. GONZALES Director
- -----------------------------------------------------
Fred P. Gonzales
/s/ CALVIN M. BOARDMAN Director
- -----------------------------------------------------
Calvin M. Boardman
</TABLE>
II-5
<PAGE> 96
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes
4.1 Form of Indenture
4.2 Form of Transfer and Servicing Agreement*
4.3 Form of Limited Liability Company 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*
24.1 Powers of Attorney for Advanta Bank Corp. (included in page
II-5)
25.1 Statement of Eligibility of Trustee (Form T-1)*
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
OH&S DRAFT
12/28/99
FORM OF UNDERWRITING AGREEMENT
_________ __, 2000
[Underwriter]
Ladies and Gentlemen:
1. Introduction. Advanta Equipment Receivables Series 2000-__
LLC ("Advanta LLC") proposes to issue the $___________ aggregate principal
amount of Equipment Receivables Asset-Backed Notes, Series 2000-__, Class A-1
(the "Class A-1 Notes"), $___________ aggregate principal amount of Equipment
Receivables Asset-Backed Notes, Series 2000-__ Class A-2 (the "Class A-2
Notes"), $___________ aggregate principal amount of Equipment Receivables
Asset-Backed Notes, Series 2000-__ Class A-3 (the "Class A-3 Notes") and
$____________ aggregate principal amount of Equipment Receivables Asset-Backed
Notes and Series 2000-__ Class A-4 (the "Class A-4 Notes").
Advanta LLC proposes to issue $____________ aggregate
principal amount of Equipment Receivables Asset-Backed Notes, Series 2000-__
Class B Notes (the "Class B Notes").
Advanta LLC proposes to issue $___________ aggregate principal
amount of Equipment Receivables Asset-Backed Notes, Series 2000-__ Class C Notes
(the "Class C Notes" and, together with the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes and the Class B Notes, the
"Offered Notes").
Advanta LLC also proposes to issue $_____________ aggregate
principal amount of Equipment Receivables Asset-Backed Notes, Series 2000-__
Class D Notes (the "Class D Notes" and, together with the Offered Notes, the
"Notes"). The Notes are issued pursuant to an Indenture, dated as of _________
__, 2000 (the "Indenture") between Advanta LLC, as issuer, and
____________________, as Trustee (the "Trustee"). Capitalized terms used herein
but not defined shall have the meaning ascribed to them in the Indenture.
Advanta Bank Corp. (the "Bank") and Advanta LLC hereby agree
with _____________ (the "Representative"), as representative of the underwriters
attached on Schedule A hereto (the "Underwriters") as follows:
2. Representations and Warranties of Advanta LLC. Advanta LLC
represents and warrants to, and agrees with, the Underwriters that:
<PAGE> 2
(a) Advanta LLC has all requisite corporate power, authority
and legal right to own its property and conduct its business as such properties
are presently owned and such business is presently conducted, and to execute,
deliver and perform its obligations under this underwriting agreement (the
"Underwriting Agreement"), the Notes, and each of the Indenture and the Transfer
and Servicing Agreement dated as of ___________ __, 2000 (the "Transfer
Agreement", and together with the Indenture, the "Transaction Documents"), among
the Bank, as Transferor and Servicer and Advanta LLC, as Transferee.
(b) The execution and delivery of the Underwriting Agreement,
the Notes and each of the Transaction Documents, 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 members of Advanta LLC and all other necessary action has been taken.
(c) The Underwriting Agreement has been duly authorized and
validly executed and delivered by Advanta LLC.
(d) Each of the Transaction Documents will be executed and
delivered by Advanta LLC on or before the Closing Date (as defined herein), and
when executed and delivered by the other parties thereto, will constitute a
valid and binding agreement of Advanta LLC, enforceable against Advanta LLC in
accordance with its 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 Advanta LLC 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 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.
(f) Advanta LLC is 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 Advanta
LLC.
<PAGE> 3
(g) Neither the issuance and sale of the Offered Notes, nor
the execution and delivery by Advanta LLC of the Underwriting Agreement, the
Notes or the Transaction Documents, nor the incurrence by Advanta LLC 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
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 Advanta LLC of the Underwriting Agreement,
the Notes or the Transaction Documents, 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 Advanta LLC 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 and
Registration Statement have been or, prior to the Closing Date, will be taken.
(j) The Indenture has been qualified under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act").
(k) The representations and warranties made by Advanta LLC in
the Indenture and made in any Officer's Certificate of Advanta LLC delivered
pursuant to the Indenture will be true and correct at the time made and on and
as of the Closing Date as if set forth herein.
(l) Advanta LLC agrees it has 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 [Contracts],
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 [Contracts]
granted pursuant to the Indenture.
(m) A registration statement on Form S-3 (No. ___________),
including a form of prospectus and representative form of prospectus supplement
and such amendments thereto as may have been required to the date hereof,
relating to the Offered Notes and the offering thereof in accordance with the
Securities Act of 1933, as amended (the "Act"), has been filed with, and has
been declared effective by, the Securities and Exchange Commission (the
"Commission"). If any post-effective amendment to such registration statement
has been filed with the Commission prior to the execution and delivery of the
Underwriting Agreement, the most recent such amendment has been declared
effective by the Commission. For purposes of the Underwriting Agreement,
"Effective Time" means the date and time as of which such registration
statement, or the most recent post-effective amendment thereto, if any, was
declared effective by the Commission, and
<PAGE> 4
"Effective Date" means the date of the Effective Time. Such registration
statement, as amended at the Effective Time, is hereinafter referred to as the
"Registration Statement." Advanta LLC proposes to file with the Commission
pursuant to Rule 424(b) ("Rule 424(b)") under the Act a supplement (the
"Prospectus Supplement") to the prospectus included in the Registration
Statement (such prospectus, in the form it appears in the Registration Statement
or in the form most recently revised and filed with the Commission pursuant to
Rule 424(b), is hereinafter referred to as the "Base Prospectus") relating to
the Offered Notes and the method of distribution thereof. The Base Prospectus
and the Prospectus Supplement, together with any amendment thereof or supplement
thereto, are hereinafter referred to as the "Prospectus."
(n) On the Effective Date, the Registration Statement
conformed in all respects to the requirements of the Act and the rules and
regulations of the Commission thereunder (the "Rules and Regulations") and did
not include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and on the date of the Underwriting Agreement, the
Registration Statement and the Prospectus conform, and at the time of filing of
the Prospectus pursuant to Rule 424(b) the Registration Statement and the
Prospectus will conform, in all respects with the requirements of the Act and
the Rules and Regulations, and neither of such documents includes, or will
include, any untrue statement of a material fact or omits, or will omit, to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, except that the foregoing does not apply to
statements in or omissions from either of such documents based upon written
information furnished to Advanta LLC by the Underwriters specifically for use
therein.
(o) There has not been any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of Advanta
LLC from ________ __, 2000.
3. Purchase, Sale, Payment and Delivery of the Offered Notes.
(a) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, Advanta LLC
agrees to sell to the Underwriters, and the Underwriters agree to purchase from
Advanta LLC, the Offered Notes, each Underwriter to purchase the amounts shown
on Schedule A hereto at the prices set forth on such Schedule A. The Offered
Notes will settle without accrued interest.
(b) Advanta LLC will deliver the Offered Notes to you against
payment of the purchase price in immediately available funds, drawn to the order
of Advanta LLC, 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 ________
__, 2000, or at such other time not later than seven full business days
thereafter as you and the Bank determine, such time being herein referred to as
the "Closing Date." Each class of the Offered Notes so to be 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. Advanta LLC shall make
such definitive Offered Notes representing the Offered Notes available for
inspection by the Underwriters 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.
<PAGE> 5
4. Offering by Underwriters. It is understood that after the
Effective Date, the Underwriters propose to offer the Offered Notes for sale to
the public (which may include selected dealers) as set forth in the Prospectus.
5. Certain Agreements of Advanta LLC and the Bank. Advanta LLC
and the Bank, each for itself agrees with the Underwriters that:
(a) It will not file any amendment of the Registration
Statement with respect to the Offered Notes or supplement to the Prospectus
unless a copy has been furnished to you for your review a reasonable time prior
to the proposed filing thereof or to which you shall reasonably object to in
writing. It will advise you promptly of (i) the effectiveness of any amendment
or supplementation of the Registration Statement or Prospectus, (ii) any request
by the Commission for any amendment or supplementation of the Registration
Statement or the Prospectus or for any additional information, (iii) the receipt
by it of any notification with respect to the suspension of qualification of the
Offered Notes for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purposes and (iv) the institution by the Commission of
any stop order proceeding in respect of the Registration Statement, and will use
their best efforts to prevent the issuance of any such stop order and to obtain
as soon as possible its lifting, if issued.
(b) If, at any time when a prospectus relating to the Offered
Notes is required to be delivered under the Act, any event occurs as a result of
which the Prospectus, as then amended or supplemented, would include an 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 is necessary at any time to amend the
Prospectus to comply with the Act, the Bank promptly will prepare and file with
the Commission an amendment or supplement which will correct such statement or
omission or an amendment which will effect such compliance. Neither your consent
to, nor the Underwriters' delivery of, any such amendment or supplement shall
constitute a waiver of any of the conditions set forth in Section 6.
(c) As soon as practicable, Advanta LLC will make generally
available to the Noteholders an earnings statement or statements of Advanta LLC
covering a period of at least 12 months beginning after the Effective Date which
will satisfy the provisions of Section 11(a) of the Act and Rule 158 of the
Commission promulgated thereunder.
(d) The Bank will furnish to you copies of the Registration
Statement (one of which will be signed and will include all exhibits), the
Prospectus and all amendments and supplements to such documents, in each case as
soon as available and in such quantities as you reasonably request.
(e) The Bank will endeavor to qualify the Offered Notes for
sale under the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request and the determination of the eligibility for investment of
the Offered Notes under the laws of such jurisdictions as you may designate and
will continue such qualifications in effect so long as required for the
distribution of the Offered Notes; provided, however, that neither the Bank nor
Advanta LLC shall be obligated to qualify to do business in any jurisdiction
where such
<PAGE> 6
qualification would subject the Bank or Advanta LLC, as the case may be, to
general or unlimited service of process in any jurisdiction where it is not now
so subject.
(f) For a period from the date of the Underwriting Agreement
until the retirement of the Offered Notes, the Bank, as Servicer, will furnish
to you copies of each certificate and the annual statements of compliance
delivered to the Trustee pursuant to Section [___] of the Indenture and the
annual servicing reports furnished to the Trustee pursuant to Section [___] of
the Indenture, by first class mail as soon as practicable after such Offered
Notes, statements and reports are furnished to the Trustee.
(g) So long as any Offered Note is outstanding, the Bank will
furnish to you, by first-class mail as soon as practicable (i) all documents
concerning the Offered Notes distributed by the Bank to Noteholders, or filed
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (ii) any order of the Commission under the Act or the
Exchange Act in regard to Advanta LLC or the Bank, or pursuant to a "no-action"
letter obtained from the staff of the Commission by Advanta LLC or the Bank and
affecting Advanta LLC or the Bank and (iii) from time to time, such other
information concerning Advanta LLC as you may reasonably request.
(h) Whether or not the transactions contemplated by the
Underwriting Agreement are consummated or the Underwriting Agreement is
terminated for any reason, except a default by you hereunder, Advanta LLC will
pay all expenses incident to the performance of Advanta LLC's obligations under
the Underwriting Agreement and will reimburse the Underwriters for [any other
fees or expenses agreed upon by Advanta LLC and the Underwriters] and the Bank
will pay all expenses incident to the performance of the Bank's obligations
under the Underwriting Agreement and will reimburse the Underwriters for [any
other fees and expense agreed upon by the Bank and the Underwriters.]
(i) To the extent, if any, that any of the ratings provided
with respect to the Offered Notes by the Rating Agencies are conditional upon
the furnishing of documents or the taking of any other actions by Advanta LLC or
the Bank, Advanta LLC or the Bank, as appropriate shall furnish such documents
and take any such other actions.
6. Conditions of the Obligations of the Underwriters. The
obligation of the Underwriters to purchase and pay for the Offered Notes will be
subject to the accuracy of the representations and warranties on the part of
Advanta LLC herein, to the accuracy of the statements of officers of Advanta LLC
made pursuant to the provisions hereof, to the performance by Advanta LLC and
the Bank of their respective obligations hereunder and to the following
additional conditions precedent:
(a) On or prior to the date of the Underwriting Agreement, you
shall have received a letter, dated the date of the Underwriting Agreement, of
[independent accountants], confirming that they are independent public
accountants within the meaning of the Act and the applicable published Rules and
Regulations thereunder, substantially in the form heretofore agreed to and
otherwise in form and in substance satisfactory to you and your counsel.
<PAGE> 7
(b) The Prospectus shall have been filed with the Commission
in accordance with the Rules and Regulations; and, prior to the Closing Date, no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or,
to the knowledge of Advanta LLC, the Bank or you, shall be contemplated by the
Commission.
(c) Subsequent to the execution and delivery of the
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 Advanta LLC, the Bank or Advanta Corp. which, in your
judgment, materially impairs the investment quality of the Offered Notes; (ii)
any downgrading in the rating of any debt securities of Advanta LLC, the Bank or
Advanta Corp. by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Act), or any public announcement
that any such organization has under surveillance or review its rating of any
such debt securities (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading, of such
rating), (iii) any suspension or limitation of trading in securities generally
on the New York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of Advanta LLC,
the Bank or Advanta Corp. on any exchange or in the over-the-counter market;
(iv) any banking moratorium declared by federal, Delaware or New York
authorities; or (v) any outbreak or escalation of major hostilities in which the
United States is involved, any declaration of war by Congress or any other
substantial national or international calamity or emergency if, in your
judgment, the effect of any such outbreak, escalation, declaration, calamity or
emergency makes it impractical or inadvisable to proceed with completion of the
sale of and payment for the Offered Notes.
(d) You shall have received an opinion, dated the Closing
Date, of ____________, General Counsel for the Bank and/or _______________,
special counsel, to the effect that:
(i) The Bank is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah.
(ii) The Bank is an active corporation authorized to do
business and in good standing in the State of ________.
(iii) Advanta LLC is a limited liability company duly
organized, validly existing and in good standing under the laws of the
State of Delaware.
(iv) Both the Bank and Advanta LLC has taken all necessary
action to authorize the execution and delivery of each of the
Transaction Documents to which it is a party and the performance of its
obligations thereunder.
(v) The execution and delivery of each of the Transaction
Documents to which the Bank and Advanta LLC are a party, and their
respective performance of their obligations thereunder, will not (i)
contravene, or constitute a default under, any provision of applicable
law or regulation or of their respective certificates (or articles) of
<PAGE> 8
incorporation, limited liability company agreement or bylaws or of any
agreement, judgment, injunction, order, decree or other instrument
binding upon such company. Such opinion shall be based upon actual
knowledge.
(vi) Based on actual knowledge, there is no action, suit or
other proceeding against the Bank or Advanta LLC that would materially
adversely affect the business or financial condition of such party or
that would materially adversely affect the ability of such company to
perform its obligations under the Transaction Documents to which it is
a party.
(e) You shall have received an opinion dated the closing date,
of Orrick, Herrington & Sutcliffe LLP, special counsel to Advanta LLC and the
Bank, to the effect that:
(i) The Registration Statement has become effective under the
Act and the Prospectus has been filed with the Securities and Exchange
Commission pursuant to Rule 424(b) promulgated under the Act; to the
best of such counsel's knowledge, no stop order, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Act; and the Registration Statement
and the Prospectus (other than the financial and statistical
information therein as to which such counsel expresses no opinion), as
of its effective date, with respect to the Registration Statement, or
its date, with respect to the Prospectus, complied as to form in all
material respects with requirements of the Act and the rules and
regulations promulgated thereunder.
(ii) Each of the Underwriting Agreement, the Transaction
Documents and the Offered Notes conform in all material respects to the
descriptions thereof contained in the Registration Statement, in the
form in which it became effective, and the Prospectus.
(iii) Each of the Underwriting Agreement, the Transaction
Documents and the Offered Notes constitutes the legal, valid and
binding obligation of the Bank (except with respect to the Indenture to
which the Bank is not a party) and Advanta LLC, enforceable against
each of the Bank (except with respect to the Indenture to which the
Bank is not a party) and Advanta LLC in accordance with its terms,
subject to (a) limitations imposed by bankruptcy, insolvency,
reorganization, arrangement, moratorium, receivership, conservatorship,
readjustment of debts or other laws, including those relating to
fraudulent transfers or relating to or affecting the rights of
creditors generally; (b) rights to indemnification and contribution
which may be limited by applicable law or equitable principles or
otherwise unenforceable as against public policy; (c) the
unenforceability under certain circumstances of provisions imposing
penalties, forfeiture, late payment charges, or an increase in interest
rate upon delinquency in payment or to the occurrence of any event of
default; or (d) general principles of equity, including without
limitation, concepts of materiality, reasonableness, good faith and
fair dealing, and the possible unavailability of specific performance
or injunctive relief, regardless of whether such enforceability is
considered in a proceeding at equity or at law.
<PAGE> 9
(iv) The Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended.
(v) Neither the Bank nor Advanta LLC is an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(f) You shall have received from _____________, special
Delaware counsel, an opinion with respect to the perfection of the security
interests granted by Advanta LLC, and from ______________ an opinion with
respect to the perfection of transfers from the Bank to Advanta LLC.
(g) You shall have received an opinion, dated the Closing
Date, from Orrick, Herrington & Sutcliffe LLP, special counsel to the Bank and
Advanta LLC, with respect to federal bankruptcy matters satisfactory to the
Rating Agencies.
(h) You shall have received a certificate from Advanta LLC,
dated the Closing Date, of a Vice President or senior officer of the managing
member of Advanta LLC in which such officer, to the best of his or her knowledge
after reasonable investigation, shall state that (v) the representations and
warranties of Advanta LLC in the Underwriting Agreement are true and correct in
all material respects on and as of the Closing Date, (w) Advanta LLC has
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, (x) no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose have been instituted or are threatened by
the Commission, (y) nothing has come to such officer's attention that would lead
such officer to believe that the Registration Statement or the Prospectus, and
any amendment or supplement thereto, as of its date and as of the Closing Date,
contained an untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and (z) subsequent
to the date of the Prospectus, there has been no material adverse change in the
financial position or results of operation of Advanta LLC's business except as
set forth in or contemplated by the Prospectus or as described in such
certificate.
(i) You shall have received an opinion of _________________,
counsel to the Trustee, addressed to you, dated the Closing Date, satisfactory
in form and substance to you and your counsel and substantially to the effect
that:
(i) The Trustee is a _________________ and is authorized
thereunder to transact the business of banking and to exercise
fiduciary powers.
(ii) Each of the Transaction Documents to which the Trustee is
a party has been duly and validly authorized, executed and delivered by
the Trustee, and constitutes the legal, valid, binding and enforceable
obligations of the Trustee, except as enforceability may be limited by
(a) bankruptcy, insolvency, liquidation, receivership, moratorium,
reorganization, arrangement, or other similar laws relating to bank
insolvency (including the Federal Deposit Insurance Act, as amended by
the Financial Institutions, Reform, Recovery
<PAGE> 10
and Enforcement Act of 1989) and affecting the enforcement of the
rights of creditors generally, whether now or hereinafter in effect,
and (b) general principles of equity, whether such enforcement is
considered in a proceeding in equity or at law.
(j) You shall have received evidence satisfactory to you that
the Class A-1 Notes shall be rated "___" by ____________ and ____________, the
Class A-2 Notes shall be rated no lower than "___" by ____________ and
____________, the Class A-3 Notes shall be rated no lower than "___" by
____________ and ____________, the Class A-4 Notes shall be rated no lower than
"___" by ____________ and ____________, the Class B Notes shall be rated no
lower than "___" by ____________ and ____________, the Class C Notes shall be
rated no lower than "___" by ____________ and ____________ and the Class D Notes
shall be rated no lower than "___" by ____________ and ____________.
(k) Advanta LLC will furnish you with such conformed copies of
such opinions, Offered Notes, letters and documents as you reasonably request.
7. Indemnification and Contribution.
(a) The Bank will indemnify and hold harmless the Underwriters
against any losses, claims, damages or liabilities, joint or several, to which
the Underwriters may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon 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 will
reimburse the Underwriters for any legal or other expenses reasonably incurred
by the Underwriters in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the foregoing indemnity shall not inure to the benefit of any
Underwriter (or to the benefit of any person controlling such Underwriter) from
whom the person asserting any such losses, claims, damages or liabilities
purchased Offered Notes if such untrue statement or omission or alleged untrue
statement or omission made in the Preliminary Prospectus is eliminated or
remedied in the Prospectus (as amended or supplemented if Advanta LLC and the
Bank shall have furnished any amendments or supplements thereto) and, if
required by law, a copy of the Prospectus (as so amended or supplemented) shall
not have been furnished to such person at or prior to the written confirmation
of the sale of such Offered Notes to such person; provided further, however,
that the Bank will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon and in conformity with written
information furnished to Advanta LLC and the Bank by the Underwriters
specifically for use therein.
(b) The Underwriters agree, severally and not jointly, to
indemnify and hold harmless Advanta LLC and the Bank against any losses, claims,
damages or liabilities to which Advanta LLC or the Bank may become subject,
under the Act or otherwise and will reimburse any legal or other expenses
reasonably incurred by Advanta LLC or the Bank in connection with investigating
or defending any such loss, claim, damage, liability or action as such expenses
are
<PAGE> 11
incurred, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement,
the Prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to Advanta
LLC or the Bank by the Underwriters specifically for use therein, and will
reimburse any legal or other expenses reasonably incurred by Advanta LLC or the
Bank in connection with investigating or defending any such loss, claim, damage,
liability or action as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under this
section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than under subsection (a) or (b) above. In case any such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the consent
of the indemnified party, be counsel to the indemnifying party), and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party will not be liable to such
indemnified party under this section for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. If the indemnification
provided for in this section is unavailable or insufficient to hold harmless an
indemnified party under subsection (a) or (b) above, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified party
as a result of the losses, claims, damages or liabilities referred to in
subsection (a) or (b) above (i) in such proportion as is appropriate to reflect
the relative benefits received by Advanta LLC or the Bank on the one hand and
the Underwriters 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 Advanta LLC and
the Bank on the one hand and the Underwriters on the other in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities as well as any other relevant equitable considerations. The relative
benefits received by Advanta LLC and the Bank on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) of the Offered
Notes received by Advanta LLC and the Bank bear to the total underwriting
discounts and commissions received by the Underwriters with respect to the
Offered Notes. 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 Advanta LLC and the Bank or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission with respect to the Offered
Notes. The amount paid by
<PAGE> 12
an indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this subsection (c) shall be deemed to
include any other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the
subject of this subsection (c). Notwithstanding the provisions of this
subsection (c), the Underwriters 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 the Underwriters and distributed to the public were offered to
the public exceeds the amount of any damages which the Underwriters have
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission with respect to the Offered Notes. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The obligations of Advanta LLC and
the Bank under this Section shall be in addition to any liability which Advanta
LLC and the Bank may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Underwriters within the
meaning of the Act; and the obligations of the Underwriters under this section
shall be in addition to any liability which the Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each director of
Advanta LLC and the Bank, to each officer of Advanta LLC and the Bank who has
signed the Registration Statement and to each person, if any, who controls
Advanta LLC or the Bank within the meaning of the Act.
8. Survival of Certain Representations and Obligations. The
respective indemnities, agreements, representations, warranties and other
statements of Advanta LLC and the Bank or their officers and of the Underwriters
set forth in or made pursuant to the Underwriting Agreement will remain in full
force and effect, regardless of any investigation, or statement as to the
results thereof, made by or on behalf of the Underwriters, Advanta LLC and the
Bank or any of their respective representatives, officers or directors or any
controlling person, and will survive delivery of and payment for the Offered
Notes. If the Underwriting Agreement is terminated, or if for any reason other
than default by the Underwriters the purchase of the Offered Notes by the
Underwriters is not consummated, Advanta LLC and the Bank shall remain
responsible for the expenses to be paid or reimbursed by it pursuant to Section
5 and the respective obligations of Advanta LLC and the Bank and the
Underwriters pursuant to Section 7 shall remain in effect. If for any reason the
purchase of the Offered Notes by the Underwriters is not consummated other than
solely because of the occurrence of any event specified in clause (iii), (iv) or
(v) of Section 6(c) or because of the failure of the Underwriters to comply with
the terms of this Underwriting Agreement, Advanta LLC and the Bank will
reimburse the Underwriters for all out-of-pocket expenses (including ________
and ________ to the extent set forth in Section 5(h)) reasonably incurred by
them in connection with the offering of the Offered Notes.
9. Computational Materials and ABS Term Sheets.
(a) Each Underwriter agrees to provide to Advanta LLC and the
Bank, not less than two Business Days prior to the date on which Advanta LLC and
the Bank are required to file the Prospectus pursuant to Rule 424(b), any
information used by it (in such written or electronic format as required by
Advanta LLC and the Bank) with respect to the offering of the Offered Notes that
constitutes "Computational Materials," as defined in the Commission's No-Action
Letter, dated May 20, 1994, addressed to Kidder, Peabody Acceptance Corporation
I, Kidder,
<PAGE> 13
Peabody & Co. Incorporated and Kidder Structured Asset Corporation (as made
generally applicable to registrants, issuers and underwriters by the
Commission's response to the request of the Public Securities Association dated
May 27, 1994 (the "Kidder/PSA Letter")), that is not contained in the Prospectus
or the Preliminary Prospectus (without taking into account information
incorporated therein by reference).
(b) Each Underwriter agrees to provide to Advanta LLC and the
Bank, not less than two Business Days prior to the date on which Advanta LLC and
the Bank are required to file the Prospectus pursuant to Rule 424(b), any
information used by it (in such written or electronic format as required by
Advanta LLC and the Bank) with respect to the offering of the Offered Notes that
constitutes "ABS Term Sheets," as defined in the Commission's No-Action Letter,
dated February 17, 1995, addressed to the Public Securities Association, that is
not contained in the Prospectus or the Preliminary Prospectus (without taking
into account information incorporated therein by reference).
(c) Each Underwriter severally agrees, assuming all
information provided by Advanta LLC and the Bank is accurate and complete in all
material respects, to indemnify and hold harmless Advanta LLC and the Bank, each
of the officers and directors of Advanta LLC and the Bank and each person who
controls Advanta LLC and the Bank within the meaning of Section 15 of the Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they may become subject under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any untrue statement of a material fact contained in the
Computational Materials or ABS Term Sheets, if any, provided by the Underwriter,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and agrees to reimburse each such indemnified party for
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending or preparing to defend any such loss,
claim, damage, liability or action as such expenses are incurred. The
obligations of the Underwriter under this Section 9(c) shall be in addition to
any liability that the Underwriter may otherwise have.
The procedures set forth in Sections 7(b) and 7(c) shall be
equally applicable to this Section 9(c).
10. Notices. All communications hereunder will be in writing
and, if sent to the Underwriters, will be mailed, delivered or telegraphed and
confirmed to the Representative.
11. Counterparts. The 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 agreement.
12. Applicable Law. THE UNDERWRITING AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PROVISIONS THEREOF.
<PAGE> 14
13. Financial Services Act. Each Underwriter represents and
warrants to, and agrees with, Advanta LLC and the Bank that (w) it has complied
and will comply with all applicable provisions of the Financial Services Act
1986 and the Public Offers of Securities Regulations 1995 (the "Regulations")
with respect to anything done by it in relation to the Offered Notes in, from or
otherwise involving the United Kingdom; (x) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it in
connection with the issue of the Offered Notes to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or are persons to whom the document may
otherwise lawfully be issued or passed on; (y) 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 the Prospectus if that
person is of a kind described in either section 76(2)of the Financial Services
Act 1986 or in Regulation 1.04 of the Financial Services (Promotion of
Unregulated Schemes) Regulation 1991; and (z) it is a person of a kind described
in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1996.
<PAGE> 15
If you are in agreement with the foregoing, please sign three
counterparts hereof and return one to Advanta LLC and one to the Bank whereupon
this letter and your acceptance shall become a binding agreement among Advanta
LLC and the Bank and the Underwriters.
Very truly yours,
ADVANTA BANK CORP.
By: ____________________________
Name:
Title:
ADVANTA EQUIPMENT RECEIVABLES SERIES
2000-__ LLC
By: ____________________________
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date hereof
[Underwriter]
as Representative of the
Underwriters set forth herein
By: _______________________
Name:
Title:
<PAGE> 16
SCHEDULE A
Principal
Amount of
Underwriters Class A-1 Notes Price
- ------------ --------------- -----
Principal
Amount of
Underwriters Class A-2 Notes Price
- ------------ --------------- -----
Principal
Amount of
Underwriters Class A-3 Notes Price
- ------------ --------------- -----
Principal
Amount of
Underwriters Class A-4 Notes Price
- ------------ --------------- -----
Principal
Amount of
Underwriters Class B Notes Price
- ------------ --------------- -----
Principal
Amount of
Underwriters Class C Notes Price
- ------------ --------------- -----
<PAGE> 1
EXHIBIT 4.1
OH&S Draft
12/28/99
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC
Class A-1 [____%] Asset Backed Notes
Class A-2 [____%] Asset Backed Notes
Class A-3 [____%] Asset Backed Notes
Class A-4 [____%] Asset Backed Notes
Class B [____%] Asset Backed Notes
Class C [____%] Asset Backed Notes
Class D [____%] Asset Backed Notes
_________________________
INDENTURE
Dated as of __________ __, 2000
_________________________
______________________________,
Trustee
<PAGE> 2
-------------------------------
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE
ACT OF 1939 AND INDENTURE PROVISIONS*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
----------- -----------------
<S> <C>
310(a)(1).................................................................. 6.11
(a)(2)................................................................ 6.11
(a)(3)................................................................ 6.10
(a)(4)................................................................ Not Applicable
(b)................................................................... 6.08(a)(1)
(c)................................................................... Not Applicable
311(a)..................................................................... 6.12
(b)................................................................... 6.12
312(a)..................................................................... 7.01(a)
(b)................................................................... 7.02(b)
(c)................................................................... 7.02(c)
313(a)..................................................................... 7.04
(b)................................................................... 7.04
(c)................................................................... 7.04
(d)................................................................... 7.04
314(a)..................................................................... 3.09, 7.03(a)
(b)................................................................... 3.06
(c)(1)................................................................ 2.09, 8.04(b)
(c)(2)................................................................ 2.09, 8.04(b), 11.01(a)
(c)(3)................................................................ 2.09, 8.04(b), 11.01(a)
(d)(1)................................................................ 2.09, 8.04(b), 11.01(a)
(d)(2)................................................................ Not Applicable
(d)(3)................................................................ Not Applicable
(e)................................................................... 11.01(a)
315(a)..................................................................... 6.01(b)
(b)................................................................... 6.05
(c)................................................................... 6.01(b)
(d)................................................................... 6.01(b)
(d)(1)................................................................ 6.01(b)
(d)(2)................................................................ 6.01(c)
(d)(3)................................................................ 6.01(c)
(e)................................................................... 5.13
316(a)(1)(A)............................................................... 5.11
316(a)(1)(B)............................................................... 5.12
316(a)(2).................................................................. Not Applicable
316(b)..................................................................... 5.07
317(a)(1).................................................................. 5.03
317(a)(2).................................................................. 5.03
317(b)..................................................................... 5.03
318(a)..................................................................... 11.07
</TABLE>
- --------
* This reconciliation and tie shall not, for any purpose, be deemed
to be part of the within indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GRANTING CLAUSE.................................................................................................. 3
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. (a) Definitions................................................................... 4
Section 1.02. Incorporation by Reference of Trust Indenture Act................................. 12
Section 1.03. Calculations of Interest.......................................................... 12
ARTICLE II
THE NOTES
Section 2.01. Form.............................................................................. 13
Section 2.02. Execution, Authentication and Delivery............................................ 13
Section 2.03. Temporary Notes................................................................... 14
Section 2.04. Registration; Registration of Transfer and Exchange............................... 14
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes........................................ 15
Section 2.06. Persons Deemed.................................................................... 16
Section 2.07. Payment of Principal and Interest; Defaulted Interest............................. 16
Section 2.08. Cancellation...................................................................... 17
Section 2.09. Release of Collateral............................................................. 17
Section 2.10. Book-Entry Notes.................................................................. 17
Section 2.11. Notices to Clearing Agency........................................................ 18
Section 2.12. Definitive Notes.................................................................. 18
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest................................................. 20
Section 3.02. Maintenance of Office or Agency................................................... 20
Section 3.03. Money for Payments To Be Held in Trust............................................ 20
Section 3.04. Existence......................................................................... 21
Section 3.05. Protection of Trust Estate........................................................ 22
Section 3.06. Opinions as to Trust Estate....................................................... 22
Section 3.07. Performance of Obligations; Servicing of Contracts................................ 23
Section 3.08. Negative Covenants................................................................ 25
Section 3.09. Statements as to Compliance....................................................... 25
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms............................... 26
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 3.11. Successor or Transferee........................................................... 27
Section 3.12. No Other Business................................................................. 27
Section 3.13. No Borrowing...................................................................... 27
Section 3.14. Servicer's Obligations............................................................ 27
Section 3.15. Guarantees, Loans, Advances and Other Liabilities................................. 28
Section 3.16. Capital Expenditures.............................................................. 28
Section 3.17. [Reserved]........................................................................ 28
Section 3.18. Restricted Payments............................................................... 28
Section 3.19. Notice of Events of Default....................................................... 28
Section 3.20. Further Instruments and Acts...................................................... 28
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture........................................... 29
Section 4.02. Application of Trust Money........................................................ 30
Section 4.03. Repayment of Moneys Held by Paying Agent.......................................... 30
ARTICLE V
REMEDIES
Section 5.01. Events of Default................................................................. 31
Section 5.02. Acceleration of Maturity; Rescission and Annulment................................ 32
Section 5.03. Collection of Indebtedness and Suits for Enforcement by Trustee................... 32
Section 5.04. Remedies; Priorities.............................................................. 34
Section 5.05. Optional Preservation of the Contracts............................................ 37
Section 5.06. Limitation of Suits............................................................... 37
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and Interest............. 37
Section 5.08. Restoration of Rights and Remedies................................................ 38
Section 5.09. Rights and Remedies Cumulative.................................................... 38
Section 5.10. Delay or Omission Not a Waiver.................................................... 38
Section 5.11. Control by Noteholders............................................................ 38
Section 5.12. Waiver of Past.................................................................... 39
Section 5.13. Undertaking for Costs............................................................. 39
Section 5.14. Waiver of Stay or Extension Laws.................................................. 39
</TABLE>
-ii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 5.15. Action on Notes................................................................... 39
Section 5.16. Performance and Enforcement of Certain Obligations................................ 40
ARTICLE VI
THE TRUSTEE
Section 6.01. Duties of Trustee................................................................. 41
Section 6.02. Rights of Trustee................................................................. 42
Section 6.03. Individual Rights of Trustee...................................................... 42
Section 6.04. Trustee's Disclaimer.............................................................. 42
Section 6.05. Notice of Defaults................................................................ 43
Section 6.06. Reports by Trustee to Holders..................................................... 43
Section 6.07. Compensation and Indemnity........................................................ 43
Section 6.08. Replacement of Trustee............................................................ 44
Section 6.09. Successor Trustee by Merger....................................................... 44
Section 6.10. Appointment of Co-Trustee or Separate Trustee..................................... 45
Section 6.11. Eligibility; Disqualification..................................................... 46
Section 6.12. Preferential Collection of Claims Against......................................... 46
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Trustee Names and Addresses of Noteholders...................... 47
Section 7.02. Preservation of Information; Communications to Noteholders........................ 47
Section 7.03. Reports by Issuer................................................................. 47
Section 7.04. Reports by Trustee................................................................ 48
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money............................................................... 49
Section 8.02. Collection and Reserve Accounts................................................... 49
Section 8.03. General Provisions Regarding Accounts............................................. 53
Section 8.04. Release of Trust Estate........................................................... 54
Section 8.05. Opinion of Counsel................................................................ 54
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders............................ 55
Section 9.02. Supplemental Indentures with Consent of Noteholders............................... 56
</TABLE>
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<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 9.03. Execution of Supplemental Indentures.............................................. 57
Section 9.04. Effect of Supplemental Indenture.................................................. 57
Section 9.05. Conformity With Trust Indenture Act............................................... 58
Section 9.06. Reference in Notes to Supplemental Indentures..................................... 58
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption........................................................................ 59
Section 10.02. Form of Redemption Notice......................................................... 59
Section 10.03. Notes Payable on Redemption Date.................................................. 59
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions etc.......................................... 60
Section 11.02. Form of Documents Delivered to Trustee............................................ 61
Section 11.03. Acts of Noteholders............................................................... 62
Section 11.04. Notices, etc. to Trustee, Issuer and Rating Agencies.............................. 62
Section 11.05. Notices to Noteholders; Waiver.................................................... 63
Section 11.06. Alternate Payment and Notice Provisions........................................... 63
Section 11.07. Conflict with Trust Indenture Act................................................. 64
Section 11.08. Effect of Headings and Table of Contents.......................................... 64
Section 11.09. Successors and Assigns............................................................ 64
Section 11.10. Separability...................................................................... 64
Section 11.11. Benefits of Indenture............................................................. 64
Section 11.12. Legal Holidays.................................................................... 64
Section 11.13. GOVERNING LAW..................................................................... 64
Section 11.14. Counterparts...................................................................... 64
Section 11.15. Recording of Indenture............................................................ 65
Section 11.16. Trust Obligation.................................................................. 65
Section 11.17. No Petition....................................................................... 65
Section 11.18. Inspection........................................................................ 65
Section 11.19. Restrictions on Transfer of Class D Notes......................................... 65
Section 11.20. Tax Treatment..................................................................... 65
</TABLE>
-iv-
<PAGE> 7
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A - List of Contracts[Deemed Incorporated]........................................................... A-1
EXHIBIT B - Form of Transfer and Servicing Agreement......................................................... B-1
EXHIBIT C - Form of Depository Agreement..................................................................... C-1
EXHIBIT D - Form of Note..................................................................................... D-1
EXHIBIT E - Form of Class D Note Transferee Certificate...................................................... E-1
</TABLE>
-v-
<PAGE> 8
This INDENTURE dated as of __________ __, 2000 is hereby
executed by and between ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC, a
Delaware limited liability company (the "Issuer") and __________ (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Class A-1 [____%]
Asset Backed Notes, Class A-2 [____%] Asset Backed Notes, Class A-3 [____%]
Asset Backed Notes, Class A-4 [____%] Asset Backed Notes, Class B [____%] Asset
Backed Notes, Class C [____%] Asset Backed Notes and Class D [____%] Asset
Backed Notes, (collectively, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing Date, as Trustee
for the benefit of the Holders of the Notes, all of the Issuer's right, title
and interest, whether now owned or hereafter acquired, in, to and under all
accounts, money, chattel paper, securities, instruments, documents, deposit
accounts, certificates of deposit, letters of credit, advices of credit,
banker's acceptances, uncertificated securities, investment property, general
intangibles, contract rights, goods and other property consisting of, arising
from or relating to (a) the Contracts and all obligations of the [Obligors]
thereunder, including all monies (including accrued interest) due or to become
due thereon on or after the Cut-off Date and listed on the List of Contracts;
(b) the Issuer's security interest in the [Financed Equipment]; (c) any and all
Collections and Related Security with respect to the Contracts; (d) all
balances, monies, securities, investment property, instruments and other
property received or held from time to time in the Collection Account and the
Reserve Account, and in all interest, dividends, earnings, income and other
distributions from time to time received, receivable or otherwise distributed to
or in respect thereto; (e) the Transfer and Servicing Agreement and the Issuer's
rights to enforce the provisions of, and to benefit from the representations,
warranties and covenants made in the Transfer and Servicing Agreement; and (f)
all present and future claims, demands, causes and chose in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds, products, rents, receipts or profits of the conversion,
voluntary or involuntary, into cash or other property, all cash and non-cash
proceeds, and other property consisting of, arising from or relating to all or
any part of any of the foregoing or any proceeds thereof (collectively, the
"Collateral").
The foregoing Grant is made in trust to secure the payment of principal
of and interest on, and any other amounts owing in respect of, the Notes and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture. This Indenture shall be deemed to be and hereby is a security
agreement within the meaning of Article 8 and Articles of the UCC as in effect
in the States of New York, Utah and Delaware.
The Trustee, as Trustee on behalf of the Holders of the Notes,
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties as
required in this Indenture.
3
<PAGE> 9
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. (a) Definitions. Except as otherwise specified herein or
as the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under 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.
"Authorized Officer" means any officer of the Issuer who is authorized
to act for the Issuer in matters relating to the Issuer and who is identified on
the list of Authorized Officers, containing the specimen signature of each such
Person, delivered to the Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
"Basic Documents" means the Transfer and Servicing Agreement, the
Underwriting Agreement and other documents and certificates delivered in
connection therewith.
"Book-Entry Notes" means a beneficial interest in the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes
or the Class C Notes, ownership and transfers of which shall be made through
book entries by a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions or trust companies in The City of New York and
__________, __________ or in such other location as the Corporate Trust Office
may be located are authorized or obligated by law, regulation or executive order
to remain closed.
"Class A-1 Note" means any Note, substantially in the form of Exhibit
D, designated therein as a Class A-1 [____%] Asset Backed Note.
"Class A-1 Note Interest Rate" means [____%] per annum.
"Class A-1 Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-1 Noteholder" means any Holder of a Class A-1 Note.
4
<PAGE> 10
"Class A-1 Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class A-2 Note" means any Note, substantially in the form of Exhibit
D, designated therein as a Class A-2 [___%] Asset Backed Note.
"Class A-2 Note Interest Rate" means [____%] per annum.
"Class A-2 Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-2 Noteholder" means any Holder of a Class A-2 Note.
"Class A-2 Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class A-3 Note" means any Note, substantially in the form of Exhibit
D, designated therein as a Class A-3 [___%] Asset Backed Note.
"Class A-3 Note Interest Rate" means [____%] per annum.
"Class A-3 Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-3 Noteholder" means any Holder of a Class A-3 Note.
"Class A-3 Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class A-4 Note" means any Note, substantially in the form of Exhibit
D, designated therein as a Class A-4 [___%] Asset Backed Note.
"Class A-4 Note Interest Rate" means [____%] per annum.
"Class A-4 Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-4 Noteholder" means any Holder of a Class A-4 Note.
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"Class A-4 Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class B Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class B [___%] Asset Backed Note.
"Class B Note Interest Rate" means [____%] per annum.
"Class B Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class B Noteholder" means any Holder of a Class B Note.
"Class B Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class C Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class C [___%] Asset Backed Note.
"Class C Note Interest Rate" means [____%] per annum.
"Class C Note Owner" means, 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 as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class C Noteholder" means any Holder of a Class C Note.
"Class C Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Class D Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class D [____%] Asset Backed Note.
"Class D Note Interest Rate" means [____%] per annum.
"Class D Noteholder" means the Holder of any Class D Note.
"Class D Noteholders' Principal Distributable Amount" with respect to
any Payment Date has the meaning specified in the Transfer and Servicing
Agreement.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
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"Clearing Agency Participant" means 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" means ___________ __, 2000.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
["Collection Account" means the account by that name established and
maintained by the Servicer pursuant to the Transfer and Servicing Agreement.]
"Collections" as defined in the Transfer and Servicing Agreement.
"Contract" means any finance contract pledged to the Trustee on the
Closing Date and identified on the List of Contracts.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at date of the execution of this Agreement is located at
__________________________ Attention: __________________________, except that
for purposes of Section 3.02, such term shall mean the office or agency of the
Trustee in __________________________, which office at the date hereof is
located at __________________________, or at such other address as the Trustee
may designate from time to time by notice to the Noteholders and the Transferor,
or the principal corporate trust office of any successor Trustee (the address of
which the successor Trustee will notify the Noteholders and the Transferor);
provided, that for the purposes of Section 3.02, the address of any such office
shall be in __________________________.
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.10.
"Depository Agreement" means the agreement among the Issuer, the
Trustee and The Depository Trust Company, as the initial Clearing Agency, dated
as of the Closing Date, substantially in the form of Exhibit C.
"Payment Date" means the ____ day of each calendar month, or, if any
such date is not a Business Day, the next succeeding Business Day, commencing
__________ __, 2000.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice
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President, the Secretary or the Treasurer of such corporation; and with respect
to any partnership, any general partner thereof.
"Grant" means to mortgage, pledge, bargain, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive anything that the Granting party is or may be entitled to do or
receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Independent" means, when used with respect to any specified Person,
that the Person (a) is in fact independent of the Issuer, any other obligor upon
the Notes, the Transferor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, made by an
Independent appraiser or other expert appointed by an Issuer Order, and such
opinion or certificate shall state that the signer has read the definition of
"Independent" in this Indenture and that the signer is Independent within the
meaning thereof.
"Issuer" means Advanta Equipment Receivables Series 2000-__ LLC or any
successor thereto and, for purposes of any provision contained herein and
required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"List of Contracts" means a printed or electronic list of Contracts,
certified by an Authorized Officer and attached hereto as Exhibit A.
"Net APR" means, with respect to a Receivable, its APR less the
Servicing Fee Rate.
"Note Interest Rate" means the per annum interest rate borne by a Note.
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"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.04.
"Notes" means, collectively, the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes
and the Class D Notes.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Trustee.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to __________________________ and who shall be satisfactory to the
Trustee, and which opinion or opinions shall be addressed to the Trustee as
Trustee, shall comply with any applicable requirements of Section 11.01, and
shall be in form and substance reasonably satisfactory to the Trustee.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Transferor or any Affiliate of
any of the foregoing Persons 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; provided, however, that at anytime following an Event of Default,
in determining whether the Holders of the requisite Outstanding Amount of the
Notes have given any request, demand, authorization, direction, notice, consent
or waiver hereunder or under any Basic Document, Class D Notes shall be
disregarded and deemed not to be Outstanding. 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 the Issuer, any other obligor upon the
Notes, the Transferor or any Affiliate of any of the foregoing
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<PAGE> 15
Persons. In making any such determination, the Trustee may rely on the
representations of the pledgee and shall not be required to undertake any
independent investigation.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or a class of Notes, as applicable, Outstanding at the date of determination.
"Paying Agent" means the Trustee or any Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
business trust, trust (including any beneficiary thereof), unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency" means _______________ and _______________. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Issuer, notice of which designation shall be given to the
Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Servicer and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current rating of any Class of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date,
(i) if the Notes are held in book-entry form, the close of business on the
calendar day (whether or not such day is a Business Day) immediately preceding
such Payment Date or Redemption Date or (ii) if the Notes are held in definitive
form, the last calendar day (whether or not such day is a Business Day) of the
month preceding the month in which such Payment Date or Redemption Date occurs.
"Redemption Date" means the Payment Date specified by the Servicer or
the Issuer pursuant to Section 10.01, as applicable.
"Redemption Price" means in the case of a redemption of the Notes
pursuant to Section 10.01, an amount equal to the principal amount of the Notes
redeemed plus accrued and unpaid interest thereon at the related Note Interest
Rate to but excluding the Redemption Date.
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"Registered Holder" means the Person in whose name a Note is registered
in the Note Register on the applicable Record Date.
["Related Security" as defined in the Transfer and Servicing
Agreement.]
["Reserve Account" means the account or accounts by that name
established and maintained by the Trustee pursuant to Section 8.02(a).]
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee assigned to administer the
Trustee's duties hereunder and under the Basic Documents.
"Servicer" means Advanta Bank Corp.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"Transfer and Servicing Agreement" means the Transfer and Servicing
Agreement dated as of ______ __, 2000, among the Issuer and the Transferor, in
its capacity as Transferor and as Servicer.
"Transferor" means Advanta Bank Corp.
"Trust Estate" means all money, instruments, documents, securities,
contract rights, general intangibles and other property that are subject or
intended to be subject to the lien and security interest of this Indenture for
the benefit of the Noteholders (including, without limitation, all property and
interests Granted to the Trustee), including all proceeds thereof.
"Trustee" means __________________________, a __________________
[banking corporation] as Trustee under this Indenture, or any successor Trustee
under this Indenture.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as in force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
(iv) Other Definitional Provisions. (1) Capitalized terms used
herein and not otherwise defined have the meanings assigned to them in
the Transfer and Servicing Agreement.
(2) All terms defined in this Agreement shall have
the defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein.
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(3) As used in this Agreement and in any certificate
or other document made or delivered pursuant hereto or thereto, accounting terms
not defined in this Agreement or in any such certificate or other document, and
accounting terms partly defined in this Agreement or in any such certificate or
other document to the extent not defined, shall have the respective meanings
given to them under generally accepted accounting principles. To the extent that
the definitions of accounting terms in this Agreement or in any such certificate
or other document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions contained in this
Agreement or in any such certificate or other document shall control.
(4) The words "hereof," "herein," "hereunder," and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement;
Section and Exhibit references contained in this Agreement are references to
Sections and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including without limitation."
(5) The definitions contained in this Agreement 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 such terms.
Section 1.02. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
Section 1.03. Calculations of Interest. [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, Class A-4 notes, Class B
notes, Class C notes and Class D notes will be calculated on the basis of a year
of 360 days and twelve 30-day months.]
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ARTICLE II
THE NOTES
Section 2.01. Form. The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes, the Class A-4 Notes, Class B Notes, the Class C Notes and the Class D
Notes, in each case together with the Trustee's certificate of authentication,
shall be in substantially the forms set forth in Exhibit D, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters, numbers or
other marks of identification and such legends or endorsements placed thereon as
may, consistently herewith, be determined by the officers executing such Notes,
as evidenced by their execution of the Notes. Any portion of the text of any
Note may be set forth on the reverse thereof, with an appropriate reference
thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibit D are part of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall
be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall, upon written order of the Transferor, authenticate
and deliver Notes for original issue in an aggregate principal amount of
$___________. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.05. The Trustee shall
be entitled to rely upon such written order as authority to so authenticate and
deliver the Notes without further inquiry of any Person.
Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples thereof provided, however, that a single Note of any Class
may be issued in a denomination of less than $1,000.
No Note shall be entitled to any benefit under this Indenture 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 by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
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Section 2.03. Temporary Notes. Pending the preparation of definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
If temporary Notes are issued, the Issuer will cause definitive Notes
to be prepared without unreasonable delay. After the preparation of definitive
Notes, the temporary Notes shall be exchangeable for definitive Notes upon
surrender of the temporary Notes at the office or agency of the Issuer to be
maintained as provided in Section 3.02, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute, and the Trustee shall authenticate and deliver in exchange therefor, a
like principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
Section 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be the initial "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer 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 Register, 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 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 Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and upon receipt of such surrendered Note the Trustee shall authenticate and the
Noteholder shall obtain from the Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of
the same class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute, and upon receipt
of such surrendered Note the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
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All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee (or with respect to Class D Notes,
in the form of Exhibit E) duly executed by, the Holder thereof or such Holder's
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 to a Holder for any registration of
transfer or exchange of Notes, but the Issuer 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 Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer
shall not be required to make, and the Note Registrar need not register,
transfers or exchanges of Notes for a period of 20 days preceding the due date
for any payment with respect to the Note.
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee such security or indemnity as may be required
by it to hold the Issuer and the Trustee harmless, then, in the absence of
notice to the Issuer, the Note Registrar or the Trustee that such Note has been
acquired by a bona fide purchaser, and provided that the requirements of Section
8-405 of the UCC are met, the Issuer shall execute and upon its request the
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note of the same class;
provided, however, that if any such destroyed, lost or stolen Note, but not a
mutilated Note, shall have become or within twenty days shall be due and
payable, or shall have been called for redemption, instead of issuing a
replacement Note, the Issuer may pay such destroyed, lost or stolen Note when so
due or payable or upon the Redemption Date without surrender thereof. If, after
the delivery of such replacement Note or payment of a destroyed, lost or stolen
Note pursuant to the proviso to the preceding sentence, a bona fide purchaser of
the original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer and the Trustee shall be entitled to
recover such replacement Note (or such payment) from the Person to whom it was
delivered or any Person taking such replacement Note from such Person to whom
such replacement Note was delivered or any assignee of such Person, except a
bona fide-purchaser, and shall be entitled to recover upon the security or
indemnity provided therefor to the extent of any loss, damage, cost or expense
incurred by the Issuer or the Trustee in connection therewith.
Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental
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<PAGE> 21
charge that may be imposed in relation thereto and any other reasonable expenses
(including the fees and expenses of the Trustee) connected therewith.
Except as set forth in the first paragraph of this Section 2.05, every
replacement Note issued pursuant to this Section in replacement of any
mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
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 2.06. Persons Deemed. Prior to due presentment for registration
of transfer of any Note, the Issuer, the Trustee and any agent of the Issuer or
the Trustee may treat the Person in whose name any Note is registered (as of the
day of determination) as the owner of such Note for the purpose of receiving
payments of principal of and interest, if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected
by notice to the contrary.
Section 2.07. Payment of Principal and Interest; Defaulted Interest.
(a) The Notes shall accrue interest as provided in the form of the Note set
forth in Exhibit D and such interest shall be payable on each Payment Date as
specified therein, subject to Section 3.01. Any installment of interest or
principal, if any, or any other amount, payable on any Note which is punctually
paid or duly provided for by the Issuer on the applicable Payment Date shall be
paid to the Person in whose name such Note (or one or more Predecessor Notes) is
registered on the Record Date, by check mailed first-class, postage prepaid to
such Person's address as it appears on the Note Register on such Record Date,
(i) except that with respect to Class A-1 Notes, Class A-2 Notes, Class A-3
Notes, Class A-4 Notes, Class B Notes and Class C Notes, registered on the
Record Date in the name of the nominee of the Clearing Agency (initially, such
nominee to be Cede & Co.), payment will be made by wire transfer in immediately
available funds to the account designated by such nominee, (ii) except that with
respect to [Class D Notes] registered in the name of the Transferor, payment
will be made by wire transfer in immediately available funds to the account
designated by the Transferor and (iii) except for (A) the final installment of
principal payable with respect to such Note on a Payment Date and (B) the
Redemption Price for any Note called for redemption pursuant to Section 10.01,
in each case which shall be payable as provided below. The funds represented by
any such checks returned undelivered shall be held in accordance with Section
3.03.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the form of Note set forth in Exhibit D.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable, if not previously paid, on the date on which an Event
of Default shall have occurred and be continuing, if the Trustee or the Holders
of the Notes representing a majority of the Outstanding Amount of the Notes have
declared the Notes to be immediately due and payable in the manner provided in
Section 5.02. All principal payments on each class of Notes shall be made pro
rata to the Noteholders of such
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Class entitled thereto. Upon notice to the Trustee by the Issuer, the Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the second Record Date preceding the Payment Date on which the
Issuer expects that the final installment of principal of and interest on such
Note will be paid. Such notice shall be mailed no later than thirty days prior
to such final Payment Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify the
place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Interest Rate in any lawful manner.
The Issuer may pay such defaulted interest to the persons who are Noteholders on
a subsequent special record date, which date shall be fixed or caused to be
fixed by the Issuer and shall be at least five Business Days prior to the
payment date. The Issuer shall fix or cause to be fixed any such payment date,
and, at least 15 days before any such special record date, the Issuer shall mail
to each Noteholder a notice that states the special record date, the payment
date and the amount of defaulted interest to be paid.
Section 2.08. Cancellation. All Notes surrendered for payment,
registration of transfer, exchange or redemption shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee and shall, following
its receipt thereof, be promptly cancelled by the Trustee. The Issuer may at any
time deliver to the Trustee for cancellation any Notes previously authenticated
and delivered hereunder which the Issuer may have acquired in any manner
whatsoever, and all Notes so delivered shall, following its receipt thereof, 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 Indenture. All cancelled Notes may be held or
disposed of by the Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided that such Issuer Order
is timely and the Notes have not been previously disposed of by the Trustee.
Section 2.09. Release of Collateral. Subject to Section 11.01, the
Trustee shall release property from the lien of this Indenture only upon receipt
of an Issuer Request accompanied by an Officer's Certificate, an Opinion of
Counsel and Independent Certificates in accordance with TIA Sections 314(c)
and 314 (d)(1) or an Opinion of Counsel in lieu of such Independent Certificates
to the effect that the TIA does not require any such Independent Certificates.
Section 2.10. Book-Entry Notes. The Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C
Notes, upon original issuance, will be issued in the form of a typewritten Note
or Notes representing the Book-Entry Notes, to be delivered to The Depository
Trust Company, the initial Clearing Agency, by, or on behalf of, the Issuer.
Such Notes shall initially be registered on the Note Register in the name of
Cede & Co., the nominee of the initial Clearing Agency, and no Class A-1 Note,
Class A-2 Note, Class A-3 Note, Class A-4 Note, Class B Note or Class C Note
Owner will receive a Definitive Note representing such Class A-1 Note, Class A-2
Note, Class A-3 Note, Class A-4 Note, Class B Note or Class C Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Class A-1
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Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class B Note or Class C
Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole holder
of the Notes, and shall have no obligation to the Class A-1 Note, Class
A-2 Note, Class A-3 Note, Class A-4 Note, Class B Note or Class C Note
Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Class A-1 Note, Class A-2 Note, Class A-3
Note, Class A-4 Note, Class B Note or Class C Note Owners shall be
exercised only through the Clearing Agency and shall be limited to
those established by law and agreements between such Class A-1 Note,
Class A-2 Note, Class A-3 Note, Class A-4 Note, Class B Note or Class C
Note Owners and the Clearing Agency and/or the Clearing Agency
Participants pursuant to the Depository Agreement. Unless and until
Definitive Notes are issued pursuant to Section 2.12, the initial
Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of
and interest on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note,
Class B Note or Class C Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such instructions to
the Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Holders of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class B Notes or the Class C Notes is
required under this Indenture, unless and until Definitive Notes shall have been
issued to Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note Owners,
Class A-4 Note Owners, Class B Note Owners or Class C Note Owners pursuant to
Section 2.12, the Trustee shall give all such notices and communications
specified herein to be given to Holders of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class
C Notes to the Clearing Agency, and shall have no obligation to the Class A-1
Note Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note
Owners, Class B Note Owners or Class C Note Owners.
Section 2.12. Definitive Notes. (a) The Class D Notes shall be issued
in definitive, fully-registered form and (b) if (i) the Issuer advises the
Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities with respect to the
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Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes,
the Class B Notes and the Class C Notes, and the Issuer is unable to locate a
qualified successor, or (ii) the Issuer at its option advises the Trustee in
writing that it elects to terminate the book-entry system through the Clearing
Agency, or (iii) after the occurrence of an Event of Default or a Servicer
Default, Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note Owners,
Class A-4 Note Owners, Class B Note Owners and Class C Note Owners representing
beneficial interests aggregating a majority of the Outstanding Amount of the
Class A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B
Notes and Class C Notes advise the Clearing Agency in writing that the
continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Class A Note Owners, Class A-2 Note Owners, Class A-3
Note Owners, Class A-4 Note Owners, Class B Note Owners and Class C Note Owners
then the Clearing Agency shall notify all Class A Note Owners, Class A-2 Note
Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners and
Class C Note Owners and the Trustee of the occurrence of any such event and of
the availability of Definitive Notes to Class A-1 Note Owners, Class A-2 Note
Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners and
Class C Note Owners requesting the same. Upon surrender to the Trustee of the
typewritten Note or Notes representing the Book-Entry Notes by the Clearing
Agency, accompanied by registration instructions, the Issuer shall execute and
the Trustee shall authenticate the Definitive Notes in accordance with the
instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
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. Upon the issuance of Definitive Notes to Class A-1 Note Owners,
Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class B
Note Owners and Class C Note Owners, the Trustee shall recognize the Holders of
such Definitive Notes as Noteholders.
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ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly
and punctually pay the principal of and interest, if any, on the Notes in
accordance with the terms of the Notes and this Indenture. Without limiting the
foregoing, the Issuer will cause to be distributed all amounts on deposit in the
Note Distribution Account on a Payment Date pursuant to Section 8.02(c). Amounts
properly withheld under the Code by any Person from a payment to any Noteholder
of interest and/or principal and/or premium shall be considered as having been
paid by the Issuer to such Noteholder for all purposes of this Indenture.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain
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, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Corporate
Trust Office to serve as its agent for the foregoing purposes. The Issuer will
give prompt written notice to the Trustee of the location, and of any change in
the location, of any such office or agency. If at any time the Issuer shall fail
to maintain any such office or agency or shall fail to furnish the Trustee with
the address thereof, such surrenders, notices and demands may be made or served
at the Corporate Trust Office, the Trustee shall be entitled to rely upon, and
the Issuer hereby appoints the Trustee as its agent to receive, all such
surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02(a) and (b), all payments of amounts due and payable with respect to
any Notes that are to be made from amounts withdrawn from the Collection Account
[and the Note Distribution Account] pursuant to Section 8.02(c) shall be made on
behalf of the Issuer by the Trustee or by another Paying Agent, and no amounts
so withdrawn from the Collection Account [and the Note Distribution Account] for
payments of Notes shall be paid over to the Issuer except as provided in this
Section.
[On or before 12:00 noon (New York time) on each Payment Date and the
Redemption Date, the Issuer shall deposit or cause to be deposited in the Note
Distribution Account an aggregate sum sufficient to pay the amounts then
becoming due under the Notes, such sum to be held in trust for the benefit of
the Persons entitled thereto and (unless the Paying Agent is the Trustee) shall
promptly notify the Trustee of its action or failure so to act.]
The Issuer 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 (and if the Trustee acts as Paying Agent, it hereby
so agrees), subject to the provisions of this Section, that such Paying Agent
will:
(i) hold all sums held by it for the payment of amounts due
with respect to the 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 and pay such sums to such
Persons as herein provided;
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(ii) give the Trustee notice of any default by the Issuer of
which it has actual knowledge (or any other obligor upon the Notes) in
the making of any payment required to be made with respect to the
Notes;
(iii) 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;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Trustee all sums held by it in trust for the payment of 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
(v) 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 taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
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 the 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.
Subject to applicable laws with respect to escheat of funds, any money
held by the Trustee or any Paying Agent in trust for the payment of any amount
due with respect to any Note and remaining unclaimed for two years after such
amount has become due and payable shall be discharged from such trust, and the
Trustee or such Paying Agent, as the case may be, shall give prompt notice of
such occurrence to the Issuer and shall release such money to the Issuer on
Issuer Request; and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Issuer (and then only to the extent of the
amounts so paid to the Issuer) 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, shall at the expense and direction of the
Issuer 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 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 Issuer. The Trustee shall also adopt and employ, at the
expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Trustee or of any Paying Agent,
at the last address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its
existence, rights and franchises as a limited liability company under the laws
of the State of Delaware (unless it
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becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other State or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
Section 3.05. Protection of Trust Estate. The Issuer will from time to
time take all actions necessary (other than taking possession of the original
Contracts), including without limitation preparing, executing, delivering and
filing all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance and other
instruments, if applicable, and will take such other action necessary or
advisable to:
(i) maintain or preserve the lien and security interest (and
the priority thereof) of this Indenture or carry out more effectively
the purposes hereof;
(ii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture:
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the
rights of the Trustee and the Noteholders in such Trust Estate against
the claims of all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
pursuant to this Section.
Section 3.06. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Trustee an Opinion of Counsel either stating that,
in the opinion of such counsel, such action has been taken to perfect the lien
and security interest of this Indenture, including without limitation with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are so necessary and reciting the details of such action, or stating that, in
the opinion of such counsel, no such action is necessary to maintain the
perfection of such lien and security interest.
(b) On or before May 30 in each calendar year, beginning in ______, the
Issuer shall furnish to the Trustee an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been
taken to perfect the lien and security interest of this Indenture,
including without limitation with respect to the recording, filing,
re-recording and refiling of this Indenture, any indentures
supplemental hereto and any other requisite documents and with respect
to the execution and filing of any financing statements and
continuation statements as is so necessary and reciting the details of
such action or stating that in the opinion of such counsel no such
action is necessary to maintain the perfection of such lien and
security interest. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and refiling of this Indenture, any
indentures supplemental hereto and any other requisite documents and
the execution and filing of any financing
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statements and continuation statements that will, in the opinion of
such counsel, be required to maintain the perfection of the lien and
security interest of this Indenture until May 30 in the following
calendar year.
Section 3.07. Performance of Obligations; Servicing of Contracts. (a)
The Issuer will not 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 the 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 Indenture, the Transfer and Servicing Agreement or
such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in
performing its duties under this Indenture, and any performance of such
duties by a Person identified to the Trustee in an Officer's
Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Servicer to
assist the Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic
Documents and in the instruments and agreements included in the 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 Indenture and the Transfer and Servicing
Agreement in accordance with and within the time periods provided for
herein and therein. Except as otherwise expressly provided therein, the
Issuer shall not waive, amend, modify, supplement or terminate any
Basic Document or any provision thereof without the consent of the
Trustee or the Holders of a majority of the Outstanding Amount of the
Notes; provided that the consent of the Trustee shall be required for
any amendment which increases the obligations of the Servicer.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Transfer and Servicing Agreement, the Issuer shall
promptly notify the Trustee and the Rating Agencies thereof, and shall
specify in such notice the action, if any, the Issuer is taking with
respect to such default. If a Servicer Default shall arise from the
failure of the Servicer to perform any of its duties or obligations
under the Transfer and Servicing Agreement with respect to the
Contracts, the Issuer shall take all reasonable steps available to it
to remedy such failure.
(e) As promptly as possible after the giving of notice of termination
to the Servicer of the Servicer's rights and powers pursuant to
[Section 8.01] of the Transfer and Servicing Agreement, the Issuer
shall appoint a successor servicer (the "Successor Servicer"), and such
Successor Servicer shall accept its appointment by a written assumption
in a form acceptable to the Trustee. In the event that a Successor
Servicer has not been appointed and accepted its appointment at the
time when the Servicer ceases to act as Servicer, the Trustee without
further action shall automatically be appointed the Successor Servicer.
The Trustee may resign as the Servicer by giving written notice of such
resignation to the Issuer and in such event will be released from such
duties and obligations, such release
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not to be effective until the date a new servicer enters into a
servicing agreement with the Issuer as provided below. Upon delivery of
any such notice to the Issuer, the Issuer shall obtain a new servicer
as the Successor Servicer under the Transfer and Servicing Agreement.
Any Successor Servicer other than the Trustee shall (i) be a
corporation having a net worth of not less than $20,000,000 and whose
regular business includes the servicing of equipment receivables and
(ii) enter into a servicing agreement with the Issuer having
substantially the same provisions as the provisions of the Transfer and
Servicing Agreement applicable to the Servicer. If within 30 days after
the delivery of the notice referred to above, the Issuer shall not have
obtained such a new servicer, the Trustee may appoint, or may petition
a court of competent jurisdiction to appoint, a Successor Servicer. In
connection with any such appointment, the Trustee may make such
arrangements for the compensation of such successor as it and such
successor shall agree, subject to the limitations set forth below and
in the Transfer and Servicing Agreement, and in accordance with Section
[8.02] of the Transfer and Servicing Agreement, the Issuer shall enter
into an agreement with such successor for the servicing of the
Contracts (such agreement to be in form and substance reasonably
satisfactory to the Trustee). If the Trustee shall succeed to the
Servicer's duties as servicer of the Contracts as provided herein, it
shall do so in its individual capacity and not in its capacity as
Trustee and, accordingly, the provisions of Article VI hereof shall
be inapplicable to the Trustee in its duties as the successor to the
Servicer and the servicing of the Contracts. In case the Trustee shall
become a successor to the Servicer under the Transfer and Servicing
Agreement, the Trustee shall be entitled to appoint any one of its
Affiliates to carry out its functions as Servicer (pending appointment
of a Successor Servicer), provided that it shall be fully liable for
the actions and omissions of such Affiliate in such capacity as
Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant
to the Transfer and Servicing Agreement, the Issuer shall promptly
notify the Trustee. As soon as a Successor Servicer is appointed, the
Issuer shall notify the Trustee of such appointment, specifying in such
notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment
granted to the Trustee under this Indenture or the rights of the
Trustee hereunder, the Issuer agrees that it will not, without the
prior written consent of the Trustee or the Holders of a majority in
Outstanding Amount of the Notes, amend, modify, waive, supplement,
terminate or surrender, or agree to any amendment, modification,
supplement, termination, waiver or surrender of, the terms of any
Collateral (except to the extent otherwise permitted pursuant to the
terms of the Transfer and Servicing Agreement) or the Basic Documents,
or waive timely performance or observance by the Servicer or the
Transferor under the Transfer and Servicing Agreement; provided,
however, that no such amendment shall (i) except to the extent
otherwise provided in the Transfer and Servicing Agreement, increase or
reduce in any manner the amount of, or accelerate or delay the timing
of, collections of payments on Contracts or distributions that are
required to be made for the benefit of the Noteholders or (ii) reduce
the aforesaid percentage of the Notes which are required to consent to
any such amendment, without the consent of the holders of all the
Outstanding Notes. If any such amendment, modification, supplement or
waiver shall be so consented to by the Trustee or such Holders, the
Issuer agrees, promptly following a
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request by the Trustee to do so, to execute and deliver, in its own
name and at its own expense, such agreements, instruments, consents and
other documents as the Trustee may reasonably deem necessary or
appropriate under the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are Outstanding,
the Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Transfer and Servicing Agreement, sell, transfer, exchange or otherwise
dispose of any of the properties or assets of the Issuer, including
those included in the Trust Estate, unless directed to do so by the
Trustee;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code or
applicable state law) 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 the Trust Estate;
(iii) dissolve or liquidate in whole or in part; or
(iv) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien of this Indenture to be
amended, hypothecated, subordinated, terminated or discharged, or
permit any Person to be released from any covenants or obligations with
respect to the Notes under this Indenture except as may be expressly
permitted hereby, (B) permit any lien, charge, excise, claim, security
interest, mortgage or other encumbrance (other than the lien of this
Indenture) to be created on or extend to or otherwise arise upon or
burden the Trust Estate or any part thereof or any interest therein or
the proceeds thereof (other than tax liens, mechanics' liens and other
liens on a Financed Equipment arising solely as a result of an action
or omission of the related Obligor) or (C) permit the lien of this
Indenture not to constitute a valid first priority perfected security
interest in the Trust Estate (other than with respect to any such tax,
mechanics' or other lien).
Section 3.09. Statements as to Compliance. (a) The Issuer will deliver
to the Trustee, within 120 days after the end of each fiscal year of the Issuer
(commencing within 120 days after the end of the fiscal year ____), an Officer's
Certificate stating, as to the Authorized Officer signing such Officer's
Certificate, that
(i) a review of the activities of the Issuer during the
12-month period ending at the end of such fiscal year (or in the case
of the fiscal year ending ________ __, ____, the period from the
Closing Date to ________ __, 2000) and of performance under this
Indenture has been made under such Authorized Officer's supervision;
and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
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Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms. The
Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) 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 an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory
to the Trustee and/or approved by Holders of Notes representing more
than 50% of the Outstanding Amount, the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee) to the effect that
such transaction will not have any material adverse tax consequence to
any Noteholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
(b) The Issuer shall not convey or transfer any of its properties or
assets, including those included in the Trust Estate, to any Person,
unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any State, expressly assumes, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form reasonably satisfactory
to the Trustee, the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to
be performed or observed, all as provided herein, expressly agrees by
means of such supplemental indenture that all right, title and interest
so conveyed or transferred shall be subject and subordinate to the
rights of Holders of the Notes, unless otherwise provided in such
supplemental indenture, expressly agrees to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and expressly
agrees by means of such
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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 Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing:
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee) to the effect that
such transaction will not have any material adverse tax consequence to
any Noteholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act).
Section 3.11. Successor or Transferee. Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(a) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), Advanta Equipment Receivables
Series 2000-___ LLC will be released from every covenant and agreement
of this Indenture to be observed or performed on the part of the Issuer
with respect to the Notes immediately upon the delivery to the Trustee
of the Officer's Certificate and Opinion of Counsel specified in
Section 3.10(b)(vi) stating that Advanta Equipment Receivables Series
2000-___ LLC is to be so released.
Section 3.12. No Other Business. The Issuer shall not engage in any
business other than the purposes set forth in the Basic Documents or this
Indenture.
Section 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except as expressly provided for pursuant to the terms of the Basic
Documents and the Notes.
Section 3.14. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with all of its obligations under the Basic Documents,
including without limitation those set forth in Sections [4.09, 4.10, 4.11 and
5.06] of the Transfer and Servicing Agreement.
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Section 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Transfer and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
Section 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.17. [RESERVED].
Section 3.18. Restricted Payments. The Issuer shall not, directly or
indirectly, pay any dividend or make any distribution (by reduction of capital
or otherwise), whether in cash, property, securities or a combination thereof,
to any owner of a beneficial interest in the Issuer or otherwise with respect to
any ownership or equity interest or security in or of the Issuer or to the
Servicer, redeem, purchase, retire or otherwise acquire for value any such
ownership or equity interest or security or set aside or otherwise segregate any
amounts for any such purpose; provided, however, that the Issuer may make, or
cause to be made, distributions to the Servicer as permitted by, and to the
extent funds are available for such purpose under the Transfer and Servicing
Agreement. The Issuer will not, directly or indirectly, make payments to or
distributions from the Collection Account except in accordance with this
Indenture and the Basic Documents.
Section 3.19. Notice of Events of Default. The Issuer agrees to give
the Trustee and the Rating Agencies prompt written notice of each Event of
Default hereunder and, immediately after obtaining knowledge of any of the
following occurrences, written notice of each default on the part of the
Servicer or the Transferor of its obligations under the Transfer and Servicing
Agreement.
Section 3.20. Further Instruments and Acts. Upon request of the
Trustee, the Issuer 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 Indenture.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes (except as to
rights of registration of transfer and exchange, substitution of mutilated,
destroyed, lost or stolen Notes, rights of Noteholders to receive payments of
principal thereof and interest thereon, Sections 3.03, 3.04, 3.05, 3.08, 3.10,
3.12 and 3.13, the rights, obligations and immunities of the Trustee hereunder
(including the rights of the Trustee under Section 6.07 and the obligations of
the Trustee under Section 4.02) and (vi) the rights of Noteholders as
beneficiaries hereof with respect to the property so deposited with the Trustee
payable to all or any of them for a period of one year after clauses (A), (B)
and (C) below have occurred), and the Trustee, on demand of and at the expense
of the Issuer, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that have been
replaced or paid as provided in Section 2.05 and (ii) Notes for whose payment
money has theretofore been deposited in trust or segregated and held in trust by
the Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Trustee for cancellation;
or
(2) all Notes not theretofore delivered to the Trustee for
cancellation:
(i) have become due and payable;
(ii) will become due and payable at (A) the Class A-1
Final Scheduled Payment Date with respect to the Class A-1
Notes, (B) the Class A-2 Final Scheduled Payment Date with
respect to the Class A-2 Notes, (C) the Class A-3 Final
Scheduled Payment Date with respect to the Class A-3 Notes,
(D) the Class A-4 Final Scheduled Payment Date with respect to
the Class A-4 Notes, (E) the Class B Final Scheduled Payment
Date with respect to the Class B Notes, (F) the Class C Final
Scheduled Payment Date with respect to the Class C Notes and
(G) the Class D Final Scheduled Payment Date with respect to
the Class D Notes; or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Issuer;
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited with the
Trustee cash or direct obligations of or obligations guaranteed by the
United States of America (which will mature prior to the date such
amounts are payable), in trust for such purpose, in an amount
sufficient to pay and discharge the entire indebtedness on such Notes
not theretofore delivered to the Trustee for cancellation when due to
the Class A-1 Final Scheduled Payment Date, the Class
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A-2 Final Scheduled Payment Date, the Class A-3 Final Scheduled Payment
Date, the Class A-4 Final Scheduled Payment Date, the Class B Final
Scheduled Payment Date, the Class C Final Scheduled Payment Date and
the Class D Final Scheduled Payment Date or the Redemption Date (if
Notes shall have been called for redemption pursuant to Section 10.01),
as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Trustee an Officer's Certificate,
an Opinion of Counsel and (if required by the TIA or the Trustee) an Independent
Certificate from a firm of certified public accountants, each meeting the
applicable requirements of Section 11.01(a) and each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; provided such moneys need not
be segregated from other funds except to the extent required herein or in the
Transfer and Servicing Agreement or required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.03, and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
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ARTICLE V
REMEDIES
Section 5.01. Events of Default. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Class A-1
Note, Class A-2 Note, Class A-3 Note, Class A-4 Note, Class B Note or
Class C Note when the same becomes due and payable (without regard to
the provisos set forth in Section 8.02(c)(i)), and such default shall
continue for a period of five days; or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable; or
(iii) default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such representation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days after there shall have been given, by registered or
certified mail, to the Issuer by the Trustee or to the Issuer and the
Trustee by the Holders of at least 25% of the Outstanding Amount of the
Notes, a written notice specifying such default or incorrect
representation or warranty and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(iv) the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official for the
Issuer or for any substantial part of the Trust Estate, or ordering the
winding-up or liquidation of the Issuer's affairs, and such decree or
order shall remain unstayed and in effect for a period of 90
consecutive days; or
(v) the commencement by the Issuer of a voluntary case under
any applicable federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator,
conservator or similar official of the Issuer or for any substantial
part of the Trust Estate, or the making by the
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Issuer of any general assignment for the benefit of creditors, or the
failure by the Issuer generally to pay, or admit in writing its
inability to pay, its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii) or clause (iv), its status and what action
the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default should occur and be continuing, then and in every such case the
Trustee or the Holders of Notes representing not less than a majority of the
Outstanding Amount of the Notes may declare all the Notes to be immediately due
and payable, by a notice in writing to the Issuer (and to the Trustee if
declared by Noteholders), and upon any such declaration the unpaid principal
amount of the Notes, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable.
At any time after such declaration of acceleration of maturity 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 V provided, the Holders
of Notes representing not less than a majority of the Outstanding Amount of the
Notes, by written notice to the Issuer and the Trustee, may rescind and annul
such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder or upon such Notes
if the Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Issuer covenants that if (i) default is made in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable, the Issuer will, upon demand of the Trustee, pay to it,
for the benefit of the Holders of the Notes, 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
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interest, at the applicable Note Interest Rate borne by the Notes, and in
addition thereto will pay such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel.
(a) In case the Issuer shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
may institute a Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and may enforce the
same against the Issuer or other obligor upon such Notes and collect in the
manner provided by law out of the property of the Issuer or other obligor upon
such Notes, wherever situated, the moneys adjudged or decreed to be payable.
(b) If an Event of Default occurs and is continuing, the Trustee may,
as more particularly provided in Section 5.04, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings 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 Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right vested
in the Trustee by this Indenture or by law.
(c) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of any
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
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 the Notes and
to 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
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 allowed in
such Proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or Person performing similar functions in any such
Proceedings;
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(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and
(iv) 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 allowed in any judicial proceedings
relative to the Issuer, 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 Indenture,
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 judgment, 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 benefit of the Holders of the Notes as
provided herein.
(f) In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall
have occurred and be continuing, the Trustee may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate;
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(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Trustee and the Holders of the Notes; and
(iv) in the event that all the Notes have been declared due
and payable pursuant to Section 5.02, sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or
private sales called and conducted in any manner permitted by law;
provided, however, that the Trustee may not sell or otherwise liquidate the
Trust Estate following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii) unless (A) the Holders of 100% of the
Outstanding Amount of the Notes consent thereto, (B) the Trustee determines that
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest or (C) the Trustee determines that the Trust Estate
will not continue to provide sufficient funds for the payment of principal of
and interest 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 Holders of
at least 66-2/3% of the Outstanding Amount of the Notes. In determining such
sufficiency or insufficiency with respect to clause (B) and (C), the Trustee
may, but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
(b) If the Trustee collects any money or property pursuant to this
Article V following the acceleration of the maturities of the Notes
pursuant to Section 5.02 (so long as such declaration shall not have
been rescinded or annulled), it shall pay out the money or property
(other than the Servicer's Yield, unpaid Servicing Fees and unpaid
Administration Fees, which may be retained by the Servicer free and
clear of the lien of this Indenture in accordance with Section 5.07 of
the Transfer and Servicing Agreement) in the following order:
FIRST: to the Trustee for amounts due pursuant to Section
6.07;
SECOND: to Holders of the Class A-1 Notes for amounts due and
unpaid on the Class A-1 Notes for interest, ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Class A-1 Notes for interest;
THIRD: to Holders of the Class A-1 Notes for amounts due and
unpaid on the Class A-1 Notes for principal, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class A-1 Notes for principal;
FOURTH: to Holders of the Class A-2 Notes for amounts due and
unpaid on the Class A - 2 Notes for interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class A - 2 Notes for interest;
FIFTH: to Holders of the Class A - 2 Notes for amounts due and
unpaid on the Class A - 2 Notes for principal, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class A - 2 Notes for principal;
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SIXTH: to Holders of the Class A-3 Notes for amounts due and
unpaid on the Class A-3 Notes for interest, ratably, with preference or
priority of any kind, according to the amounts due and payable on the
Class A-3 notes for interest;
SEVENTH: to Holders of the Class A-3 Notes for amounts due and
unpaid on the Class A-3 Notes for principal, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class A-3 Notes for principal;
EIGHTH: to Holders of the Class A-4 Notes for amounts due and
unpaid on the Class A-4 Notes for interest, ratably, with preference or
priority of any kind, according to the amounts due and payable on the
Class A-4 notes for interest;
NINTH: to Holders of the Class A-4 Notes for amounts due and
unpaid on the Class A-4 Notes for principal, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class A-4 Notes for principal;
TENTH: to Holders of the Class B Notes for amounts due and
unpaid on the Class B Notes for interest, ratably, with preference or
priority of any kind, according to the amounts due and payable on the
Class B notes for interest;
ELEVENTH: to Holders of the Class B Notes for amounts due and
unpaid on the Class B Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Class B Notes for principal;
TWELFTH: to Holders of the Class C Notes for amounts due and
unpaid on the Class C Notes for interest, ratably, with preference or
priority of any kind, according to the amounts due and payable on the
Class C notes for interest;
THIRTEENTH: to Holders of the Class C Notes for amounts due
and unpaid on the Class C Notes for principal, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Class C Notes for principal;
FOURTEENTH: to Holders of the Class D Notes for amounts due
and unpaid on the Class D Notes for interest, ratably, with preference
or priority of any kind, according to the amounts due and payable on
the Class D notes for interest;
FIFTEENTH: to Holders of the Class D Notes for amounts due and
unpaid on the Class D Notes for principal, ratably, without preference
or priority of any kind, according to the amounts due and payable on
the Class D Notes for principal; and
SIXTEENTH: to the Issuer for distribution.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Trustee a notice that states
the record date, the payment date and the amount to be paid.
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Section 5.05. Optional Preservation of the Contracts. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee may, but need not, elect to maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes 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;
(iii) Holder or Holders have offered to the Trustee an
indemnity against the costs, expenses and liabilities to be incurred in
complying with such request in form and substance satisfactory to the
Trustee;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
Proceedings; and
(v) 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;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal
and Interest. Notwithstanding any other provisions in this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
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Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason or has been determined adversely to the Trustee or to such Noteholder,
then and in every such case the Issuer, the Trustee and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Trustee or to the 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 5.10. Delay or Omission Not a Waiver. No delay or omission of
the Trustee or any Holder of any Note to exercise any right or remedy accruing
upon any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Notes shall have the right to direct the time, method
and place of conducting any Proceeding for any remedy available to the Trustee
with respect to the Notes or exercising any trust or power conferred on the
Trustee; provided that
(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.04, any
direction to the Trustee to sell or liquidate the Trust Estate shall be
by the Holders of Notes representing not less than 100% of the
Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.05 have been
satisfied and the Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to the Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction;
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provided, however, that, subject to Section 6.01, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Notes may waive any past Default or Event of Default and its consequences except
a Default (a) in payment of principal of or interest on any of the Notes or (b)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; provided that no such
waiver shall extend to any subsequent or other Default or impair any right
consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; provided that no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture
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 Indenture, 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; provided that the provisions of this Section shall not
apply to (a) any suit instituted by the Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Outstanding Amount of the Notes or (c) any suit instituted by
any Noteholder for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such Note and in this
Indenture (or, in the case of redemption, on or after the Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it 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, that may affect the covenants or the performance of this
Indenture; and the Issuer (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 5.15. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any
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rights or remedies of the Trustee or the Noteholders shall be impaired by the
recovery of any judgment by the Trustee against the Issuer or by the levy of any
execution under such judgment upon any portion of the Trust Estate or upon any
of the assets of the Issuer. Any money or property collected by the Trustee
shall be applied in accordance with Section 5.04(b).
Section 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Trustee to do so and at the Transferor's
expense, the Issuer agrees to take all such lawful action as the Trustee may
request to compel or secure the performance and observance by the Transferor, in
its capacity as Transferor and as Servicer of its obligations to the Issuer
under or in connection with the Transfer and Servicing Agreement in accordance
with the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Transfer and Servicing Agreement to the extent and in the manner directed by the
Trustee, including the transmission of notices of default on the part of the
Transferor [or in its capacity as Servicer] thereunder and the institution of
legal or administrative actions or proceedings to compel or secure performance
by the Transferor of its obligations under the Transfer and Servicing Agreement,
both in its capacity as Transferor and as Servicer.
(b) If an Event of Default has occurred and is continuing, the Trustee
may, and, at the direction (which direction shall be in writing or by telephone
(confirmed in writing promptly thereafter)) of the Holders of at least 66-2/3%
of the Outstanding Amount of the Notes shall, exercise all rights, remedies,
powers, privileges and claims of the Issuer against the Transferor or under or
in connection with the Transfer and Servicing Agreement, including the right or
power to take any action to compel or secure performance or observance by the
Transferor of its obligations to the Issuer thereunder and to give any consent,
request, notice, direction, approval, extension or waiver under the Transfer and
Servicing Agreement, and any right of the Issuer to take such action shall be
suspended.
(c) [RESERVED].
(d) [RESERVED].
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ARTICLE VI
THE TRUSTEE
Section 6.01. Duties of Trustee. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture 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 such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations (including, without limitation, to
exercise any discretionary powers granted by this Indenture) shall be
read into this Indenture against the Trustee; and
(ii) 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 pursuant to the requirements of this
Indenture; provided, however, the Trustee shall examine the
certificates and opinions to determine whether or not they conform on
their face to the requirements of this Indenture.
The Trustee shall not be required to determine, confirm or recalculate
the information contained in the Servicer's Certificate delivered to it pursuant
to the Transfer and Servicing Agreement.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of subsection
6.01(b);
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with the
direction of any requisite majority of Noteholders authorized to give
direction to the Trustee pursuant to this Indenture.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections 6.01(a), (b) and (c);
(e) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer.
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(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 Indenture
or the Transfer and Servicing Agreement.
(g) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayments of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
Section 6.02. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) 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 or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
Section 6.03. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee, in its capacity as Trustee, must comply with Sections 6.11 and 6.12.
Section 6.04. Trustee's Disclaimer. The Trustee shall not be
responsible for and makes no representation as to the validity or adequacy of
the Trust Estate, this Indenture or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture or in any document issued in
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connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing
and if it is known to a Responsible Officer of the Trustee, the Trustee shall
mail to each Noteholder notice of the Default within 90 days after it occurs.
Except in the case of a Default in payment of principal of or interest on any
Note (including payments pursuant to the mandatory redemption provisions of such
Note), the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interests of Noteholders.
Section 6.06. Reports by Trustee to Holders. The Trustee shall, to the
extent provided to it by the Servicer pursuant to Section 5.06 of the Transfer
and Servicing Agreement, deliver to each Noteholder such information as may be
required to enable such holder to prepare its federal and state income tax
returns, which shall include the information required to be distributed pursuant
to the second to last paragraph of Section 5.06 of the Transfer and Servicing
Agreement. The Trustee shall not be required to determine, confirm or recompute
any such information provided to it.
Section 6.07. Compensation and Indemnity. The Issuer shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Issuer
shall indemnify the Trustee against any and all loss, liability or expense
(including the fees of either in-house counsel or outside counsel, but not both)
incurred by it in connection with the administration of the Trust Estate and the
performance of its duties hereunder. The Trustee shall notify the Issuer
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Issuer shall not relieve the Issuer of its obligations hereunder
unless such loss, liability or expense could have been avoided with such prompt
notification and then only to the extent of such loss, expense or liability
which could have been so avoided. The Issuer shall defend, any claim against the
Trustee, the Trustee may have separate counsel and if it does, the Issuer to pay
the fees and expenses of such counsel. The Issuer need not reimburse any expense
or indemnify against any loss, liability or expense incurred by the Trustee
through the Trustee's own willful misconduct, negligence or bad faith.
The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 5.01(iv) or (v)
with respect to the Issuer, 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 herein to the contrary, the Trustee's right to
enforce any of the Issuer's payment obligations pursuant to this Section 6.07
shall be subject to the provisions of Section 11.17.
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Section 6.08. Replacement of Trustee. No resignation or removal of the
Trustee and no appointment of a successor Trustee shall become effective until
the acceptance of appointment by the successor Trustee pursuant to this Section
6.08. The Trustee may resign at any time by so notifying the Issuer. The Holders
of a majority in Outstanding Amount of the Notes may remove the Trustee by so
notifying the Trustee and may appoint a successor Trustee. The Issuer shall
remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) the Trustee shall consent to the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings
of or relating to the Trustee or all or substantially all of its
property, or a decree or order of a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator or receiver or liquidator in any insolvency, readjustment
of debt, marshalling of assets and liabilities or similar proceedings,
or for the winding-up or liquidation of its affairs, shall have been
entered against the Trustee; or the Trustee shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations; or
(iii) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Issuer shall promptly appoint a successor
Trustee, which successor shall be reasonably acceptable to the Transferor.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuer. Thereupon the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Noteholders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of not less than a majority in Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's obligations under Section 6.07 shall continue for the
benefit of the retiring Trustee.
Section 6.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to,
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another corporation or banking association, the resulting, surviving or
transferee corporation or banking association without any further act shall be
the successor Trustee. The Trustee shall provide the Rating Agencies prior
written notice of any such transaction; provided that such corporation or
banking association shall be otherwise qualified and eligible under Section
6.11.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons reasonably acceptable to the Issuer to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust Estate, and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the 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
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 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 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.
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(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. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. 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 Indenture,
specifically including every provision of this Indenture 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) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. 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 or
successor trustee.
Section 6.11. Eligibility; Disqualification. The Trustee shall at all
times satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and its long-term unsecured debt
shall be rated at least [__________________ and __________________]. The Trustee
shall comply with TIA Section 310(b), including the optional provision permitted
by the second sentence of TIA Section 310(b)(9); provided, however, that there
shall be excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures under which other securities of the issuer are outstanding if the
requirements for such exclusion set forth in TIA Section 310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against. The Trustee
shall comply with TIA Section 311(a), excluding any creditor relationship listed
in TIA Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders of Notes as of
such Record Date, (b) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Issuer 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.
Section 7.02. Preservation of Information; Communications to
Noteholders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders of Notes
contained in the most recent list furnished to the Trustee as provided in
Section 7.01 and the names and addresses of Holders of Notes received by the
Trustee in its capacity as Note Registrar. The Trustee may destroy any list
furnished to it as provided in such Section 7.01 upon receipt of a new list so
furnished.
(b) Noteholders may communicate, pursuant to TIA Section 312(b), with
other Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
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 Issuer may
be required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act;
(ii) file 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 Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA Section 313(c)) such summaries
of any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.03(a) as may
be required by rules and regulations prescribed from time to time by
the Commission.
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(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
Section 7.04. Reports by Trustee. If required by TIA Section 313(a),
within 60 days after each March 31 beginning with March 31, 2000, the Trustee
shall mail to each Noteholder as required by TIA Section 313(c) a brief report
dated as of such date that complies with TIA Section 313(a). The Trustee also
shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall
be filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture. The Trustee shall apply
all such money received by it as provided in this Indenture. Except as otherwise
expressly provided in this Indenture, if any default occurs in the making of any
payment or performance under any agreement or instrument that is part of the
Trust Estate, the Trustee may take such action as may be appropriate to enforce
such payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any right
to claim a Default or Event of Default under this Indenture and any right to
proceed thereafter as provided in Article V.
Section 8.02. Collection and Reserve Accounts. (a) On or prior to the
Closing Date, the Issuer shall cause the Servicer to establish and maintain, in
the name of the Trustee, for the benefit of the Noteholders the Collection
Account as provided in [Section 5.01] of the Transfer and Servicing Agreement.
The Trustee shall establish and maintain a Reserve Account in its name, for the
benefit of the Noteholders.
(b) On or before the Business Day preceding each Payment Date, amounts
with respect to the preceding Collection Period will be transferred [from the
__________________ accounts to the Note Distribution Account as provided in
Sections [5.04 and 5.05] of the Transfer and Servicing Agreement.]
(c) On each Payment Date and Redemption Date, the Trustee shall
distribute from the __________________ account to Noteholders in respect of the
Notes to the extent of amounts due and unpaid on the Notes for principal and
interest in the following amounts and in the following order of priority (except
as otherwise provided in Section 5.04(b)):
[(i) during the Revolving Period, to the Holders of the Class
A-1 Notes, accrued and unpaid interest on the Class A-1 Notes; provided
that if there are not sufficient funds in the __________________
Account to pay the entire amount of accrued and unpaid interest then
due on the Class A-1 Notes, the amount in the __________________
Account shall be applied to the payment of such interest on the Class
A-1 Notes pro rata on the basis of the total of such interest due on
the Class A-1 Notes;]
[(ii) during the Revolving Period, to the Holders of the Class
A-2 Notes, accrued and unpaid interest on the Class A-2 Notes; provided
that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-2 Notes after giving effect to
the distribution in clause (i) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class A-2 Notes pro rata on the basis of the total of
such interest due on the Class A-2 Notes;]
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[(iii) during the Revolving Period, to the Holders of the
Class A-3 Notes, accrued and unpaid interest on the Class A-3 Notes;
provided that if there are not sufficient funds in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-3 Notes, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class A-3 Notes pro rata on the basis of the total of
such interest due on the Class A-3 Notes;]
[(iv) during the Revolving Period, to the Holders of the Class
A-4 Notes, accrued and unpaid interest on the Class A-4 Notes; provided
that if there are not sufficient funds in the __________________
Account to pay the entire amount of accrued and unpaid interest then
due on the Class A-4 Notes, the amount in the __________________
Account shall be applied to the payment of such interest on the Class
A-4 Notes pro rata on the basis of the total of such interest due on
the Class A-4 Notes;]
[(v) during the Revolving Period, to the Holders of the Class
B Notes, accrued and unpaid interest on the Class B Notes; provided
that if there are not sufficient funds in the __________________
Account to pay the entire amount of accrued and unpaid interest then
due on the Class B Notes, the amount in the __________________ Account
shall be applied to the payment of such interest on the Class B Notes
pro rata on the basis of the total of such interest due on the Class B
Notes;]
[(vi) during the Revolving Period, to the Holders of the Class
C Notes, accrued and unpaid interest on the Class C Notes; provided
that if there are not sufficient funds in the __________________
Account to pay the entire amount of accrued and unpaid interest then
due on the Class C Notes, the amount in the __________________ Account
shall be applied to the payment of such interest on the Class C Notes
pro rata on the basis of the total of such interest due on the Class C
Notes;]
[(vii) during the Revolving Period, to the Holders of the
Class D Notes, accrued and unpaid interest on the Class D Notes;
provided that if there are not sufficient funds in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class D Notes, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class D Notes pro rata on the basis of the total of
such interest due on the Class D Notes;]
[(viii) during the Amortization Period, to the Holders of the
Class A-1 Notes, accrued and unpaid interest on the Class A-1 Notes;
provided that if there are not sufficient funds in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-1 Notes, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class A-1 Notes pro rata on the basis of the total of
such interest due on the Class A-1 Notes;]
[(ix) during the Amortization Period, to the Holders of the
Class A-1 Notes principal in an amount equal to the Class A-1
Noteholders' Principal Distributable
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<PAGE> 56
Amount with respect to such Payment Date; provided that if there are
not sufficient funds remaining in the __________________ Account to pay
the entire amount of such Class A-1 Noteholders' Principal
Distributable Amount after giving effect to the distribution in clause
(viii) above, the amount remaining in the __________________ Account
shall be applied to the payment of such Class A-1 Noteholders'
Principal Distributable Amount pro rata on the basis to the total of
such Class A-1 Noteholders' Principal Distributable Amount due on the
Class A-1 Notes;]
[(x) during the Amortization Period, to the Holders of the
Class A-2 Notes, accrued and unpaid interest on the Class A-2 Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-2 Notes after giving effect to
the distribution in clause (ix) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class A-2 Notes pro rata on the basis to the total of
such interest due on the Class A-2 Notes;]
[(xi) during the Amortization Period, to the Holders of the
Class A-2 Notes principal in an amount equal to the Class A-2
Noteholders' Principal Distributable Amount with respect to such
Payment Date; provided that if there are not sufficient funds remaining
in the __________________ Account to pay the entire amount of such
Class A-2 Noteholders' Principal Distributable Amount after giving
effect to the distribution in clause (x) above, the amount remaining in
the __________________ Account shall be applied to the payment of such
Class A-2 Noteholders' Principal Distributable Amount pro rata on the
basis to the total of such Class A-2 Noteholders' Principal
Distributable Amount due on the Class A-2 Notes.]
[(xii) during the Amortization Period, to the Holders of the
Class A-3 Notes, accrued and unpaid interest on the Class A-3 Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class A-3 Notes after giving effect to
the distribution in clause (xi) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class A-3 Notes pro rata on the basis to the total of
such interest due on the Class A-3 Notes;]
[(xiii) during the Amortization Period, to the Holders of the
Class A-3 Notes principal in an amount equal to the Class A-3
Noteholders' Principal Distributable Amount with respect to such
Payment Date; provided that if there are not sufficient funds remaining
in the __________________ Account to pay the entire amount of such
Class A-3 Noteholders' Principal Distributable Amount after giving
effect to the distribution in clause (xii) above, the amount remaining
in the __________________ Account shall be applied to the payment of
such Class A-3 Noteholders' Principal Distributable Amount pro rata on
the basis to the total of such Class A-3 Noteholders' Principal
Distributable Amount due on the Class A-3 Notes.]
[(xiv) during the Amortization Period, to the Holders of the
Class A-4 Notes, accrued and unpaid interest on the Class A-4 Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount
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<PAGE> 57
of accrued and unpaid interest then due on the Class A-4 Notes after
giving effect to the distribution in clause (xiii) above, the amount in
the __________________ Account shall be applied to the payment of such
interest on the Class A-4 Notes pro rata on the basis to the total of
such interest due on the Class A-4 Notes;]
[(xv) during the Amortization Period, to the Holders of the
Class A-4 Notes principal in an amount equal to the Class A-4
Noteholders' Principal Distributable Amount with respect to such
Payment Date; provided that if there are not sufficient funds remaining
in the __________________ Account to pay the entire amount of such
Class B Noteholders' Principal Distributable Amount after giving effect
to the distribution in clause (xiv) above, the amount remaining in the
__________________ Account shall be applied to the payment of such
Class A-4 Noteholders' Principal Distributable Amount pro rata on the
basis to the total of such Class A-4 Noteholders' Principal
Distributable Amount due on the Class A-4 Notes;]
[(xvi) during the Amortization Period, to the Holders of the
Class B Notes, accrued and unpaid interest on the Class B Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class B Notes after giving effect to
the distribution in clause (xv) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class B Notes pro rata on the basis to the total of
such interest due on the Class B Notes;]
[(xvii) during the Amortization Period, to the Holders of the
Class B Notes principal in an amount equal to the Class B Noteholders'
Principal Distributable Amount with respect to such Payment Date;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of such Class B
Noteholders' Principal Distributable Amount after giving effect to the
distribution in clause (xvi) above, the amount remaining in the
__________________ Account shall be applied to the payment of such
Class B Noteholders' Principal Distributable Amount pro rata on the
basis to the total of such Class B Noteholders' Principal Distributable
Amount due on the Class B Notes;]
[(xviii) during the Amortization Period, to the Holders of the
Class C Notes, accrued and unpaid interest on the Class C Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class C Notes after giving effect to
the distribution in clause (xvii) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class C Notes pro rata on the basis to the total of
such interest due on the Class C Notes;]
[(xix) during the Amortization Period, to the Holders of the
Class C Notes principal in an amount equal to the Class C Noteholders'
Principal Distributable Amount with respect to such Payment Date;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of such Class C
Noteholders' Principal Distributable Amount after giving effect to the
distribution in clause (xviii) above, the amount remaining in the
__________________ Account shall be
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<PAGE> 58
applied to the payment of such Class C Noteholders' Principal
Distributable Amount pro rata on the basis to the total of such Class C
Noteholders' Principal Distributable Amount due on the Class C Notes.]
[(xx) during the Amortization Period, to the Holders of the
Class D Notes, accrued and unpaid interest on the Class D Notes;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of accrued and
unpaid interest then due on the Class D Notes after giving effect to
the distribution in clause (xix) above, the amount in the
__________________ Account shall be applied to the payment of such
interest on the Class D Notes pro rata on the basis to the total of
such interest due on the Class D Notes; and]
[(xxi) during the Amortization Period, to the Holders of the
Class D Notes principal in an amount equal to the Class D Noteholders'
Principal Distributable Amount with respect to such Payment Date;
provided that if there are not sufficient funds remaining in the
__________________ Account to pay the entire amount of such Class D
Noteholders' Principal Distributable Amount after giving effect to the
distribution in clause (xx) above, the amount remaining in the
__________________ Account shall be applied to the payment of such
Class D Noteholders' Principal Distributable Amount pro rata on the
basis to the total of such Class D Noteholders' Principal Distributable
Amount due on the Class D Notes.]
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Reserve Account shall be invested in Eligible
Investments and reinvested by the Trustee upon Issuer Order, subject to the
provisions of Section 5.01(b) of the Transfer and Servicing Agreement (which
Issuer Order may be upon direction of the Servicer). All income or other gain
from investments of moneys deposited in the Reserve Account shall be deposited
by the Trustee in the Collection Account, and any loss resulting from such
investments shall be charged to such account. The Issuer will not direct the
Trustee to make any investment of any funds or to sell any investment held in
any of the Reserve Account unless the security interest granted and perfected in
such account will continue to be perfected in such investment or the proceeds of
such sale, and, in connection with any direction to the Trustee to make any such
investment or sale, if requested by the Trustee, the Issuer shall deliver to the
Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect.
(b) Subject to Section 6.01(c), the Trustee shall not in any way be
held liable by reason of any insufficiency in the Collection Account and Reserve
Account resulting from any loss on any Eligible Investment included therein
pursuant to the terms of the Basic Documents except for losses attributable to
the Trustee's failure to make payments on such Eligible Investments issued by
the Trustee, in its commercial capacity as principal obligor and not as trustee,
in accordance with their terms.
(c) If (i) the Issuer shall have failed to give investment directions
for any funds on deposit in the Collection Account and Reserve Account to the
Trustee by 12:00 noon New York Time (or such other time as may be agreed by the
Issuer and Trustee) on any Business Day; or (ii) a Default or Event of Default
shall have occurred and be continuing with respect to the Notes
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<PAGE> 59
but the Notes shall not have been declared due and payable pursuant to Section
5.02, or, if such Notes shall have been declared due and payable following an
Event of Default and amounts collected or receivable from the Trust Estate are
being applied in accordance with Section 5.05; then the Trustee shall, to the
fullest extent practicable, invest and reinvest funds in the Collection Account
and Reserve Account in Eligible Investments of the same type as the Trustee was
most recently directed to invest such funds and maturing prior to the succeeding
Payment Date in accordance with Section [5.01(b)] of the Transfer and Servicing
Agreement.
Section 8.04. Release of Trust Estate. (a) Subject to the payment of
its fees and expenses pursuant to Section 6.07, the Trustee may, and when
required by the provisions of this Indenture shall, execute instruments to
release property from the lien of this Indenture, or convey the Trustee's
interest in the same, in a manner and under circumstances that are not
inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article VIII 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.
(b) The Trustee shall, at such time as there are no Notes Outstanding
and all sums due the Trustee pursuant to Section 6.07 have been paid, release
any remaining portion of the Trust Estate that secured the Notes from the lien
of this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Collection Account and Reserve Account. The
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.04(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and
314(d)(1) meeting the applicable requirements of Section 11.01.
(c) Notwithstanding anything to the contrary in this Indenture or the
Transfer and Servicing Agreement, immediately prior to the release of any
portion of the Trust Estate or any funds on deposit in the Collection Account
and Reserve Account pursuant to this Indenture, the Trustee shall remit to the
Transferor for its own account any funds that, upon such release, would
otherwise be remitted to the Issuer.
Section 8.05. Opinion of Counsel. The Trustee shall receive at least
seven days' notice when requested by the Issuer to take any action pursuant to
Section 8.04(a), accompanied by copies of any instruments involved, and the
Trustee shall also require, as a condition to such action, an Opinion of
Counsel, in form and substance reasonably satisfactory to the Trustee, stating
the legal effect of any such action, outlining the steps required to complete
the same, and concluding that all conditions precedent to the taking of such
action have been complied with and such action will not materially and adversely
impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
value of the Trust Estate. The Trustee and counsel rendering any such opinion
may rely, without independent investigation, on the accuracy and validity of any
certificate or other instrument delivered to the Trustee in connection with any
such action.
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<PAGE> 60
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Trustee, when authorized by an Issuer Order,
at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the TIA as in
force at the date of the execution thereof), in form reasonably satisfactory to
the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another Person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary, as evidenced by an
Opinion of Counsel, to effect the qualification of this Indenture under
the TIA or under any similar federal statute hereafter enacted and to
add to this Indenture such other provisions as may be expressly
required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
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<PAGE> 61
(b) The Issuer and the Trustee, when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; 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.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies and with the consent of the Holders of not less
than a majority of the Outstanding Amount of the Notes, by Act of such Holders
delivered to the Issuer and the Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provisions of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the 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 the provisions of this Indenture requiring the
application of funds available therefor, as provided in Article V, to
the payment of any such amount due on the Notes on or after the
respective due dates thereof (or, in the case of redemption, on or
after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iii) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to
increase any percentage specified herein or to provide that certain
additional provisions of this Indenture or the Basic Documents cannot
be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby;
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<PAGE> 62
(vi) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation) or to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(vii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein,
terminate the lien of this Indenture on any property at any time
subject hereto or deprive the Holder of any Note of the security
provided by the lien of this Indenture.
The Trustee may in its discretion determine whether or not any Notes
would be affected by any supplemental indenture 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.
It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. 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 supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Trustee, the Issuer and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
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Section 9.05. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the TIA as then in effect so
long as this Indenture shall then be qualified under the TIA.
Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
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ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. The Notes are subject to redemption in
whole, but not in part, at the direction of the Transferor pursuant to Section
9.02 of the Transfer and Servicing Agreement, on any Payment Date on which the
Transferor exercises the option to purchase the Trust Estate pursuant to said
Section 9.02 of the Transfer and Servicing Agreement; provided, however, that
such purchase is subject to such payment resulting in the Issuer having
available funds sufficient to pay the Redemption Price for the Notes. The
Servicer or the Issuer shall furnish the Rating Agencies notice of such
redemption. If the Notes are to be redeemed pursuant to this Section 10.01, the
Servicer or the Issuer shall furnish notice of such election to the Trustee not
later than 15 days prior to the Redemption Date, and the Issuer shall deposit
with the Trustee in the Note Distribution Account the Redemption Price of the
Notes to be redeemed whereupon all such Notes shall be due and payable on the
Redemption Date upon the furnishing of a notice complying with Section 10.02 to
each Holder of the Notes.
[Provisions relating to Class A-4 Special Redemption to be added.]
Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 shall be given by the Trustee by first-class mail, postage
prepaid, mailed not less than thirty days prior to the applicable Redemption
Date to each Holder of Notes, as of the close of business on the Record Date
preceding the applicable Redemption Date, at such Holder's address appearing in
the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for
payment of the Redemption Price (which shall be the office or agency of
the Issuer to be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01), on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions etc. (a) Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee (i) an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case of
any such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) 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;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory, such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.01(a) or elsewhere in this
Indenture, furnish to the Trustee an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value (within
90 days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee
an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (i) above, the
Issuer shall also deliver to the Trustee an Independent Certificate as
to the same matters, if the fair value to the Issuer of the securities
to be so deposited and of all other such securities made the basis of
any such withdrawal or release since the commencement of the
then-current fiscal year of the Issuer, as set forth in the
certificates delivered pursuant to clause (i) above and this clause
(ii), is 10% or
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<PAGE> 66
more of the Outstanding Amount of the Notes, but such a certificate
need not be furnished with respect to any securities so deposited if
the fair value thereof to the Issuer as set forth in the related
Officer's Certificate is less than $25,000 or less than one percent of
the Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any [Acquired
Contracts] or [Liquidated Contracts] whenever any property or
securities are to be released from the lien of this Indenture, the
Issuer shall also furnish to the Trustee an Officer's Certificate
certifying or stating the opinion of each person signing such
certificate as to the fair value (within 90 days of such release) of
the property or securities proposed to be released and stating that in
the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
an Officer's Certificate certifying or stating the opinion of any
signer thereof as to the matters described in clause (iii) above, the
Issuer shall also furnish to the Trustee an Independent Certificate as
to the same matters if the fair value of the property or securities and
of all other property, other than [Acquired Contracts] and [Liquidated
Contracts], or securities released from the lien of this Indenture
since the commencement of the then current calendar year, as set forth
in the certificates required by clause (iii) above and this clause
(iv), equals 10% or more of the Outstanding Amount of the Notes, but
such certificate need not be furnished in the case of any release of
property or securities if the fair value thereof as set forth in the
related Officer's Certificate is less than $25,000 or less than one
percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.09 or any other provision of
this Section, the Issuer may (A) collect, liquidate, sell or otherwise
dispose of Contracts and Financed Equipment as and to the extent
permitted or required by the Basic Documents and (B) make cash payments
out of the Collection Account and Reserve Account as and to the extent
permitted or required by the Basic Documents.
Section 11.02. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters, and any such Person may certify or give an opinion as to
such matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the
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<PAGE> 67
Transferor or the Issuer, stating that the information with respect to such
factual matters is in the possession of the Servicer, the Transferor, the
Issuer, unless such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders 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 instruments are delivered to the Trustee, and, where it is hereby
expressly required, to the Issuer. Such instrument or instruments (and the
action embodied therein and evidenced thereby) are herein sometimes referred to
as the "Act" of the Noteholders 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 Indenture and (subject to Section 6.01)
conclusive in favor of the Trustee and the Issuer, 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 action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration 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 Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
Section 11.04. Notices, etc. to Trustee, Issuer and Rating Agencies.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
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<PAGE> 68
(a) the Trustee by any Noteholder or by the Issuer shall be sufficient
for every purpose hereunder if made, given, furnished or filed in writing to or
with the Trustee and received at its Corporate Trust Office, or
(b) the Issuer by the Trustee or by any Noteholder shall be sufficient
for every purpose hereunder if in writing and mailed, first-class, postage
prepaid, to the Issuer addressed to: Advanta Equipment Receivables Series
2000-___ LLC, as Issuer _________________________________, Attention:
_______________________. The Issuer shall promptly transmit any notice received
by it from the Noteholders to the Trustee.
(c) the Rating Agencies by the Issuer or the Trustee shall be
sufficient for every purpose hereunder if in writing, personally delivered or
mailed by certified mail, return receipt requested to (i) in the case of
_________________, at the following address: _______________________ and (ii) in
the case of _____________________, at the following address:
_______________________, Attention of _____________________; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders 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 Noteholder affected by such
event, at such Noteholder's address as it appears on the Note Register, 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 Noteholders is given
by mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may
be waived in writing by any 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 Noteholders 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 a waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder and shall not under any circumstance constitute a Default or
Event of Default.
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, to the
extent reasonably satisfactory to the Trustee, the Issuer 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,
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<PAGE> 69
that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer 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.
Section 11.07. Conflict with Trust Indenture Act. If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this indenture by any of the provisions of the TIA,
such required provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties
on any person (including the provisions automatically deemed included herein
unless expressly excluded by this Indenture) are a part of and govern this
Indenture, whether or not physically contained herein.
Section 11.08. 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 11.09. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not.
All covenants and agreements of the Trustee in this Indenture shall
bind its successors, co-trustees and agents of the Trustee.
Section 11.10. Separability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
Section 11.11. Benefits of Indenture. Nothing in this Indenture or in
the Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
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Section 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee under this Indenture.
Section 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Trustee or of any successor or assign of the Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee has no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Section 11.17. No Petition. The Trustee (in its capacity as Trustee),
by entering into this Indenture, and each Noteholder, by accepting a Note,
hereby covenant and agree that they will not at any time institute against the
Transferor, or voluntarily join in any institution against the Transferor of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee, during the Issuer's
normal business hours, to examine all the books of account, records, reports,
and other papers of the Issuer, to make copies and extracts therefrom, to cause
such books to be audited by Independent certified public accountants, and to
discuss the Issuer's affairs, finances and accounts with the Issuer's officers,
employees, and Independent certified public accountants, all at such reasonable
times and as often as may be reasonably requested. The Trustee shall, and shall
cause its representatives, to hold in confidence all such information except to
the extent disclosure may be required by law (and all reasonable applications
for confidential treatment are unavailing) and except to the extent that the
Trustee may reasonably determine that such disclosure is consistent with its
obligations hereunder.
Section 11.19. Restrictions on Transfer of Class D Notes. To the
fullest extent permitted by applicable law, the Class D Notes (or any interest
therein) may not be transferred by the initial Holder of the Class D Notes to
any Person.
Section 11.20. Tax Treatment. Each Class A-1 Noteholder, Class A-2
Noteholder, Class A-3 Noteholder, Class A-4 Noteholder, Class B Noteholder and
Class C Noteholder, by acceptance of their Note, and each holder of a beneficial
interest in a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note,
Class B Note and Class C Note, by the acquisition of a
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<PAGE> 71
beneficial interest therein, agree to treat the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes as
indebtedness of the Transferor for applicable federal, state, and local income
and franchise tax law and for purposes of any other tax imposed on or measured
by income.
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<PAGE> 72
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, thereunto duly
authorized, all as of the day and year first above written.
ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-___ LLC
By:
Name:
Title:
----------------------------------------
not in its individual capacity but as
Trustee,
By:
Name:
Title:
67
<PAGE> 73
- ----------------- )
) ss.:
)
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared _________________ known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
_________________ banking corporation and that he executed the same as the
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of
_________________, 2000.
---------------------------------
Notary Public
[Seal]
My commission expires:
- -------------------------
68
<PAGE> 74
EXHIBIT A
LIST OF CONTRACTS
A-1
<PAGE> 75
EXHIBIT B
FORM OF TRANSFER AND SERVICING AGREEMENT
B-1
<PAGE> 76
EXHIBIT C
FORM OF DEPOSITORY AGREEMENT
C-1
<PAGE> 77
EXHIBIT D
FORM OF CLASS [A-1] [A-2] [A-3] [A-4] [B] [C] [D] NOTE
REGISTERED $_________________ *
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.___________
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) - ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]**
[TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE CLASS D NOTES
(OR ANY INTEREST THEREIN) MAY NOT BE TRANSFERRED BY THE INITIAL HOLDER OF THE
CLASS B NOTES TO ANY PERSON.]***
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES
THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE TRANSFEROR, OR JOIN IN ANY
INSTITUTION AGAINST THE TRANSFEROR, OF, ANY BANKRUPTCY PROCEEDINGS UNDER ANY
UNITED STATES FEDERAL OR STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY
OBLIGATIONS RELATING TO THE NOTES OR THE INDENTURE.
- ----------------------
* Denominations of $1, 000 and integral multiples thereof; provided,
however, that a single Note of any Class may be issued in a
denomination of other than $1,000.
** For Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and
Class D Notes only.
*** For Class D Note only.
D-1
<PAGE> 78
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[THE HOLDER OF THIS CLASS [A-1, A-2, A-3, A-4, B, C, or D] NOTE, BY
ACCEPTANCE OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS CLASS
A NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST THEREIN, AGREE TO TREAT THE
CLASS [A-1, A-2, A-3, A-4, B, C, or D] NOTES AS INDEBTEDNESS OF ADVANTA
EQUIPMENT RECEIVABLES SERIES 2000-___ LLC FOR APPLICABLE FEDERAL, STATE, AND
LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON
OR MEASURED BY INCOME.]
D-2
<PAGE> 79
[ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-___ LLC]
[rate%] [rate%]
[CLASS A-1] [CLASS A-2] [CLASS A-3] [CLASS A-4]
[CLASS B] [CLASS C] [CLASS D]
ASSET BACKED NOTES
[Advanta Equipment Receivables Series 2000-___ LLC], a limited
liability company organized and existing under the laws of the State of Delaware
(herein referred to as the "Issuer"), for value received, hereby promises to pay
to [__________], or registered assigns, the principal sum of [_________] DOLLARS
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is [$________ [for Class A-1
Notes]] [$__________ [for Class A-2 Notes]] [$__________ [for Class A-3 Notes]
[$__________ [for Class A-4 Notes] [$__________ [for Class B Notes] [$__________
[for Class C Notes] [$__________ [for Class D Notes] by (ii) the aggregate
amount, if any, payable from the Note Distribution Account in respect of
principal on the [Class A-1] [Class A-2] [Class A-3] [Class A-4] [Class B]
[Class C] [Class D] Notes pursuant to Section 8.02(c) of the Indenture;
provided, however, the entire unpaid principal amount of this Note shall be due
and payable on the earlier of the [[month] [2000] Payment Date for the Class
A-1] [[month] [2000] Payment Date for the Class A-2] [[month] [2000] Payment
Date for the Class A-3] [[month] [2000] Payment Date for the Class A-4] [[month]
[2000] Payment Date for the Class B] [[month] [2000] Payment Date for the Class
C] [[month] [2000] Payment Date for the Class D] Notes and the Redemption Date,
if any, pursuant to Section 10.01 of the Indenture. The Issuer will pay interest
on this Note at the [Class A-1] [Class A-2] [Class A-3] [Class A-4] [Class B]
[Class C] [Class D] Note Interest Rate on each Payment Date until the principal
of this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date after giving effect to all
payments of principal made on such preceding Payment Date (or in the case of the
first Payment Date, on the initial principal amount of this Note). Interest on
this Note will accrue for each Payment Date from and including the most recent
Payment Date on which interest has been paid to but excluding such Payment Date
or, for the initial Payment Date from ______ __, 2000 to but excluding such
Payment Date. [Interest will be computed on the basis of a 360-day year of
twelve 30-day months.] Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
D-3
<PAGE> 80
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-___ LLC,
By: __________________________
Name:
Title:
D-4
<PAGE> 81
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
[TRUSTEE]
not in its individual capacity but
solely as Trustee,
By:
Name:
Title:
D-5
<PAGE> 82
[REVERSE OF NOTE]
This Note is one of the [Class A-1] [Class A-2] [Class A-3] [Class A-4]
[Class B] [Class C] [Class D] Notes of a duly authorized issue of Notes of the
Issuer, designated as its [rate] [rate%] [Class A-1] [Class A-2] [Class A-3]
[Class A-4] [Class B] [Class C] [Class D] Asset Backed Notes (herein called the
"Notes"), all issued under an Indenture dated as of __________ __, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and [Trustee], as trustee (the "Trustee", which term includes
any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Trustee and the
Holders of the Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the ____ day of each
calendar month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing __________ __, 2000.
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the [[ ] Payment Date [for Class A-1]
[ ] Payment Date [for Class A-2] [ ] Payment Date [for Class A-3] [ ] Payment
Date [for Class A-4] [ ] Payment Date [for Class B] [ ] Payment Date [for Class
C] [ ] Payment Date [for Class D] [ ]] and the Redemption Date, if any, pursuant
to Section 10.01 of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable on the date on
which an Event of Default shall have occurred and be continuing and the Trustee
or the Holders of the Notes representing a majority of the Outstanding Amount of
the Notes have declared the Notes to be immediately due and payable in the
manner provided in Section 5.02 of the Indenture. All principal payments on the
Notes of a Class shall be made pro rata to the Noteholders of such Class
entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be
1
<PAGE> 83
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Registered Holder hereof as of
the Record Date preceding such Payment Date by notice mailed within five days of
such Payment Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Trustee's principal Corporate
Trust Office or at the office of the Trustee's agent appointed for such purposes
located in The City of New York.
As provided in the Indenture, the Notes may be redeemed in whole, but
not in part, at the option of the Servicer, on any Payment Date on or after the
date on which the Pool Balance is less than or equal to ten percent of the
Initial Pool Balance.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his 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 a member firm of a national
securities exchange, and such other documents as the Trustee may require, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer or the Trustee on the Notes or under the Indenture or any
certificate or other writing delivered in connection therewith, against (i) the
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Trustee or of any successor or assign of the Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Transferor, or join in any institution against the
Transferor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
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Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one of more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of the Notes issued
thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither the Trustee in its individual capacity,
any owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture. The Holder of this Note by the acceptance hereof
agrees that, except as expressly
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provided in the Basic Documents in the case of an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
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ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- ------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- --------------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: *
Signature Guaranteed:
* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
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EXHIBIT E
[FORM OF CLASS D TRANSFEREE CERTIFICATE]
E-1
