<PAGE> 1
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 NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MARCH 13, 2000
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MARCH 13, 2000
$385,607,000
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-1 LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-1
$181,285,000 _____% CLASS A-1 NOTES
$63,269,000 ____% CLASS A-2 NOTES
$84,623,000 ____% CLASS A-3 NOTES
$28,215,000 ____% CLASS B NOTES
$18,810,000 ____% CLASS C NOTES
$9,405,000 ____% CLASS D NOTES
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-7 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................................. % % % %
B................................... % % % %
C................................... % % % %
D................................... % % % %
</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 B notes and the Class A 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. The issuer also is issuing $23,512,000
of Class E asset-backed notes. The Class E notes are subordinated to, and
provide credit enhancement for, the Class A notes, the Class B notes, the Class
C notes and the Class D notes. The issuer will also create and retain a Class F
interest in the original amount of $61,134,515.34. The Class F interest is
subordinated to, and provides credit enhancement for, the Class A notes, the
Class B notes, the Class C notes, the Class D notes and the Class E notes.
In addition, the issuer will create a reserve account and make an
initial deposit of $4,702,535.15 into that account.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES OR DETERMINED THAT THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Underwriters of the Class A notes
PRUDENTIAL SECURITIES
BARCLAYS CAPITAL
MORGAN STANLEY DEAN WITTER
Underwriter of the Class B, C and D notes
PRUDENTIAL SECURITIES
March __, 2000
<PAGE> 2
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> 3
TABLE OF CONTENTS
Page
----
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-2
The Notes ......................................................... S-2
Payment Date ...................................................... S-3
Issuance Date ..................................................... S-3
Interest Payments ................................................. S-3
Principal Payments ................................................ S-3
Stated Maturity ................................................... S-4
Subordination ..................................................... S-4
Reserve Account ................................................... S-4
Flow of Funds ..................................................... S-4
Optional Redemption ............................................... S-5
Federal Income Tax Status ......................................... S-5
ERISA Considerations .............................................. S-5
Ratings ........................................................... S-5
Risk Factors .......................................................... S-7
You May Not Be Able to Sell Your
Notes .......................................................... S-7
Security Interest in Most Equipment
Has Not Been Perfected ......................................... S-7
Limited Interest in Contracts May
Cause Payment Delay or Defaults ................................ S-7
Losses on the Contracts May Be
More Than Expected and Cause
Defaults on the Notes .......................................... S-8
Geographic Concentration of the
Contract Portfolio Causes
Increased Risk From Local
Economic Conditions and Natural
Disasters ...................................................... S-8
Introduction .......................................................... S-9
The Issuer ............................................................ S-9
Capitalization of the Issuer ...................................... S-9
Management's Discussion and Analysis of
Financial Condition ............................................ S-10
Use of Proceeds ....................................................... S-10
The Pledged Assets .................................................... S-10
General ........................................................... S-10
No Residual Interest Available .................................... S-11
Trust Estate ...................................................... S-11
The Contracts ..................................................... S-11
Eligible Contracts ................................................ S-11
Statistical Information ............................................... S-12
Servicing Portfolio Delinquency and
Default Information ............................................ S-18
Historical Delinquency Information ................................ S-18
Historical Default Experience ..................................... S-18
Description of the Notes .............................................. S-19
General ........................................................... S-19
Payment Dates, Business Days and
Stated Maturity Date ........................................... S-19
Determination Date and Collection
Periods ........................................................ S-20
Interest Payments ................................................. S-20
Principal Payments ................................................ S-20
Payments During a Trigger Event ................................... S-23
Flow of Funds ..................................................... S-23
Servicing Fee ..................................................... S-25
Trustee's Fees .................................................... S-25
Trigger Events .................................................... S-25
Optional Redemption ............................................... S-26
Subordination Provisions .......................................... S-26
Reserve Account ................................................... S-27
Reports to Noteholders ............................................ S-27
Payments Subsequent to an Event of
Default ........................................................ S-29
Prepayment and Yield Considerations ................................... S-30
Aggregate Monthly Scheduled Payments .................................. S-35
Underwriting .......................................................... S-37
Ratings of the Notes .................................................. S-38
Legal Matters ......................................................... S-39
Reports to Noteholders ................................................ S-39
Where You Can Find More Information ................................... S-39
INDEX OF TERMS ........................................................ S-40
APPENDIX A: GLOBAL
CLEARANCE, SETTLEMENT
AND TAX DOCUMENTATION
PROCEDURES ..................................................... A-1
<PAGE> 4
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 2000-1 LLC will issue the notes.
The issuer is a Nevada limited liability company. Its principal place of
business is 639 Isbell Road, Suite 390-1, Reno, Nevada 89509. Its telephone
number is (775) 823-3020.
The issuer is a newly created limited liability company. The sole 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, collateral
provided for the contracts and funds on deposit in the reserve account. 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.
Advanta Bank Corp. will service the contracts through a subservicing arrangement
with Advanta Business Services Corp.
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.
TRUSTEE
The trustee is Bankers Trust Company. The trustee's address is Four Albany
Street, New York, New York 10006. Its telephone number is (212) 250-2500.
THE PLEDGED ASSETS
We will pledge to the trustee, as security for the notes:
- our interest in the contracts listed on a schedule delivered
to the trustee, but not including any residual interest in the
equipment related to the contracts;
- the right to payments made on the contracts, except the
excluded amounts and except any amounts received as payments
for the residual interest in the underlying equipment;
- our 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 on the disposition of
equipment repossessed as a result of a default;
- our rights in the transfer and servicing agreement.
S-1
<PAGE> 5
Advanta Bank Corp. will not transfer the residual interest in the equipment to
the issuer. The pledged assets and amounts available to pay the notes,
therefore, do not include any residual interest in the equipment or any amounts
received for the residual interest.
THE CONTRACTS
We will use the proceeds from the sale of the notes (i) to buy from Advanta Bank
Corp., Advanta Bank Corp.'s interest in 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 connection with issuing the notes.
The contracts are primarily leases of small-ticket equipment.
The contracts include leases and loan agreements. Approximately 1.47% 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 9%.
The statistical characteristics of the contracts shown in this prospectus
supplement, however, are calculated as of January 31, 2000 using a discount rate
of 9%.
The contracts had the following characteristics as of January 31, 2000:
- statistical aggregate contract principal balance:
$444,821,253.94
- statistical average contract principal balance: $11,712.60
- number of contracts: 37,978
The actual cut-off date for contracts to be conveyed to the issuer is February
29, 2000. As shown in the next paragraph, there will be a variance between the
January 31, 2000 statistical information included in this prospectus supplement
and the actual portfolio as of the February 29, 2000 cut-off date. The variance
will result from several factors including payments or other reductions made to
the contracts in the month of February. In addition to the existing contracts
remaining on January 31, 2000, Advanta Bank Corp. originated additional
contracts from February 1, 2000 through February 29, 2000 that are to be
conveyed to the issuer for inclusion in the actual portfolio as of the February
29, 2000 cut-off date. Except to the extent related to the greater principal
amount of the contracts as of February 29, 2000, as shown in the next paragraph,
the material characteristics of the portfolio on the closing date will not vary
by more than 5% from the January 31, 2000 information in this prospectus
supplement.
As of February 29, 2000, the aggregate contract principal balance was
$470,253,515.34, the average contract principal balance was $11,861.31 and the
number of contracts was 39,646.
We will make payments on the notes from collections on the contracts and from
amounts on deposit in the reserve account.
THE NOTES
In this document, we are offering six classes of notes:
- % Class A-1 notes with an initial principal balance of
$181,285,000;
- % Class A-2 notes with an initial principal balance of
$63,269,000;
- % Class A-3 notes with an initial principal balance of
$84,623,000;
- % Class B notes with an initial principal balance of
$28,215,000;
- % Class C notes with an initial principal balance of
$18,810,000; and
- % Class D notes with an initial principal balance of
$9,405,000.
We also will issue $23,512,000 of Class E notes at the same time as the offered
notes. We are not offering the Class E notes by this document. We may retain the
Class E notes or we may, at any time, sell the Class E notes to an investor. The
issuer will also create and retain a Class F interest in the initial principal
amount of $61,134,515.34
We will issue the notes under an indenture dated as of March 1, 2000. The terms
of the notes will be contained in the indenture.
S-2
<PAGE> 6
PAYMENT DATE
We will pay interest and principal on the offered notes on the 15th day of each
month if the 15th is a business day. If the 15th day of a month is not a
business day, then the payment will be on the next business day. April 17, 2000,
will be the first payment date.
ISSUANCE DATE
We will issue the notes on or about March __, 2000.
INTEREST PAYMENTS
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 will accrue
from the date of issuance of the notes.
Interest on the offered notes will be computed on the basis of a 360-day year
comprised of twelve 30-day months and will be paid on each payment date.
PRINCIPAL PAYMENTS
We will pay monthly principal on the notes from available funds only after:
- trustee fees and expenses are paid;
- servicer advances are repaid;
- servicing fees are paid; and
- interest on the notes is paid.
Principal payments will be made from remaining amounts.
The monthly principal amount for any payment date will be equal to the decrease
in the aggregate contract principal balance during the calendar month
immediately preceding that payment date.
Unless a trigger event occurs, we will pay principal on each payment date in the
following order of priority to the extent of funds available:
- to Class A, a portion of the monthly principal amount equal to
the Class A monthly principal payment amount; amounts
allocated to pay the Class A notes will be paid sequentially
to retire the Class A-1 notes, then the Class A-2 notes and
then the Class A-3 notes;
- to Class B, a portion of the monthly principal amount equal to
the Class B monthly principal payment amount;
- to Class C, a portion of the monthly principal amount equal to
the Class C monthly principal payment amount;
- to Class D, a portion of the monthly principal amount equal to
the Class D monthly principal payment amount;
- to Class E, a portion of the monthly principal amount equal to
the Class E monthly principal payment amount; and
- to the Class F interest, a portion of the monthly principal
amount equal to the Class F monthly principal payment amount.
In addition to the regular monthly principal amount, additional principal may be
distributed to the holders of the notes as described in this prospectus
supplement.
If the Class F principal amount has been reduced to 2% of the initial aggregate
contract principal balance, then additional principal will be paid, starting
with the Class D notes, in reverse sequential order. This means that, to the
extent of funds available, additional principal will be paid first to the Class
D notes, then to the Class C notes, then to the Class B notes, then to the Class
A notes, then to the Class E notes and finally to the Class F interest.
If a trigger event occurs, the principal payment provisions described above will
not apply. If a trigger event occurs, then, unless the trigger event is cured,
each month the full amount of available funds, after paying amounts due to the
trustee and the servicer and after paying interest on the notes, will be applied
sequentially to pay principal to Class A-1, Class A-2, Class A-3, Class B, Class
C, Class D, Class E and the Class F, in that order.
We refer you to "Description of the Notes--Interest Payments," "--Principal
Payment" and --Flow of Funds" in this prospectus supplement for more detail on
the payment of principal and interest.
S-3
<PAGE> 7
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 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................... July 15, 2002
A-2................... May 15, 2003
A-3................... February 15, 2007
B..................... February 15, 2007
C..................... February 15, 2007
D..................... February 15, 2007
</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, then interest on
the Class D notes and finally interest, if any, on the Class E
notes; and
- On each payment date, the trustee will use the available funds
to pay monthly principal on the Class A notes, then monthly
principal on the Class B notes, then monthly principal on the
Class C notes, then monthly principal on the Class D notes,
then monthly principal on the Class E notes and finally
monthly principal on the Class F interest.
- If a trigger event occurs and has not been cured, the full
amount of available funds, after paying amounts due to the
trustee and the servicer and after paying interest on the
notes, will be applied to pay principal sequentially first to
the Class A notes until paid in full, then to Class B until
paid in full, then to Class C until paid in full, then to
Class D until paid in full, then to Class E until paid in full
and finally to pay Class F.
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, the Class D notes, the Class E notes and
the Class F interest.
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 1% of the initial
aggregate contract principal balance. 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 trustee and the servicer;
- repayment of servicer advances;
- interest due on the notes; and
- principal due on the notes.
The required reserve amount is the lesser of 1% of the initial aggregate
contract principal balance and 100% of the then outstanding principal amount of
the notes (not including the then outstanding Class F interest). If on any
payment date, the amount on deposit in the reserve account is less than the
required reserve amount, a deposit will be made to the reserve account, if funds
are available after making other required payments.
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, unless a trigger event has occurred and is continuing, make
payments in the following order of priority:
- first, to the trustee to pay fees and expenses subject to a
limitation;
- then, to the servicer to pay for any unrecoverable servicer
advances;
S-4
<PAGE> 8
- then, to the servicer to pay the servicer fee along with any
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 the Class C note
interest;
- then, to the Class D noteholders to pay the Class D note
interest;
- then, to the Class E noteholders to pay the Class E note
interest, if any;
- then, the Class A monthly principal payment amount to pay
principal of the Class A notes; within the Class A notes
principal allocated to Class A will be used sequentially to
pay Class A-1, then Class A-2 and then Class A-3;
- then, the Class B monthly principal payment amount to pay
principal of the Class B notes;
- then, the Class C monthly principal payment amount to pay
principal of the Class C notes;
- then, the Class D monthly principal payment amount to pay
principal of the Class D notes;
- then, the Class E monthly principal payment amount to pay
principal of the Class E notes;
- then, to the reserve account an amount, if any, needed to
maintain the amount in the reserve account at the required
reserve amount;
- then, so long as the Class F principal amount is greater than
the Class F floor, to the issuer the Class F monthly principal
payment amount to reduce the principal amount of the Class F
interest;
- then, to pay any remaining trustee's fees and expenses; and
- finally, to the issuer, any remaining available funds.
If a trigger event has occurred and is continuing the flow of funds will be
altered so that all available amounts to pay principal will be paid sequentially
to retire each class in full before principal is paid on the next class
beginning with Class A-1.
OPTIONAL REDEMPTION
The servicer has the option to direct the redemption of all remaining notes when
the aggregate contract principal balance is 10% or less of the initial aggregate
contract principal balance.
If a redemption occurs, you will receive a final distribution equaling the
entire unpaid balance of your notes plus any accrued and unpaid interest. You
will not receive a redemption premium.
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 B notes, the Class C notes and the Class D 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 B notes, the Class C notes and the Class D 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:
S-5
<PAGE> 9
<TABLE>
<CAPTION>
MOODY'S
INVESTOR
SERVICE, FITCH IBCA,
CLASS INC. INC.
- ----- -------- -----------
<S> <C> <C>
A-1..................... Aaa AAA
A-2..................... Aaa AAA
A-3..................... Aaa AAA
B....................... Aa3 AA-
C....................... A2 A
D....................... Baa2 BBB+
</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-6
<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 YOUR NOTES If no public market develops, you, as
a noteholder, may not be able to
liquidate your investment in the notes
prior to maturity. There currently is
no public market for the notes, and we
offer no assurance that one will
develop. The underwriters expect, but
are not obligated, to make a market in
the notes. There is no assurance,
however, that any market will be
created or, if created, will continue.
SECURITY INTEREST IN MOST EQUIPMENT Financing statements in favor of
HAS NOT BEEN PERFECTED Advanta Bank Corp. have been filed for
equipment with an original cost of
$25,000 or more; such equipment
represents only approximately 46.63%
of the statistical aggregate contract
principal balance. As a result, the
security interest in equipment that
represents approximately 53.37% 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.
LIMITED INTEREST IN CONTRACTS MAY CAUSE With respect to approximately 12.35%
PAYMENT DELAY OR DEFAULTS of the contracts determined on the
basis of the statistical aggregate
contract principal balance, Advanta
Bank Corp. has acquired only a right
to scheduled payments and the vendor
of the equipment or another entity has
retained other rights in the contract.
If the entity retaining an interest in
the contracts were to become a debtor
in a bankruptcy case, the timing or
amount of payments transferred to the
issuer could be adversely affected.
For example, if the contracts in which
the issuer has only a right to
periodic payments were determined to
be "true leases" (not financing
leases), under the federal bankruptcy
code, the bankruptcy trustee of the
originator of such contracts,
including the originator itself as a
debtor-in-possession, may be
authorized to reject the contracts.
Rejection of a contract is treated as
a breach of the contract. Delays in or
possible reductions of the amount of
scheduled payments owed by the users
might result. Additionally, the
originator of such contracts may be
permitted under the federal bankruptcy
code, in certain circumstances, to
dispose of all of the rights under the
contracts including the right to
scheduled payments transferred to
Advanta Bank Corp. In such event, the
proceeds of the disposition of such
contracts paid to the issuer and
therefore the trustee may be less than
the amount of the scheduled payments
owed by the users.
S-7
<PAGE> 11
LOSSES ON THE CONTRACTS MAY BE MORE THAN EXPECTED AND CAUSE DEFAULTS ON THE
NOTES
Payment of principal and interest on the notes is dependent upon the users'
payment of amounts due on the contracts. In structuring the Series 2000-1 notes,
the issuer has made certain assumptions based upon historical default
experience, however, historical performance is not necessarily indicative of
future results and many factors could cause losses on the contracts to be higher
than expected and such increases in losses could be material. If the losses were
to increase significantly, this could result in payment defaults on your notes.
GEOGRAPHIC CONCENTRATION OF THE CONTRACT PORTFOLIO CAUSES INCREASED RISK FROM
LOCAL ECONOMIC CONDITIONS AND NATURAL DISASTERS
As of the statistical calculation date, approximately 15.34%, 8.63%, 8.38%,
7.69%, 7.15% and 5.03% of the contracts based on the statistical aggregate
contract principal balance were located in California, Florida, New York, Texas,
New Jersey and Pennsylvania respectively. No other state accounts for more than
5% 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-8
<PAGE> 12
INTRODUCTION
On or about March __, 2000 the "CLOSING DATE", Advanta Equipment
Receivables Series 2000-1 LLC will issue $409,119,000 of its equipment
receivables asset-backed notes, Series 2000-1 including the Class A-1 notes,
Class A-2 notes, Class A-3 notes, Class B notes, Class C notes, Class D notes
and Class E notes and will create and retain a Class F interest in the initial
principal amount of $61,134,515.34. Only the Class A-1 notes, Class A-2 notes,
Class A-3 notes, Class B notes, Class C notes and Class D notes are being
offered by this prospectus supplement. The Class A notes, the Class B notes, the
Class C notes and the Class D notes are, for Series 2000-1, the "OFFERED NOTES."
The Class A-1 notes, the Class A-2 notes, the Class A-3 notes, the Class B
notes, the Class C notes, the Class D notes and the Class E 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. Certain 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 and the Class F interest will be created under
the terms of the indenture, dated as of March 1, 2000 between Advanta Equipment
Receivables Series 2000-1 LLC, as the issuer and Bankers Trust Company, as
trustee. The specific terms of the notes will be set forth in the indenture.
Advanta Equipment Receivables Series 2000-1 LLC will enter into a
transfer and servicing agreement dated as of March 1, 2000 with Advanta Bank
Corp., as transferor and as servicer. Pursuant to the transfer and servicing
agreement, Advanta Equipment Receivables Series 2000-1 LLC will acquire Advanta
Bank Corp.'s right, title and interest in the pledged assets.
THE ISSUER
The issuer is Advanta Equipment Receivables Series 2000-1 LLC.
Advanta Equipment Receivables Series 2000-1 LLC is a single-member
limited liability company formed under the laws of Nevada. The sole member of
the issuer is Advanta Bank Corp. The issuer will be operated under the terms of
its articles of organization filed in the Nevada Secretary of State's office on
March 10, 2000, and a limited liability company operating agreement dated March
__, 2000. The principal office of the issuer is located at 639 Isbell Road,
Suite 390-1, Reno, Nevada 89509.
CAPITALIZATION OF THE ISSUER
Advanta Bank Corp. is the sole member of the issuer and has contributed
$100 to the issuer for its membership interest. On the closing date Advanta Bank
Corp. will transfer to the issuer a portfolio of contracts with an initial
aggregate contract principal balance as of the cut-off date of $470,253,515. The
transfer will be in part a sale to the extent the issuer receives net proceeds
from the sale of the offered notes (excluding amounts used to pay costs and
expenses and the amount deposited into the reserve account and uses such amount
to purchase the portfolio) and the balance of the transfer of the portfolio will
be a contribution by Advanta Bank Corp. to the capital of the issuer.
The following table illustrates the capitalization of the issuer as of
the closing date:
<TABLE>
<S> <C>
Class A-1 notes................................................... $181,285,000
Class A-2 notes................................................... 63,269,000
Class A-3 notes................................................... 84,623,000
Class B notes..................................................... 28,215,000
Class C notes..................................................... 18,810,000
Class D notes..................................................... 9,405,000
Class E notes..................................................... 23,512,000
Class F interest.................................................. 61,134,515
------------
$470,253,515
============
</TABLE>
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<PAGE> 13
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 or interest in
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
articles of organization from engaging in any other business other than (i) the
purchase of equipment leases and lease receivables, 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 Nevada. The issuer's ability to incur, assume or guarantee
indebtedness for borrowed money is also restricted by its limited liability
company operating 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 $4,702,535.15 which amount is equal to 1% 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 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 contracts to be
included in the portfolio are contracts originated or acquired by Advanta Bank
Corp. or in which Advanta Bank Corp. has acquired an interest.
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:
- contracts including 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; the assets pledged to secure the notes do not
include any residual interest in the equipment;
- all monies due or to become due on the contracts after the
opening of business on March 1, 2000, except the excluded
amounts;
- the issuer's rights in the security interests granted by the
users to secure the payment obligations on the contracts;
S-10
<PAGE> 14
- 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;
- recoveries on insurance policies and disposition of equipment
repossessed as a result of a default; and
- proceeds of each of the above, but not including the right to
any excluded amounts.
"EXCLUDED AMOUNTS" are those amounts received by the servicer from the
users to pay or reimburse the servicer for paying insurance premiums and taxes
and amounts received as late charge fees for those contracts for which a
servicer advance has been made, any initial unpaid amounts and various other
incidental amounts.
NO RESIDUAL INTEREST AVAILABLE
Advanta Bank Corp. will not transfer any residual interest in the
underlying equipment to the issuer and no residual interest or any amounts
related to the residual interest will be available to pay the notes.
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, 98.53%, measured by the statistical aggregate
contract principal balance, are leases and the remaining 1.47% are loan
agreements.
The originator represents that, for accounting purposes, all of the
leases included as contracts are financing leases rather than "true" leases or
operating leases.
Approximately 12.35% of the statistical aggregate contract principal
balance represents contracts in which Advanta Bank Corp. has acquired from
vendors or other lease financing entities and transferred to Advanta Equipment
Receivables Series 2000-1 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 any remaining interest to the vendor or other lease financing entity.
Statistical information concerning the contracts is included in this
prospectus supplement under the caption "Statistical Information."
ELIGIBLE CONTRACTS
In the Transfer and Servicing Agreement, the issuer has represented and
warranted that each of the contracts is an eligible contract and that each
contract has the characteristics described in the prospectus under the caption
"The Transaction Documents --Transfer and Servicing Agreement--Representations
Concerning the Contracts."
In addition, with respect to Series 2000-1, the originator will
represent and warrant that each of the following is true with respect to the
contracts as of the closing date, or where indicated, the cut-off date:
- The contract, as of the cut-off date, is not more than 60 days
delinquent; provided, however, that a contract can be up to 90
days delinquent if the contract principal balance of the
contract when
S-11
<PAGE> 15
aggregated with the contract principal balances of all
contracts which are between 61 and 90 days delinquent is less
than 2.50% of the initial aggregate contract principal
balance;
- The contract, as of the cut-off date, is not a defaulted
contract;
- The contract, when aggregated with the sum of the contract
principal balances of all other contracts relating to a single
user or its affiliates, shall not be greater than 1% of the
initial aggregate contract principal balance;
- The contract is not subject to any guaranty by the originator;
- The contract has not been restructured at any time when the
contract was delinquent by more than 60 days;
- The payments arising under the contract constitute an account,
a general intangible or chattel paper which is evidenced by a
contract that constitutes chattel paper within the meaning of
the relevant provisions of the Uniform Commercial Code of all
applicable jurisdictions (other than a contract which is in
the form of a loan);
- The contract is not a municipal contract; and
- The contract for purposes of the Investment Company Act of
1940, as amended, either (a) is an account receivable
representing all or part of the sale price of merchandise,
insurance and/or services, or (b) represents a financial asset
that converts into cash within a finite period of time.
STATISTICAL INFORMATION
The statistical information presented in this prospectus supplement
concerning the contracts reflects those cashflows from March, 2000 and onward
related to the portfolio of contracts as of the close of business on January 31,
2000 (the "STATISTICAL CALCULATION DATE"), and has been calculated using an
assumed discount rate of 9% per year. The "AGGREGATE CONTRACT PRINCIPAL BALANCE"
of the contracts as of the statistical calculation date is $444,821,253.94 using
the 9% discount rate. The aggregate contract principal balance of the contracts
as of February 29, 2000 is $470,253,515.34 using the 9% discount rate. As of the
cut-off date, the total number of contracts in the final pool was 39,646.
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 as presented in this prospectus supplement, because
between January 31, 2000 and February 29, 2000 contracts will have been added to
the pool, payments have been made on the contracts and some contracts may be
determined not to meet the eligibility requirements for the final pool.
The variance in the aggregate contract principal balance as of the
February 29, 2000 cut-off date is $25,432,261 which is approximately 5.72%
greater than the aggregate contract principal balance as of the January 31, 2000
statistical calculation date. Except to the extent the information changes to
reflect the increased initial contract principal balance, the material
characteristics of the final pool will not vary by more than 5% compared to the
characteristics as of the statistical calculation date 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.
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 January 31, 2000 statistical calculation
date using the 9% 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.
S-12
<PAGE> 16
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 January 31, 2000)
<TABLE>
<S> <C>
Number of Contracts ............................ 37,978
Statistical Aggregate Contract Principal Balance $444,821,254
Statistical Average Contract Principal Balance . $ 11,713
Statistical Minimum Contract Principal Balance . $ 93
Statistical Maximum Contract Principal Balance . $ 354,935
Aggregate Original Equipment Cost .............. $506,343,301
Average Original Equipment Cost ................ $ 13,333
Minimum Original Equipment Cost ................ $ 178
Maximum Original Equipment Cost ................ $ 473,623
Weighted Average Original Term in Months ....... 48
Minimum Original Term in Months ................ 5
Maximum Original Term in Months ................ 83
Weighted Average Remaining Term in Months ...... 40
Minimum Remaining Term in Months ............... 1
Maximum Remaining Term in Months ............... 78
Weighted Average Seasoning in Months ........... 8
Largest User ................................... 0.10%
Loan Contracts ................................. 1.47%
</TABLE>
S-13
<PAGE> 17
DISTRIBUTION OF CONTRACTS BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE PERCENTAGE
NUMBER OF OF NUMBER CONTRACT CONTRACT EQUIPMENT OF ORIGINAL
STATE CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST EQUIPMENT COST
- ----------------------------- --------- ------------ ----------------- ----------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Alabama..................... 463 1.22% $ 4,934,960 1.11% $ 5,649,449 1.12%
Alaska...................... 58 0.15 962,655 0.22 1,074,804 0.21
Arizona..................... 773 2.04 8,348,138 1.88 9,559,059 1.89
Arkansas.................... 194 0.51 2,240,967 0.50 2,554,173 0.50
California.................. 4,652 12.25 68,256,393 15.34 75,998,675 15.01
Colorado.................... 690 1.82 8,412,059 1.89 9,439,289 1.86
Connecticut................. 644 1.70 6,840,587 1.54 7,876,188 1.56
Delaware.................... 207 0.55 2,055,422 0.46 2,345,475 0.46
District of Columbia........ 214 0.56 2,523,822 0.57 3,083,302 0.61
Florida..................... 3,523 9.28 38,401,519 8.63 43,718,263 8.63
Georgia..................... 1,164 3.06 13,356,336 3.00 15,125,864 2.99
Hawaii...................... 94 0.25 1,207,009 0.27 1,307,165 0.26
Idaho....................... 121 0.32 1,266,654 0.28 1,412,718 0.28
Illinois.................... 1,098 2.89 14,395,902 3.24 16,191,952 3.20
Indiana..................... 421 1.11 4,733,923 1.06 5,195,378 1.03
Iowa........................ 111 0.29 1,626,601 0.37 1,753,502 0.35
Kansas...................... 181 0.48 1,773,468 0.40 1,899,821 0.38
Kentucky.................... 358 0.94 3,378,280 0.76 3,812,319 0.75
Louisiana................... 159 0.42 1,172,460 0.26 1,336,759 0.26
Maine....................... 140 0.37 1,753,662 0.39 1,905,092 0.38
Maryland.................... 988 2.60 11,171,388 2.51 12,969,527 2.56
Massachusetts............... 1,374 3.62 15,776,928 3.55 18,761,265 3.71
Michigan.................... 769 2.02 7,736,011 1.74 8,610,043 1.70
Minnesota................... 420 1.11 5,611,513 1.26 6,330,917 1.25
Mississippi................. 176 0.46 1,595,169 0.36 1,762,635 0.35
Missouri.................... 447 1.18 4,757,149 1.07 5,350,637 1.06
Montana..................... 70 0.18 733,700 0.16 804,246 0.16
Nebraska.................... 80 0.21 1,098,442 0.25 1,178,596 0.23
Nevada...................... 216 0.57 3,306,492 0.74 3,600,025 0.71
New Hampshire............... 232 0.61 2,780,345 0.63 3,117,563 0.62
New Jersey.................. 2,667 7.02 31,791,544 7.15 37,099,268 7.33
New Mexico.................. 259 0.68 2,494,898 0.56 2,780,997 0.55
New York.................... 3,180 8.37 37,291,239 8.38 42,885,488 8.47
North Carolina.............. 1,135 2.99 11,774,432 2.65 13,180,441 2.60
North Dakota................ 32 0.08 440,784 0.10 466,456 0.09
Ohio........................ 1,155 3.04 12,356,219 2.78 13,916,829 2.75
Oklahoma.................... 306 0.81 3,355,324 0.75 3,778,618 0.75
Oregon...................... 373 0.98 4,239,228 0.95 4,702,186 0.93
Pennsylvania................ 2,268 5.97 22,381,814 5.03 25,931,544 5.12
Puerto Rico................. 6 0.02 84,541 0.02 94,612 0.02
Rhode Island................ 357 0.94 3,332,545 0.75 3,918,577 0.77
South Carolina.............. 396 1.04 4,679,157 1.05 5,387,186 1.06
South Dakota................ 41 0.11 482,521 0.11 529,149 0.10
Tennessee................... 368 0.97 4,814,481 1.08 5,490,196 1.08
Texas....................... 3,030 7.98 34,206,957 7.69 39,661,127 7.83
Utah........................ 200 0.53 2,808,008 0.63 3,107,260 0.61
Vermont..................... 133 0.35 1,457,943 0.33 1,643,363 0.32
Virgin Islands.............. 7 0.02 38,602 0.01 49,315 0.01
Virginia.................... 991 2.61 11,257,645 2.53 13,260,186 2.62
Washington.................. 503 1.32 6,757,205 1.52 7,448,380 1.47
West Virginia............... 120 0.32 1,464,807 0.33 1,600,067 0.32
Wisconsin................... 364 0.96 4,585,069 1.03 5,106,493 1.01
Wyoming..................... 50 0.13 518,339 0.12 580,858 0.11
------ ------ ------------ ------ ------------ ------
Total.................. 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
S-14
<PAGE> 18
DISTRIBUTION OF CONTRACTS BY CONTRACT PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- -------------------------- --------- ------------ ----------------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00 to $ 5,000.00.... 14,554 38.32% $ 40,318,668 9.06% $ 52,648,889 10.40%
$ 5,000.01 to $ 10,000.00.... 9,170 24.15 66,038,146 14.85 78,335,616 15.47
$ 10,000.01 to $ 15,000.00.... 5,573 14.67 67,403,179 15.15 76,221,688 15.05
$ 15,000.01 to $ 20,000.00.... 2,540 6.69 43,921,389 9.87 49,535,089 9.78
$ 20,000.01 to $ 25,000.00.... 1,721 4.53 38,457,348 8.65 43,284,064 8.55
$ 25,000.01 to $ 50,000.00.... 3,441 9.06 120,270,157 27.04 132,370,228 26.14
$ 50,000.01 to $ 100,000.00.... 901 2.37 56,663,797 12.74 60,501,418 11.95
$100,000.01 to $ 200,000.00.... 67 0.18 8,898,784 2.00 10,098,087 1.99
$200,000.01 to $ 300,000.00.... 8 0.02 1,859,195 0.42 2,075,006 0.41
Greater than $300,000.00.......... 3 0.01 990,591 0.22 1,273,216 0.25
------ ------ ------------ ------ ------------ ------
Total........................ 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL EQUIPMENT COST
<TABLE>
<CAPTION>
STATISTICAL STATISTICAL PERCENTAGE
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
ORIGINAL EQUIPMENT COST CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- -------------------------- --------- ------------ ----------------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00 to $ 5,000.00... 12,122 31.92% $30,694,304 6.90% $ 37,284,083 7.36%
$ 5,000.01 to $ 10,000.00... 9,729 25.62 60,391,449 13.58 70,659,295 13.95
$ 10,000.01 to $ 15,000.00... 6,112 16.09 66,627,359 14.98 75,096,293 14.83
$ 15,000.01 to $ 20,000.00... 2,861 7.53 43,329,494 9.74 49,489,357 9.77
$ 20,000.01 to $ 25,000.00... 1,882 4.96 37,315,450 8.39 42,227,565 8.34
$ 25,000.01 to $ 50,000.00... 3,971 10.46 124,878,014 28.07 138,826,790 27.42
$ 50,000.01 to $100,000.00.... 1,181 3.11 66,362,543 14.92 74,517,073 14.72
$100,000.01 to $200,000.00..... 104 0.27 11,575,493 2.60 13,643,986 2.69
$200,000.01 to $300,000.00..... 10 0.03 1,929,242 0.43 2,317,362 0.46
Greater than $300,000.00......... 6 0.02 1,717,906 0.39 2,281,497 0.45
------ ------ ------------ ------ ------------ ------
Total..................... 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY REMAINING MONTHS TO STATED MATURITY (1)
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
REMAINING TERM (MONTHS) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- -------------------------- --------- ------------ ----------------- ----------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
0 to 12....................... 1,997 5.26% $ 6,526,053 1.47% $ 13,548,921 2.68%
13 to 24....................... 7,357 19.37 50,375,291 11.32 71,600,373 14.14
25 to 36....................... 13,351 35.15 132,607,133 29.81 152,835,702 30.18
37 to 48....................... 5,837 15.37 90,573,444 20.36 100,168,839 19.78
49 to 60....................... 9,326 24.56 162,082,575 36.44 165,516,743 32.69
61 to 72....................... 107 0.28 2,324,119 0.52 2,328,220 0.46
73 to 84....................... 3 0.01 332,639 0.07 344,503 0.07
------ ------ ------------ ------ ------------ ------
Total....................... 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
(1) Remaining payments from February 29, 2000.
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<PAGE> 19
DISTRIBUTION OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT CONTRACT EQUIPMENT EQUIPMENT
ORIGINAL TERM (MONTHS) CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ---------------------- --------- ------------- ----------------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
0 to 12................. 809 2.13% $ 2,397,020 0.54% $ 4,570,330 0.90%
13 to 24................. 3,172 8.35 17,270,614 3.88 25,579,585 5.05
25 to 36................. 16,882 44.45 151,073,801 33.96 184,170,055 36.37
37 to 48................. 4,400 11.59 56,047,909 12.60 62,683,036 12.38
49 to 60................. 12,066 31.77 207,843,754 46.73 218,129,307 43.08
61 to 72................. 646 1.70 9,855,517 2.22 10,866,484 2.15
73 to 84................. 3 0.01 332,639 0.07 344,503 0.07
------ ------ ------------ ------ ------------ ------
Total................. 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL PERCENTAGE
PERCENTAGE AGGREGATE AGGREGATE AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER CONTRACT CONTRACT EQUIPMENT EQUIPMENT
PAYMENT TYPE CONTRACTS OF CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- ---------------------- --------- ------------- ----------------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Annual..................... $ 32 0.08% $ 204,003 0.05% 296,003 0.06%
Monthly.................... 37,014 97.46 435,837,739 97.98 496,210,150 98.00
Quarterly.................. 628 1.65 3,003,524 0.68 3,696,519 0.73
Semiannual................. 7 0.02 38,619 0.01 46,990 0.01
Variable................... 297 0.78 5,737,369 1.29 6,093,638 1.20
------ ------ ------------ ------ ------------ ------
Total................. 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL
STATISTICAL AGGREGATE PERCENTAGE
PERCENTAGE AGGREGATE CONTRACT AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT PRINCIPAL EQUIPMENT EQUIPMENT
PURCHASE OPTION CONTRACTS CONTRACTS PRINCIPAL BALANCE BALANCE COST COST
- ---------------------- --------- ------------ ----------------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Fair Market Value.......... 12,388 32.62% $124,882,044 28.07% $154,941,911 30.60%
Nominal Buyout............. 13,507 35.57 169,558,378 38.12 184,351,861 36.41
Stated Residual............ 7,418 19.53 84,476,039 18.99 92,796,417 18.33
Other (1).................. 4,665 12.28 65,904,792 14.82 74,253,112 14.66
------ ------ ------------ ------ ------------ ------
Total................. 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
- ---------------
(1) "Other" includes loans and contracts in which the issuer will obtain only
the right to scheduled payments.
DISTRIBUTION OF CONTRACTS BY SOURCE OF CONTRACT
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL
STATISTICAL AGGREGATE PERCENTAGE
PERCENTAGE AGGREGATE CONTRACT AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF CONTRACT PRINCIPAL EQUIPMENT EQUIPMENT
SOURCE OF CONTRACT CONTRACTS CONTRACTS PRINCIPAL BALANCE BALANCE COST COST
- ------------------ --------- ------------ ----------------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Broker..................... 14,534 38.27% $239,800,490 53.91% $263,060,628 51.95%
Vendor..................... 23,444 61.73 205,020,764 46.09 243,282,673 48.05
============= ============== =================== ================= ============== ===============
Total................. 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
============= ============== =================== ================= ============== ===============
</TABLE>
S-16
<PAGE> 20
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
PERCENTAGE STATISTICAL STATISTICAL AGGREGATE OF ORIGINAL
NUMBER OF OF NUMBER OF AGGREGATE CONTRACT AGGREGATE CONTRACT EQUIPMENT EQUIPMENT
EQUIPMENT DESCRIPTION CONTRACTS CONTRACTS PRINCIPAL BALANCE PRINCIPAL BALANCE COST COST
- --------------------- --------- ------------ ------------------- ------------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Air Compressors............... 70 0.18% $ 903,577 0.20% $ 1,031,913 0.20%
Amusement Equipment........... 88 0.23 1,391,907 0.31 1,506,594 0.30
Automated Teller Machines..... 1,669 4.39 18,451,417 4.15 19,128,382 3.78
Automotive Equipment.......... 1,171 3.08 14,766,642 3.32 15,952,846 3.15
Commercial Fitness Equipment.. 207 0.55 3,269,400 0.73 3,584,033 0.71
Commercial/Industrial Cleaning.. 492 1.30 4,408,962 0.99 4,760,737 0.94
Communication Equipment....... 5,144 13.54 43,256,479 9.72 48,990,690 9.68
Construction Equipment........ 354 0.93 7,079,766 1.59 7,623,814 1.51
Copiers....................... 7,977 21.00 75,097,496 16.88 93,990,902 18.56
Environmental................. 105 0.28 1,766,369 0.40 1,849,659 0.37
Freezer/Refrigerator/Restaurant. 1,917 5.05 23,446,145 5.27 25,290,254 4.99
Furniture..................... 545 1.44 10,321,558 2.32 11,056,208 2.18
Heavy Machinery............... 1,918 5.05 33,805,620 7.60 37,212,841 7.35
Landscaping Equipment......... 277 0.73 3,291,509 0.74 3,556,561 0.70
Laundry Equipment............. 192 0.51 4,540,859 1.02 4,896,608 0.97
Mailing Machines & Equipment.. 711 1.87 7,218,760 1.62 8,485,099 1.68
Measuring Equipment........... 56 0.15 789,706 0.18 823,483 0.16
Medical Equipment............. 639 1.68 12,858,075 2.89 14,722,200 2.91
Microcomputers & Printers..... 6,788 17.87 91,817,588 20.64 105,544,095 20.84
Office Equipment.............. 786 2.07 4,822,569 1.08 5,559,372 1.10
Photography Equipment........... 421 1.11 3,829,929 0.86 4,691,277 0.93
Point of Sale Systems......... 670 1.76 9,798,296 2.20 10,687,204 2.11
Pressure Washers................ 127 0.33 687,958 0.15 764,399 0.15
Printing Equipment.............. 300 0.79 5,292,252 1.19 5,739,019 1.13
Safes........................... 14 0.04 94,862 0.02 102,994 0.02
Sewing and Embroidery........... 193 0.51 5,390,316 1.21 6,106,512 1.21
Signs/Display................... 79 0.21 1,150,704 0.26 1,254,544 0.25
Software ....................... 673 1.77 11,309,209 2.54 13,049,390 2.58
Stenograph...................... 406 1.07 1,770,408 0.40 1,983,477 0.39
Surveillance System............. 2,685 7.07 24,085,991 5.41 25,682,502 5.07
Vending Equipment............... 561 1.48 7,521,654 1.69 8,908,514 1.76
Water Coolers................... 88 0.23 484,000 0.11 536,190 0.11
Other........................... 655 1.72 10,101,270 2.27 11,270,988 2.23
------ ------ ------------ ------ ------------ ------
Total...................... 37,978 100.00% $444,821,254 100.00% $506,343,301 100.00%
====== ====== ============ ====== ============ ======
</TABLE>
S-17
<PAGE> 21
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>
Year Ended
--------------------------------------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
---------------- ---------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total Receivables
Balance(1) $870,346 $718,418 $674,570 $614,828 $460,224
Number of Days
Delinquent
31-60 Days $ 41,212 4.74% $ 36,522 5.08% $ 31,226 4.63% $ 34,521 5.61% $ 24,481 5.32%
61-90 Days 15,244 1.75 14,172 1.97 11,920 1.77 9,705 1.58 5,890 1.28
90 Days + 11,475 1.32 9,462 1.32 9,189 1.36 6,702 1.09 4,828 1.05
-------- ---- -------- ---- -------- ---- -------- ---- -------- ----
Total Delinquency $ 67,931 7.81% $ 60,156 8.37% $ 52,335 7.76% $ 50,928 8.28% $ 35,199 7.65%
======== ==== ======== ==== ======== ==== ======== ==== ======== ====
</TABLE>
- -----------
(1) The "Total Receivables Balance" is equal to the aggregate future scheduled
payments owing on the contracts.
Past performance is not necessarily indicative of future performance.
In addition, because the information in this table reflects the entire servicing
portfolio and not only those contracts which will secure the Series 2000-1
notes, the results achieved by the Series 2000-1 portfolio may vary from the
information presented above and such variance may be material.
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.
S-18
<PAGE> 22
HISTORICAL LOSS EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31,
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1) $800,696 $676,817 $652,607 $551,645 $394,910
Net Losses $ 25,584 $ 16,217 $ 15,293 $ 10,356 $ 6,320
Net Losses as a Percentage of
Average Receivables 3.20% 2.40% 2.34% 1.88% 1.60%
</TABLE>
(1) Equals the arithmetic average of each month's receivable balance within the
period specified. The "receivable balance" is equal to the aggregate future
payments owing on all equipment financing contracts in the servicer's
servicing portfolio.
Past performance is not necessarily indicative of future performance.
In addition, because the information in this table reflects the entire servicing
portfolio and not only those contracts which will secure the Series 2000-1
notes, the results achieved by the Series 2000-1 portfolio may vary from the
information presented above and such variance may be material.
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued pursuant to the indenture. The offered 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 this prospectus supplement or the
accompanying prospectus, any references to actions taken by noteholders or
holders refer to actions taken by DTC on instruction from its participants, 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 to 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 April 17, 2000 (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
preceding 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, Salt
Lake City, Utah or any other location where the corporate trust office of the
trustee is located are authorized or obligated by law, regulation, or executive
order to be closed.
The stated maturity date for the Class A-1 notes will be the payment
date in July 2002 . The stated maturity date for the Class A-2 notes will be the
payment date in May 2003. The stated maturity date for the Class A-3 notes will
be the payment date in February 2007. The stated maturity date for the Class B
notes will be the payment date in February 2007. The stated maturity date for
the Class C notes will be the payment date in February 2007. The stated maturity
date for the Class D notes will be the payment date in February 2007. 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 that class; however time and amount of
principal payments may vary from the expected schedule. See "Payment and Yield
Considerations" in this prospectus supplement and "Weighted Average Life of the
Notes" in the prospectus.
S-19
<PAGE> 23
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 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 April 17, 2000 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 or, with respect to the first payment date, will be applied to the initial
principal amounts.
In each case, the Class A-1 note interest, the Class A-2 note interest,
the Class A-3 note interest, the Class B note interest, the Class C note
interest and the Class D note interest shall include any interest due on that
class on any preceding payment date and not paid plus interest on any overdue
amount.
- The interest rates applicable to the classes of notes are as
follows:
- The Class A-1 notes will bear interest at % per annum.
- The Class A-2 notes will bear interest at % per annum.
- The Class A-3 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.
The Class E notes will not initially bear interest, however, at the
option of the issuer, the Class E notes will begin to bear interest at ____% per
annum on any date designated by the issuer. So long as the Class E notes do not
bear interest, the amount which would have been paid as interest on the Class E
notes will be paid as additional principal. Additional principal which is paid
from amounts which would have been available to pay interest on the Class E
notes, will be paid pro rata to the Class A, Class B, Class C and Class D notes.
Interest on the notes will be calculated on the basis of a 360-day year
comprised of twelve 30-day months.
PRINCIPAL PAYMENTS
For any payment date the "MONTHLY PRINCIPAL AMOUNT" will be an amount
equal to the difference between (i) the aggregate contract principal balance as
of the second calculation date preceding the payment date and (ii) the aggregate
contract principal balance as of the calculation date immediately preceding the
payment date.
"OVERDUE PRINCIPAL" means, for any payment date, (i) for the Class A
notes, the difference between the Class A monthly principal payment amount and
the amount paid in respect of such amount on that payment date, (ii) for the
Class B notes, the difference between the Class B monthly principal payment
amount and the amount paid in respect of such amount on that payment date, (iii)
for the Class C notes, the difference between the Class C monthly principal
payment amount and the amount paid in respect of such amount on that payment
date, (iv) for the Class D notes, the difference between the Class D monthly
principal payment amount and the amount paid in respect of such amount on that
payment date and (v) for the Class E notes, the difference between the Class E
monthly principal payment amount and the amount paid in respect of such amount
on that payment date.
S-20
<PAGE> 24
In addition to the monthly principal amount to be paid to the holders of
the notes, additional principal will be paid under the following circumstances
and in the following manner:
- For any payment date, if the Class E notes did not bear
interest during the related interest period, the amount of
interest which would have been paid to the holders of the
Class E notes if they had been interest bearing will be paid
as additional principal. Additional principal derived from
amounts which would have been paid as interest on the Class E
notes will be paid pro rata among the Class A, Class B, Class
C and Class D notes.
- If the principal amount of the Class F interest has been
reduced to the Class F floor, then on the first payment date
following the date on which the Class F interest is reduced to
the Class F floor and for each payment date thereafter, all of
the Class F monthly principal payment amount will be
reallocated and used as additional principal. Additional
principal derived from the reallocated Class F monthly
principal payment amount will be paid in reverse sequential
order, meaning that additional principal will be paid to the
Class D notes until the Class D notes are paid in full, then
to the Class C notes until the Class C notes are paid in full,
then to the Class B notes until the Class B notes are paid in
full, then to the Class A notes until the Class A notes are
paid in full, then to the Class E notes until the Class E
notes are paid in full and finally to the Class F interest.
- If the Class D notes are paid in full as a result of the
application of additional principal resulting from the
reallocation of the Class F monthly principal payment amount,
the Class D monthly principal payment amount will be
reallocated and paid as additional principal in reverse
sequential order to pay the Class C notes until the Class C
notes are paid in full, then to the Class B notes until the
Class B notes are paid in full and then to the Class A notes
until the Class A notes are paid in full. Likewise, if as a
result of the application of additional principal, the Class C
notes are paid in full, the Class C monthly principal payment
amount will be reallocated as additional principal and paid in
reverse sequential order to pay the Class B notes until the
Class B notes are paid in full, then to the Class A notes
until the Class A notes are paid in full and if, as a result
of the application of additional principal, the Class B notes
are paid in full, then the Class B monthly principal payment
amount will be paid as additional principal to the Class A
notes until the Class A notes are paid in full. In each case
when all senior classes have been retired, all amounts
reallocated as additional principal will be used to pay the
Class E notes until the Class E notes are paid in full, then
will be used to pay the Class F interest until the Class F
interest is paid in full and any funds remaining thereafter
shall be paid to the issuer.
Any of the amounts described in the preceding paragraph and subsections
thereof which is reallocated to pay principal on any of the notes is "ADDITIONAL
PRINCIPAL."
On each payment date, if sufficient funds are available and if no
trigger event has occurred, the monthly principal amount plus an amount, if any,
equal to overdue principal, will be paid to the noteholders in the following
priority:
(a) The Class A monthly principal payment amount plus overdue
principal on Class A, if any, will be applied sequentially to pay the
Class A-1 notes, then the Class A-2 notes and the Class A-3 notes until
the Class A principal balance has been reduced to zero. No principal
will be paid on the Class A-2 notes and the Class A-3 until the full
amount of the Class A-1 notes has been paid and no principal will be
paid to the Class A-3 notes until the full amount of the Class A-1
notes and the Class A-2 notes has been paid.
(b) The Class B monthly principal payment amount plus overdue
principal on Class B, if any, will be paid to the Class B notes on each
payment date until the Class B principal balance has been reduced to
zero.
(c) The Class C monthly principal payment amount plus overdue
principal on Class C, if any, will be paid to the Class C notes on each
payment date until the Class C principal balance has been reduced to
zero.
(d) The Class D monthly principal payment amount plus overdue
principal on Class D, if any, will be paid to the Class D notes on each
payment date until the Class D principal balance has been reduced to
zero.
S-21
<PAGE> 25
(e) The Class E monthly principal payment amount plus overdue
principal on Class E, if any, will be paid to the Class E notes on each
payment date until the Class E principal balance has been reduced to
zero.
(f) The Class F monthly principal payment amount will, so long
as the Class F principal amount has not been reduced to the Class F
floor, be applied to reduce the Class F principal balance on each
payment date until the Class F principal balance has been reduced to
zero.
(g) If the Class F principal balance has been reduced to the
Class F floor, then the full amount of the Class F monthly principal
payment amount will be reallocated and used to pay additional principal
on the notes in reverse sequential order starting with the Class D
notes and then paying Class C, Class B and Class A, then Class E and
finally Class F.
The "CLASS A MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date,
the Class A percentage of the monthly principal amount.
The "CLASS A PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the sum of the initial principal amount of the Class A-1, Class A-2 and
Class A-3 notes divided by (ii) the initial aggregate contract principal balance
and being approximately 70.0%.
The "CLASS B MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date
the Class B percentage of the monthly principal amount.
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 and being approximately 6.0%.
The "CLASS C MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date,
the Class C percentage of the monthly principal amount.
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 and being approximately 4.0%.
The "CLASS D MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date,
the Class D percentage of the monthly principal amount.
The "CLASS D PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class D notes divided by (ii) the
initial aggregate contract principal balance and being approximately 2.0%.
The "CLASS E MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date,
the Class E percentage of the monthly principal amount.
The "CLASS E PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal amount of the Class E notes divided by (ii) the
initial aggregate contract principal balance and being approximately 5.0%.
The "CLASS F MONTHLY PRINCIPAL PAYMENT AMOUNT" is, for any payment date,
the Class F percentage of the monthly principal amount.
The "CLASS F PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal amount of the Class F interest divided by (ii) the
initial aggregate contract principal balance and being approximately 13.0%.
The "CLASS F FLOOR" means that the Class F principal balance has been
reduced to or below an amount equal to 2% of the initial aggregate contract
principal balance.
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; and the
outstanding Class A-3 note principal balance for any
S-22
<PAGE> 26
payment date equals the Class A-3 initial principal balance less any principal
payments previously made on the Class A-3 notes.
The outstanding Class B note principal balance for any payment date
equals 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
equals 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
equals the Class D initial principal balance less any principal payments
previously made on the Class D notes.
The outstanding Class E note principal balance for any payment date
equals the Class E initial principal balance less any principal payments
previously made on the Class E notes.
The outstanding Class F principal balance for any payment date equals
the Class F initial principal balance less the sum of the Class F monthly
principal payment amounts for all pervious payment dates, whether or not such
amounts were paid.
The outstanding note principal balance for any date is the sum of the
Class A-1 note principal balance, the Class A-2 note principal balance, the
Class A-3 note principal balance, the Class B note principal balance, the Class
C note principal balance, the Class D note principal balance and the Class E
note principal balance.
The "CLASS A-1 INITIAL PRINCIPAL BALANCE" is $181,285,000. The "CLASS
A-2 INITIAL PRINCIPAL BALANCE" is $63,269,000. The "CLASS A-3 INITIAL PRINCIPAL
BALANCE" is $84,623,000. The "CLASS B INITIAL PRINCIPAL BALANCE" is $28,215,000.
The "CLASS C INITIAL PRINCIPAL BALANCE" is $18,810,000. The "CLASS D INITIAL
PRINCIPAL BALANCE" is $9,405,000. The "CLASS E INITIAL PRINCIPAL BALANCE" is
$23,512,000. The "CLASS F INITIAL PRINCIPAL BALANCE" is $61,134,515.34.
The "CALCULATION DATE" for a collection period is the close of business
on the last day of that collection period.
PAYMENTS DURING A TRIGGER EVENT
If a Trigger Event occurs as described in this prospectus supplement
under "Description of the Notes -- Trigger Events" and has not been cured, then
principal of the notes and the Class F interest will no longer be paid as
described above, but will be paid sequentially. This means that each month after
providing for the payment of trustee's fees and expenses, the servicer advances
and the servicer fee and paying interest on the notes, all remaining available
funds will be used to pay principal on the notes sequentially in the following
order: first to the Class A-1 notes until the Class A-1 notes are paid in full,
then to the Class A-2 notes until the Class A-2 notes are paid in full, then to
the Class A-3 notes until the Class A-3 notes are paid in full, then to the
Class B notes until the Class B notes are paid in full, then to the Class C
notes until the Class C notes are paid in full, then to the Class D notes until
the Class D notes are paid in full, then to the Class E notes until the Class E
notes are paid in full and finally to the Class F interest.
If a Trigger Event occurs, all amounts in the reserve account will be
withdrawn and used to pay principal on the most senior class of notes then
outstanding.
If the Trigger Event is cured, then payment of the monthly principal
payment amount to each of the classes based upon the Class A percentage, Class B
percentage, Class C percentage, Class D percentage, Class E percentage and Class
F percentage will resume.
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,
other than any residual receipts and excluded amounts, no later than two
business days following the servicer's receipt and identification of such
amounts.
S-23
<PAGE> 27
Each calendar month constitutes a "COLLECTION PERIOD."
Under the terms of the transfer and servicing agreement, "AVAILABLE
FUNDS" for a payment date means:
- amounts collected during the immediately preceding collection
period for the contracts and the related security other than
residual receipts and other than excluded amounts; the
collections include, but are not limited to, scheduled
payments, servicer advances, prepayment amounts including
deposits made to the collection account as a result of the
release of 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, other amounts recovered on a
defaulted contract or from casualty or other insurance 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.
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, except that, if a Trigger Event has occurred and
has not been cured, principal will be paid to the classes sequentially:
- to the trustee to pay trustee's fees and expenses subject to
an annual limit;
- to the servicer, any servicer advances which the servicer has
determined it will not be able to recover;
- to the servicer, the servicer fee then due;
- to the holders of the Class A notes, accrued and unpaid Class
A note interest for the related interest accrual period, to be
applied pro rata to interest due on the Class A-1 notes, Class
A-2 notes and Class A-3 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;
- to the holders of the Class E notes, accrued and unpaid Class
E note interest, if any, for the related interest accrual
period; or if the Class E notes did not bear interest during
the related interest accrual period, this amount shall become
additional principal and be paid pro rata among Class A, Class
B, Class C and Class D;
- from the available funds then remaining in the collection
account, the Class A monthly principal payment amount and
overdue principal on the Class A notes, if any, to be paid to
the Class A-1 noteholders until the Class A-1 principal
balance has been reduced to zero, then to the Class A-2
noteholders until the Class A-2 principal balance has been
reduced to zero and then to the Class A-3 noteholders until
the Class A-3 principal balance has been reduced to zero;
- until the Class B principal balance has been reduced to zero,
to the Class B noteholders, the Class B monthly principal
payment amount and overdue principal on the Class B notes, if
any;
- until the Class C principal balance has been reduced to zero,
to the Class C noteholders, the Class C monthly principal
payment amount and overdue principal on the Class C notes, if
any;
- until the Class D principal balance has been reduced to zero,
to the Class D noteholders, the Class D monthly principal
payment amount and overdue principal on the Class D notes, if
any;
S-24
<PAGE> 28
- until the Class E principal balance has been reduced to zero,
to the Class E noteholders, the Class E monthly principal
payment amount and overdue principal on the Class E notes, if
any;
- to the reserve account, the amount, if any, needed to maintain
the amount in the reserve account at the required reserve
amount;
- until the Class F principal balance has been reduced to the
Class F floor, to the issuer as owner of the Class F interest,
the Class F monthly principal payment amount;
- if the Class F principal balance has been reduced to the Class
F floor, then the Class F monthly principal payment amount
will not be paid to the owner of the Class F interest but,
instead, the entire amount will be reallocated and used as
additional principal paid first to Class D, then to Class C,
then to Class B, then to Class A, then to Class E and then to
Class F;
- to the trustee any fees and expenses not previously paid; and
- to the issuer, as owner of the pledged assets, any remaining
available funds.
SERVICING FEE
On each payment date, the servicer shall be entitled to receive the
servicing fee in respect of the immediately preceding collection period equal to
the product of one-twelfth of the servicing fee rate and the aggregate contract
principal balance as of the first day of the preceding collection period.
The servicing fee rate is 1% per annum.
TRUSTEE'S FEES
The servicer estimates that the monthly trustee's fees and expenses
will be approximately $300.00, however, in the event of a servicer default or
event of default under the indenture or if under other circumstances the trustee
has significantly increased time and expenses related to its duties and
responsibilities, the trustee fees and expenses could be much higher.
The trustee's fees and expenses payable as a first priority from
available funds will be limited to $50,000 in any 12 month period; however, to
the extent in any 12 month period the actual fees and expenses are less than
$50,000, the remaining amount will, on a cumulative basis be used to increase
the limit which can be paid as a first priority in the next 12 month period. If
a servicer default or event of default occurs, then the limitation or the amount
of trustee's fees and expenses which will be paid as a first priority will be
increased to $250,000 for any 12 month period. Any amount of trustee's fees and
expenses which exceed the aggregate limit in any year will be payable from any
remaining available funds prior to the release of funds to the issuer at the end
of the flow of funds.
TRIGGER EVENTS
Upon the occurrence of a trigger event, principal payments will be made
sequentially so that all available funds, after paying amounts due to the
trustee and the servicer and after paying interest on the notes, will be applied
to pay the full principal amount of each class before any amount is used to pay
the next class. In such event principal will be paid in full on Class A-1, then
Class A-2, then Class A-3, then Class B, then Class C, then Class D, then Class
E and, finally, Class F.
Each of the following is a "TRIGGER EVENT:"
- Advanta Bank Corp. or an affiliate is no longer the servicer;
- the Three-Month Delinquency Percentage related to any
calculation date is greater than 10.50%;
- the Cumulative Net Loss Percentage as of any calculation date
occurring during the following periods exceeds the Loss
Trigger Level Percentage set forth below:
S-25
<PAGE> 29
<TABLE>
<CAPTION>
Period Loss Trigger Level Percentage
------ -----------------------------
<S> <C>
First collection period through the
twelfth collection period 4.50%
Thirteenth collection period
through the twenty-fourth collection period 6.00%
Twenty-fifth collection period and thereafter 7.25%
</TABLE>
Notwithstanding the foregoing: (i) if the trigger event relating to the
Three-Month Delinquency Percentage has occurred, it may be cured if the
Three-Month Delinquency Percentage for any subsequent collection period is less
than or equal to 10.50% and (ii) if the trigger event relating to the Cumulative
Net Loss Percentage has occurred, it may be cured if the Cumulative Net Loss
Percentage, although it exceeds the "Loss Trigger Level Percentage" in a prior
period, is less than or equal to the "Loss Trigger Level Percentage" in a
subsequent period.
"THREE-MONTH DELINQUENCY PERCENTAGE" means, for any payment date
commencing with the third payment date, the percentage equivalent of a fraction,
(a) the numerator of which is the sum of the Monthly Delinquency Percentage for
that payment date and for each of the two immediately preceding payment dates
and (b) the denominator of which is three.
"MONTHLY DELINQUENCY PERCENTAGE" means, for any payment date, the
percentage equivalent of a fraction (a) the numerator of which is the aggregate
contract principal balance on all contracts which are 31 or more days
delinquent, determined as of the related calculation date and (b) the
denominator of which is the aggregate contract principal balance as of the
related calculation date.
"CUMULATIVE NET LOSS PERCENTAGE" means, with respect to each collection
period, the percentage equivalent of a fraction, the numerator of which is the
excess of (x) the aggregate amount of the contract principal balance immediately
prior to a contract's classification as a defaulted contract of all contracts
which became defaulted contracts during all prior collection periods including
such collection period over (y) the aggregate amount of all recoveries related
to those defaulted contracts and the denominator of which is the initial
aggregate contract principal balance.
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 and the Class F interest on any
payment date on which the aggregate contract principal balance as of the
relevant calculation date is less than or equal to 10% of the initial aggregate
contract principal balance. When funds are deposited to cover a redemption, the
trustee will pay the outstanding principal balances of the notes that were
called for redemption and the remaining Class F interest and all accrued and
unpaid interest by the payment date set for redemption.
SUBORDINATION PROVISIONS
Credit enhancement for Class A noteholders is provided by the
subordination of the Class B notes, the Class C notes, the Class D notes, the
Class E notes and the Class F interest 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 the issuer as holder of the Class F interest and to repay
servicer advances and to pay the fees and expenses of the trustee and the
servicer with (i) interest on the Class E notes, if any, being paid only after
the interest on the Class A, Class B, Class C and Class D notes, (ii) interest
on the Class D notes being paid only after the interest on the Class A, Class B
and Class C notes, (iii) interest on the Class C notes being paid only after
interest on the Class A and the Class B notes, (iv) interest on the Class B
notes being paid only after interest on the Class A notes, (v) the Class F
monthly principal payment amount being paid in each month only after the Class E
monthly principal payment amount, the Class D monthly principal payment amount,
the Class C monthly principal payment amount, the Class B monthly principal
payment amount and the Class A monthly principal payment amount, (vi) the Class
E monthly principal payment amount being paid in each month
S-26
<PAGE> 30
only after the Class D monthly principal payment amount, the Class C monthly
principal payment amount, the Class B monthly principal payment amount and the
Class A monthly principal payment amount, (vii) the Class D monthly principal
payment amount being paid in each month only after the Class C monthly principal
payment amount, the Class B monthly principal payment amount and the Class A
monthly principal payment amount, (viii) the Class C monthly principal payment
amount being paid in each month only after the Class B monthly principal payment
amount and the Class A monthly principal payment amount and (ix) the Class B
monthly principal payment amount being paid in each month only after the Class A
monthly 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
trustee's fees and expenses (up to the limitation), to pay the servicer fee or
to make interest and principal payments on the notes. The reserve account will
not be available to make up shortfalls in payments on the Class F interest. The
reserve account will be funded by an initial deposit of $4,702,535.15 which
amount is equal to 1% 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 and if funds are available to
make the deposit. See "Flow of Funds" in this prospectus supplement.
The "REQUIRED RESERVE AMOUNT" is the lesser of 1% of the initial
aggregate contract principal balance and 100% of the outstanding principal
amount of the notes (not including the Class F interest).
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) 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 a trigger event occurs, amounts in the reserve account will be
withdrawn and used to pay the most senior class or classes of notes outstanding.
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 monthly
principal payment amount, the Class B monthly principal payment amount, the
Class C monthly principal payment amount, Class D monthly principal payment
amount, the Class E monthly principal payment amount and the Class F monthly
principal payment 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 note interest,
Class D note interest and, if any, the Class E note interest;
(c) The aggregate amount of fees and compensation received by
the servicer and by the trustee pursuant to the indenture for the collection
period;
(d) The Class A-1 note principal balance, the Class A-2 note
principal balance, the Class A-3 note principal balance, the Class B note
principal balance, the Class C note principal balance, the Class D note
principal balance, the Class E note principal balance, the Class F principal
balance, the Class A-1 Note Factor, the Class A-2 Note Factor, the Class A-3
Note Factor, the Class B Note Factor, the Class C Note Factor, the Class D Note
Factor, the Class E note Note Factor, the Class F Note Factor, the aggregate
contract principal balance and the Collateral Factor, after taking into account
all distributions made on that payment date;
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<PAGE> 31
(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;
(i) Amounts received during the related collection period as
payments for contracts repurchased by Advanta Bank Corp. as a result of breaches
of representations and warranties; and
(j) The calculation as of such payment date of the Cumulative
Net Loss Percentage, the Three-Month Delinquency Percentage and the Monthly
Delinquency Percentage.
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 note 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.
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 note 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 note principal balance which will be outstanding on the next
payment date, after taking into account all distributions to be made on that
payment date to (y) the Class A-3 initial principal balance.
The "CLASS B NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class B note 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 note 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 note 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 "CLASS E 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 E note 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 E initial principal balance.
The "CLASS F 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 F 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 F initial principal balance.
S-28
<PAGE> 32
The "COLLATERAL FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the aggregate contract principal balance as of the immediately preceding
calculation date to (y) the initial aggregate contract principal balance.
In addition, by January 31, of each calendar year following any year
during which the notes are outstanding, commencing in January 2001, 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, subject to a limit of $250,000
accumulating during any 12 month period, 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 Class A-1 notes, Class A-2 notes and, Class A-3 notes in equal
proportion to their interests to the date of payment and, to the extent
permitted by applicable law, interest on any overdue interest the date of
payment thereof at the Class A-1 interest rate, the Class A-2 interest rate and
the Class A-3 interest rate, respectively;
Third, to the payment of the outstanding principal balance of
the Class A notes pro rata among Class A-1, Class A-2 and Class A-3 notes until
the balance is reduced to zero;
Fourth, to the payment of all accrued and unpaid interest on
the outstanding Class B notes to the date of payment thereof and, to the extent
permitted by applicable law, interest on any overdue interest to the date of
payment thereof at the Class B interest rate;
Fifth, to the payment of the outstanding principal balance of
the Class B notes until the balance is reduced to zero;
Sixth, to the payment of all accrued and unpaid interest on
the outstanding Class C notes to the date of payment thereof and, to the extent
permitted by applicable law, interest on any overdue interest to the date of
payment thereof at the Class C interest rate;
Seventh, to the payment of the outstanding principal balance
of the Class C notes until the balance is reduced to zero;
Eight, to the payment of all accrued and unpaid interest on
the outstanding Class D notes to the date of payment thereof and, to the extent
permitted by applicable law, interest on any overdue interest to the date of
payment thereof at the Class D interest rate;
Ninth, to the payment of the outstanding principal balance of
the Class D notes until the balance is reduced to zero;
Tenth, to the payment of all accrued and unpaid interest on
the outstanding Class E notes to the date of payment thereof and, to the extent
permitted by applicable law, interest on any overdue interest to the date of
payment thereof at the Class E interest rate;
Eleventh, to the payment of the outstanding principal balance
of the Class E notes until the balance is reduced to zero;
Twelfth, to the payment of the outstanding principal balance
of the Class F interest until the balance is reduced to zero;
S-29
<PAGE> 33
Thirteenth, to pay any remaining fees and expenses of the
trustee; and
Finally, 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. The
servicer may, however, allow prepayments of leases. No prepayment of a contract
that is a lease will be allowed in an amount less than the prepayment amount.
See "Weighted Average Life of the Notes" in the accompanying Prospectus.
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. See "Weighted Average Life of the Notes" in the
accompanying prospectus.
The following chart sets forth the percentage of the initial principal
balance of the Class A-1, Class A-2, Class A-3, Class B, Class C, Class D notes,
Class E notes and the Class F interest which would be outstanding on the payment
dates set forth below assuming a CPR of 0%, 3%, 6% and 9% and were calculated
using the discount rate of 9%. The charts were calculated assuming no losses
related to the contracts. This information is hypothetical and is set forth for
illustrative purposes only.
This information is based upon assumptions which may or may not be
accurate. Actual payment experience may vary significantly from the following
tables.
The conditional payment rate 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 issuer exercises its option to
redeem the notes when the aggregate contract principal balance amortizes to less
than 10% of the initial aggregate contract principal balance and assumes the
closing date is March 29, 2000 and the first payment date is April 17, 2000.
S-30
<PAGE> 34
<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 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
15-Apr-00 95.45 95.00 94.54 94.07 100.00 100.00 100.00 100.00
15-May-00 90.89 90.01 89.12 88.20 100.00 100.00 100.00 100.00
15-Jun-00 86.28 85.01 83.70 82.37 100.00 100.00 100.00 100.00
15-Jul-00 81.66 80.02 78.33 76.61 100.00 100.00 100.00 100.00
15-Aug-00 77.05 75.05 73.01 70.93 100.00 100.00 100.00 100.00
15-Sep-00 72.38 70.06 67.69 65.29 100.00 100.00 100.00 100.00
15-Oct-00 67.72 65.09 62.43 59.73 100.00 100.00 100.00 100.00
15-Nov-00 63.06 60.16 57.22 54.25 100.00 100.00 100.00 100.00
15-Dec-00 58.39 55.22 52.04 48.83 100.00 100.00 100.00 100.00
15-Jan-01 53.73 50.34 46.93 43.50 100.00 100.00 100.00 100.00
15-Feb-01 49.10 45.50 41.89 38.28 100.00 100.00 100.00 100.00
15-Mar-01 44.46 40.68 36.90 33.11 100.00 100.00 100.00 100.00
15-Apr-01 39.83 35.89 31.96 28.04 100.00 100.00 100.00 100.00
15-May-01 35.22 31.14 27.08 23.05 100.00 100.00 100.00 100.00
15-Jun-01 30.59 26.40 22.24 18.11 100.00 100.00 100.00 100.00
15-Jul-01 25.97 21.69 17.45 13.26 100.00 100.00 100.00 100.00
15-Aug-01 21.36 17.01 12.72 8.49 100.00 100.00 100.00 100.00
15-Sep-01 16.73 12.34 8.02 3.76 100.00 100.00 100.00 100.00
15-Oct-01 12.13 7.72 3.39 0.00 100.00 100.00 100.00 97.51
15-Nov-01 7.57 3.15 0.00 0.00 100.00 100.00 96.65 84.53
15-Dec-01 3.06 0.00 0.00 0.00 100.00 96.19 83.89 71.88
15-Jan-02 0.00 0.00 0.00 0.00 96.16 83.67 71.51 59.66
15-Feb-02 0.00 0.00 0.00 0.00 83.90 71.56 59.56 47.91
15-Mar-02 0.00 0.00 0.00 0.00 72.04 59.88 48.09 36.66
15-Apr-02 0.00 0.00 0.00 0.00 60.59 48.64 37.08 25.92
15-May-02 0.00 0.00 0.00 0.00 49.56 37.85 26.56 15.68
15-Jun-02 0.00 0.00 0.00 0.00 38.92 27.48 16.48 5.90
15-Jul-02 0.00 0.00 0.00 0.00 28.69 17.54 6.85 0.00
15-Aug-02 0.00 0.00 0.00 0.00 18.90 8.06 0.00 0.00
15-Sep-02 0.00 0.00 0.00 0.00 9.51 0.00 0.00 0.00
15-Oct-02 0.00 0.00 0.00 0.00 0.57 0.00 0.00 0.00
15-Nov-02 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1) to
Call (in years) 0.90 0.85 0.80 0.75 2.18 2.09 2.00 1.92
Weighted Average Life(1) to
Maturity (in years) 0.90 0.85 0.80 0.75 2.18 2.09 2.00 1.92
</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.
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-3 NOTES BALANCE OF THE CLASS B NOTES
---------------------------------------- ----------------------------------------
CPR CPR
---------------------------------------- ----------------------------------------
PAYMENT DATE 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
15-Apr-00 100.00 100.00 100.00 100.00 97.50 97.25 96.99 96.73
15-May-00 100.00 100.00 100.00 100.00 94.98 94.50 94.01 93.50
15-Jun-00 100.00 100.00 100.00 100.00 92.44 91.74 91.02 90.29
15-Jul-00 100.00 100.00 100.00 100.00 89.90 88.99 88.07 87.12
15-Aug-00 100.00 100.00 100.00 100.00 87.36 86.26 85.14 83.99
15-Sep-00 100.00 100.00 100.00 100.00 84.79 83.51 82.21 80.89
15-Oct-00 100.00 100.00 100.00 100.00 82.22 80.78 79.31 77.82
15-Nov-00 100.00 100.00 100.00 100.00 79.66 78.06 76.44 74.80
15-Dec-00 100.00 100.00 100.00 100.00 77.08 75.34 73.59 71.82
</TABLE>
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<PAGE> 35
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-3 NOTES BALANCE OF THE CLASS B NOTES
---------------------------------------- ----------------------------------------
CPR CPR
---------------------------------------- ----------------------------------------
PAYMENT DATE 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15-Jan-01 100.00 100.00 100.00 100.00 74.52 72.65 70.77 68.88
15-Feb-01 100.00 100.00 100.00 100.00 71.97 69.99 68.00 66.01
15-Mar-01 100.00 100.00 100.00 100.00 69.41 67.33 65.25 63.16
15-Apr-01 100.00 100.00 100.00 100.00 66.87 64.69 62.53 60.37
15-May-01 100.00 100.00 100.00 100.00 64.32 62.08 59.84 57.62
15-Jun-01 100.00 100.00 100.00 100.00 61.77 59.47 57.18 54.90
15-Jul-01 100.00 100.00 100.00 100.00 59.23 56.87 54.54 52.23
15-Aug-01 100.00 100.00 100.00 100.00 56.69 54.30 51.93 49.60
15-Sep-01 100.00 100.00 100.00 100.00 54.14 51.72 49.34 47.00
15-Oct-01 100.00 100.00 100.00 100.00 51.61 49.18 46.79 44.45
15-Nov-01 100.00 100.00 100.00 100.00 49.10 46.67 44.28 41.95
15-Dec-01 100.00 100.00 100.00 100.00 46.62 44.20 41.83 39.52
15-Jan-02 100.00 100.00 100.00 100.00 44.19 41.79 39.45 37.17
15-Feb-02 100.00 100.00 100.00 100.00 41.83 39.46 37.16 34.92
15-Mar-02 100.00 100.00 100.00 100.00 39.55 37.22 34.95 32.75
15-Apr-02 100.00 100.00 100.00 100.00 37.35 35.06 32.84 30.69
15-May-02 100.00 100.00 100.00 100.00 35.23 32.98 30.81 28.72
15-Jun-02 100.00 100.00 100.00 100.00 33.19 30.99 28.87 26.84
15-Jul-02 100.00 100.00 100.00 97.46 31.22 29.08 27.02 25.05
15-Aug-02 100.00 100.00 98.28 90.87 29.34 27.26 25.26 23.36
15-Sep-02 100.00 99.25 91.76 84.61 27.53 25.52 23.59 21.75
15-Oct-02 100.00 92.83 85.59 78.71 25.82 23.86 22.00 20.23
15-Nov-02 94.11 86.77 79.79 73.18 24.19 22.31 20.51 18.81
15-Dec-02 88.12 81.04 74.33 67.99 22.65 20.83 19.11 17.48
15-Jan-03 82.52 75.69 69.25 63.17 21.21 19.46 17.80 16.24
15-Feb-03 77.25 70.68 64.49 58.67 19.86 18.17 16.58 15.08
15-Mar-03 72.27 65.96 60.03 54.46 18.58 16.96 15.43 14.00
15-Apr-03 67.46 61.42 55.75 50.44 17.34 15.79 14.33 12.97
15-May-03 62.71 56.94 51.55 46.52 16.12 14.64 13.25 11.96
15-Jun-03 58.00 52.54 47.44 42.69 14.91 13.51 12.20 10.97
15-Jul-03 53.36 48.21 43.42 38.97 13.72 12.39 11.16 8.41
15-Aug-03 48.76 43.94 39.47 35.33 12.54 11.30 8.95 4.51
15-Sep-03 44.21 39.74 35.60 31.78 11.37 9.24 4.80 0.71
15-Oct-03 39.75 35.64 31.85 27.36 9.25 4.84 0.78 0.00
15-Nov-03 35.40 31.66 27.18 22.89 4.59 0.58 0.00 0.00
15-Dec-03 31.23 26.70 22.50 18.65 0.12 0.00 0.00 0.00
15-Jan-04 25.87 21.80 18.06 14.65 0.00 0.00 0.00 0.00
15-Feb-04 20.82 17.22 13.94 10.95 0.00 0.00 0.00 0.00
15-Mar-04 16.12 12.99 10.15 7.56 0.00 0.00 0.00 0.00
15-Apr-04 11.80 9.12 6.68 4.48 0.00 0.00 0.00 0.00
15-May-04 7.86 5.60 3.55 1.69 0.00 0.00 0.00 0.00
15-Jun-04 4.25 2.38 0.70 0.00 0.00 0.00 0.00 0.00
15-Jul-04 1.02 0.00 0.00 0.00 0.00 0.00 0.00 0.00
15-Aug-04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1) to
Call (in years) 3.28 3.19 3.10 3.00 1.76 1.69 1.62 1.55
Weighted Average Life(1) to
Maturity (in years) 3.41 3.33 3.24 3.15 1.76 1.69 1.62 1.56
</TABLE>
(1) The weighted average life of a Class A-3 note or a Class B note is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such class of notes by the number of
years from the closing date to the relevant payment date, (b) adding the
results and (c) dividing the sum by the initial principal amount of the
applicable class.
S-32
<PAGE> 36
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS C NOTES BALANCE OF THE CLASS D NOTES
---------------------------------------- ----------------------------------------
CPR CPR
---------------------------------------- ----------------------------------------
PAYMENT DATE 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
15-Apr-00 97.50 97.25 96.99 96.73 97.50 97.25 96.99 96.73
15-May-00 94.98 94.50 94.01 93.50 94.98 94.50 94.01 93.50
15-Jun-00 92.44 91.74 91.02 90.29 92.44 91.74 91.02 90.29
15-Jul-00 89.90 88.99 88.07 87.12 89.90 88.99 88.07 87.12
15-Aug-00 87.36 86.26 85.14 83.99 87.36 86.26 85.14 83.99
15-Sep-00 84.79 83.51 82.21 80.89 84.79 83.51 82.21 80.89
15-Oct-00 82.22 80.78 79.31 77.82 82.22 80.78 79.31 77.82
15-Nov-00 79.66 78.06 76.44 74.80 79.66 78.06 76.44 74.80
15-Dec-00 77.08 75.34 73.59 71.82 77.08 75.34 73.59 71.82
15-Jan-01 74.52 72.65 70.77 68.88 74.52 72.65 70.77 68.88
15-Feb-01 71.97 69.99 68.00 66.01 71.97 69.99 68.00 66.01
15-Mar-01 69.41 67.33 65.25 63.16 69.41 67.33 65.25 63.16
15-Apr-01 66.87 64.69 62.53 60.37 66.87 64.69 62.53 60.37
15-May-01 64.32 62.08 59.84 57.62 64.32 62.08 59.84 57.62
15-Jun-01 61.77 59.47 57.18 54.90 61.77 59.47 57.18 54.90
15-Jul-01 59.23 56.87 54.54 52.23 59.23 56.87 54.54 52.23
15-Aug-01 56.69 54.30 51.93 49.60 56.69 54.30 51.93 49.60
15-Sep-01 54.14 51.72 49.34 47.00 54.14 51.72 49.34 47.00
15-Oct-01 51.61 49.18 46.79 44.45 51.61 49.18 46.79 44.45
15-Nov-01 49.10 46.67 44.28 41.95 49.10 46.67 44.28 41.95
15-Dec-01 46.62 44.20 41.83 39.52 46.62 44.20 41.83 39.52
15-Jan-02 44.19 41.79 39.45 37.17 44.19 41.79 39.45 37.17
15-Feb-02 41.83 39.46 37.16 34.92 41.83 39.46 37.16 34.92
15-Mar-02 39.55 37.22 34.95 32.75 39.55 37.22 34.95 32.75
15-Apr-02 37.35 35.06 32.84 30.69 37.35 35.06 32.84 30.69
15-May-02 35.23 32.98 30.81 28.72 35.23 32.98 30.81 28.72
15-Jun-02 33.19 30.99 28.87 26.84 33.19 30.99 28.87 26.84
15-Jul-02 31.22 29.08 27.02 25.05 31.22 29.08 27.02 25.05
15-Aug-02 29.34 27.26 25.26 23.36 29.34 27.26 25.26 23.36
15-Sep-02 27.53 25.52 23.59 21.75 27.53 25.52 23.59 21.75
15-Oct-02 25.82 23.86 22.00 20.23 25.82 23.86 22.00 20.23
15-Nov-02 24.19 22.31 20.51 18.81 24.19 22.31 20.51 18.81
15-Dec-02 22.65 20.83 19.11 17.48 22.65 20.83 19.11 17.48
15-Jan-03 21.21 19.46 17.80 16.24 21.21 19.46 17.80 16.24
15-Feb-03 19.86 18.17 16.58 15.08 19.86 18.17 16.58 13.13
15-Mar-03 18.58 16.96 15.43 14.00 18.58 16.96 15.43 5.01
15-Apr-03 17.34 15.79 14.33 11.59 17.34 15.79 7.48 0.00
15-May-03 16.12 14.64 12.95 6.80 16.12 9.79 0.00 0.00
15-Jun-03 14.91 13.51 7.93 2.13 11.84 1.30 0.00 0.00
15-Jul-03 13.72 8.87 3.02 0.00 2.88 0.00 0.00 0.00
15-Aug-03 9.55 3.66 0.00 0.00 0.00 0.00 0.00 0.00
15-Sep-03 3.99 0.00 0.00 0.00 0.00 0.00 0.00 0.00
15-Oct-03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1) to
Call (in years) 1.74 1.67 1.60 1.53 1.72 1.65 1.58 1.51
Weighted Average Life(1) to
Maturity (in years) 1.74 1.67 1.60 1.53 1.72 1.65 1.58 1.51
</TABLE>
(1) The weighted average life of a Class C note or 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 applicable
class.
S-33
<PAGE> 37
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS E NOTES BALANCE OF THE CLASS F INTEREST
---------------------------------------- ----------------------------------------
CPR CPR
---------------------------------------- ----------------------------------------
PAYMENT DATE 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Initial Balance 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
15-Apr-00 97.50 97.25 96.99 96.73 97.50 97.25 96.99 96.73
15-May-00 94.98 94.50 94.01 93.50 94.98 94.50 94.01 93.50
15-Jun-00 92.44 91.74 91.02 90.29 92.44 91.74 91.02 90.29
15-Jul-00 89.90 88.99 88.07 87.12 89.90 88.99 88.07 87.12
15-Aug-00 87.36 86.26 85.14 83.99 87.36 86.26 85.14 83.99
15-Sep-00 84.79 83.51 82.21 80.89 84.79 83.51 82.21 80.89
15-Oct-00 82.22 80.78 79.31 77.82 82.22 80.78 79.31 77.82
15-Nov-00 79.66 78.06 76.44 74.80 79.66 78.06 76.44 74.80
15-Dec-00 77.08 75.34 73.59 71.82 77.08 75.34 73.59 71.82
15-Jan-01 74.52 72.65 70.77 68.88 74.52 72.65 70.77 68.88
15-Feb-01 71.97 69.99 68.00 66.01 71.97 69.99 68.00 66.01
15-Mar-01 69.41 67.33 65.25 63.16 69.41 67.33 65.25 63.16
15-Apr-01 66.87 64.69 62.53 60.37 66.87 64.69 62.53 60.37
15-May-01 64.32 62.08 59.84 57.62 64.32 62.08 59.84 57.62
15-Jun-01 61.77 59.47 57.18 54.90 61.77 59.47 57.18 54.90
15-Jul-01 59.23 56.87 54.54 52.23 59.23 56.87 54.54 52.23
15-Aug-01 56.69 54.30 51.93 49.60 56.69 54.30 51.93 49.60
15-Sep-01 54.14 51.72 49.34 47.00 54.14 51.72 49.34 47.00
15-Oct-01 51.61 49.18 46.79 44.45 51.61 49.18 46.79 44.45
15-Nov-01 49.10 46.67 44.28 41.95 49.10 46.67 44.28 41.95
15-Dec-01 46.62 44.20 41.83 39.52 46.62 44.20 41.83 39.52
15-Jan-02 44.19 41.79 39.45 37.17 44.19 41.79 39.45 37.17
15-Feb-02 41.83 39.46 37.16 34.92 41.83 39.46 37.16 34.92
15-Mar-02 39.55 37.22 34.95 32.75 39.55 37.22 34.95 32.75
15-Apr-02 37.35 35.06 32.84 30.69 37.35 35.06 32.84 30.69
15-May-02 35.23 32.98 30.81 28.72 35.23 32.98 30.81 28.72
15-Jun-02 33.19 30.99 28.87 26.84 33.19 30.99 28.87 26.84
15-Jul-02 31.22 29.08 27.02 25.05 31.22 29.08 27.02 25.05
15-Aug-02 29.34 27.26 25.26 23.36 29.34 27.26 25.26 23.36
15-Sep-02 27.53 25.52 23.59 21.75 27.53 25.52 23.59 21.75
15-Oct-02 25.82 23.86 22.00 20.23 25.82 23.86 22.00 20.23
15-Nov-02 24.19 22.31 20.51 18.81 24.19 22.31 20.51 18.81
15-Dec-02 22.65 20.83 19.11 17.48 22.65 20.83 19.11 17.48
15-Jan-03 21.21 19.46 17.80 16.24 21.21 19.46 17.80 16.24
15-Feb-03 19.86 18.17 16.58 15.08 19.86 18.17 16.58 15.38
15-Mar-03 18.58 16.96 15.43 14.00 18.58 16.96 15.43 15.38
15-Apr-03 17.34 15.79 14.33 12.97 17.34 15.79 15.38 15.38
15-May-03 16.12 14.64 13.25 11.96 16.12 15.38 15.38 15.38
15-Jun-03 14.91 13.51 12.20 10.97 15.38 15.38 15.38 15.38
15-Jul-03 13.72 12.39 11.16 10.02 15.38 15.38 15.38 15.38
15-Aug-03 12.54 11.30 10.15 9.08 15.38 15.38 15.38 15.38
15-Sep-03 11.37 10.22 9.15 8.17 15.38 15.38 15.38 15.38
15-Oct-03 10.22 9.16 8.19 7.29 15.38 15.38 15.38 15.38
15-Nov-03 9.10 8.14 7.25 6.44 15.38 15.38 15.38 15.38
15-Dec-03 8.03 7.16 6.37 5.64 15.38 15.38 15.38 15.38
15-Jan-04 7.01 6.23 5.53 4.88 15.38 15.38 15.38 15.38
15-Feb-04 6.05 5.37 4.75 4.18 15.38 15.38 15.38 15.38
15-Mar-04 5.16 4.57 4.03 3.54 15.38 15.38 15.38 15.38
15-Apr-04 4.34 3.83 3.37 2.95 15.38 15.38 15.38 15.38
15-May-04 3.59 3.17 2.78 2.43 15.38 15.38 15.38 15.38
15-Jun-04 2.91 2.56 2.24 0.00 15.38 15.38 15.38 14.99
15-Jul-04 2.30 0.29 0.00 0.00 15.38 15.38 13.52 11.75
15-Aug-04 0.00 0.00 0.00 0.00 13.52 11.81 10.28 8.91
15-Sep-04 0.00 0.00 0.00 0.00 9.93 8.66 7.51 6.49
15-Oct-04 0.00 0.00 0.00 0.00 6.87 5.98 5.18 4.46
15-Nov-04 0.00 0.00 0.00 0.00 4.45 3.86 3.33 2.86
15-Dec-04 0.00 0.00 0.00 0.00 2.64 2.28 1.97 1.69
15-Jan-05 0.00 0.00 0.00 0.00 1.42 1.23 1.05 0.90
15-Feb-05 0.00 0.00 0.00 0.00 0.78 0.67 0.57 0.49
15-Mar-05 0.00 0.00 0.00 0.00 0.53 0.45 0.39 0.33
</TABLE>
S-34
<PAGE> 38
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS E NOTES BALANCE OF THE CLASS F INTEREST
---------------------------------------- ----------------------------------------
CPR CPR
---------------------------------------- ----------------------------------------
PAYMENT DATE 0.00% 3.00% 6.00% 9.00% 0.00% 3.00% 6.00% 9.00%
- ------------ ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
15-Apr-05 0.00 0.00 0.00 0.00 0.43 0.37 0.31 0.27
15-May-05 0.00 0.00 0.00 0.00 0.35 0.30 0.26 0.22
15-Jun-05 0.00 0.00 0.00 0.00 0.29 0.25 0.21 0.18
15-Jul-05 0.00 0.00 0.00 0.00 0.24 0.21 0.17 0.15
15-Aug-05 0.00 0.00 0.00 0.00 0.20 0.17 0.14 0.12
15-Sep-05 0.00 0.00 0.00 0.00 0.16 0.14 0.11 0.10
15-Oct-05 0.00 0.00 0.00 0.00 0.13 0.11 0.09 0.08
15-Nov-05 0.00 0.00 0.00 0.00 0.10 0.08 0.07 0.06
15-Dec-05 0.00 0.00 0.00 0.00 0.08 0.07 0.05 0.05
15-Jan-06 0.00 0.00 0.00 0.00 0.06 0.05 0.04 0.04
15-Feb-06 0.00 0.00 0.00 0.00 0.05 0.04 0.03 0.03
15-Mar-06 0.00 0.00 0.00 0.00 0.04 0.03 0.03 0.02
15-Apr-06 0.00 0.00 0.00 0.00 0.03 0.03 0.02 0.02
15-May-06 0.00 0.00 0.00 0.00 0.02 0.02 0.02 0.01
15-Jun-06 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.01
15-Jul-06 0.00 0.00 0.00 0.00 0.01 0.01 0.01 0.00
15-Aug-06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Weighted Average Life(1) to
Call (in years) 1.76 1.69 1.62 1.55 1.77 1.70 1.63 1.57
Weighted Average Life(1) to
Maturity (in years) 1.80 1.73 1.67 1.60 1.92 1.86 1.80 1.74
</TABLE>
(1) The weighted average life of a Class E note or a Class F interest is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such class 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.
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 MONTHLY SCHEDULED PAYMENTS
----- ------------------------------------
<S> <C>
March-00 15,304,389.41
April-00 15,262,103.62
May-00 15,283,881.64
June-00 15,210,538.69
July-00 15,131,406.49
August-00 15,155,397.67
September-00 15,058,392.33
October-00 14,970,193.43
November-00 14,922,659.30
December-00 14,781,481.77
January-01 14,619,455.25
February-01 14,556,680.60
March-01 14,420,801.04
April-01 14,312,259.18
May-01 14,259,741.62
</TABLE>
S-35
<PAGE> 39
<TABLE>
<CAPTION>
MONTH AGGREGATE MONTHLY SCHEDULED PAYMENTS
----- ------------------------------------
<S> <C>
June-01 14,138,665.13
July-01 14,023,768.72
August-01 13,987,337.07
September-01 13,826,577.75
October-01 13,640,192.86
November-01 13,392,283.27
December-01 13,049,796.83
January-02 12,640,040.60
February-02 12,196,863.98
March-02 11,744,712.44
April-02 11,287,940.44
May-02 10,860,213.08
June-02 10,418,206.45
July-02 9,947,867.92
August-02 9,522,380.74
September-02 9,046,490.06
October-02 8,549,925.87
November-02 8,090,794.00
December-02 7,574,865.88
January-03 7,114,241.94
February-03 6,716,392.76
March-03 6,472,232.30
April-03 6,358,495.45
May-03 6,256,182.43
June-03 6,139,769.89
July-03 6,041,119.00
August-03 5,944,392.97
September-03 5,791,667.96
October-03 5,616,810.26
November-03 5,364,581.81
December-03 5,093,407.24
January-04 4,752,292.89
February-04 4,396,761.69
March-04 4,029,492.66
April-04 3,664,694.35
May-04 3,342,065.54
June-04 2,977,483.13
July-04 2,626,985.00
August-04 2,255,867.28
September-04 1,913,144.86
October-04 1,514,237.27
November-04 1,124,637.68
December-04 756,735.14
January-05 401,987.75
February-05 154,060.16
March-05 62,464.20
April-05 49,931.99
May-05 40,392.88
June-05 30,418.53
July-05 26,570.13
August-05 25,026.13
September-05 21,190.69
</TABLE>
S-36
<PAGE> 40
<TABLE>
<CAPTION>
MONTH AGGREGATE MONTHLY SCHEDULED PAYMENTS
----- ------------------------------------
<S> <C>
October-05 17,881.15
November-05 13,290.51
December-05 10,027.00
January-06 7,958.44
February-06 5,775.24
March-06 5,736.24
April-06 5,486.24
May-06 5,486.24
June-06 5,486.24
July-06 1,506.32
August-06 1,506.32
</TABLE>
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 each of the underwriters named below (the
"CLASS A UNDERWRITERS") have agreed to purchase the principal amount of the
Class A notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal Amount of
---------------------------------------------------------
Class A Underwriters Class A-1 Class A-2 Class A-3
- -------------------- --------- --------- ---------
<S> <C> <C> <C>
Prudential Securities Incorporated $ $ $
Barclays Capital Inc.
Morgan Stanley & Co. Incorporated
----------------- ------------------- -----------------
Total $ $ $
================= =================== =================
</TABLE>
The issuer has been advised by Prudential Securities Incorporated, as
representative of the Class A Underwriters, that the Class A Underwriters
propose initially to offer the Class A 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 ___% of
the principal amount of the Class A-1 notes, ___% of the principal amount of the
Class A-2 notes and ___% of the principal amount of the Class A-3 notes. The
Class A Underwriters may allow and such dealers may reallow a concession not in
excess of ___% of the principal amount of the Class A-1 notes, ___% of the
principal amount of the Class A-2 notes and ___% of the principal amount of the
Class A-3 notes.
Under the terms and 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 underwriter named below (the "CLASS B, C AND D UNDERWRITER") has
agreed to purchase the principal amount of the Class B notes, Class C notes and
Class D notes set forth opposite its name below:
<TABLE>
<CAPTION>
Principal Amount of
---------------------------------------------------------
Class B, C & D Underwriter Class B Class C Class D
- -------------------- --------- --------- ---------
<S> <C> <C> <C>
Prudential Securities Incorporated $ $ $
</TABLE>
The issuer has been advised by the Class B, C & D Underwriter that the
underwriter proposes initially to offer the offered Class B notes, Class C notes
and Class D 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 B note, % per Class C
note and % per Class D note. The underwriter may allow and such dealers may
reallow to other dealers a discount not in excess of % per Class B note, % per
Class C note and % per Class D note.
S-37
<PAGE> 41
The underwriters will be compensated as set forth in the following
table:
<TABLE>
<CAPTION>
UNDERWRITERS' DISCOUNTS AMOUNT PER $1,000 OF
CLASS AND COMMISSIONS PRINCIPAL TOTAL AMOUNT
<S> <C> <C> <C> <C>
A-1 % $ $
A-2 % $ $
A-3 % $ $
B % $ $
C % $ $
D % $ $
-------------------- -------------------- --------------------
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.
Advanta Bank Corp. and the issuer have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. 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 "Aaa," the Class A-2 notes be rated at least "Aaa," the Class
A-3 notes be rated at least "Aaa," the Class B notes be rated at least "Aa3,"
the Class C notes be rated at least "A2," and the Class D notes be rated at
least "Baa2" by Moody's Investors Service, Inc. and the Class A-1 notes be rated
at least "AAA" the Class A-2 notes be rated at least "AAA," the Class A-3 notes
be rated at least "AAA," the Class B notes be rated at least "AA-," the Class C
notes be rated at least "A" and the Class D notes be rated at least "BBB+," by
Fitch IBCA, Inc. respectively.
S-38
<PAGE> 42
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 Nevada law will be passed upon for the
issuer by Woodburn and Wedge, Reno, Nevada. Legal matters for the bank will be
passed upon by Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah.
Legal matters will be passed upon for the underwriters by Winston & Strawn,
Chicago, Illinois.
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, Clearstream, Luxembourg and Euroclear, as the case may be.
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. The accompanying 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-39
<PAGE> 43
INDEX OF TERMS
<TABLE>
<S> <C>
additional principal ................................................ S-21
aggregate contract principal balance ................................ S-12
available funds ..................................................... S-24
business day ........................................................ S-19
calculation date .................................................... S-23
Class A monthly principal payment amount ............................ S-22
Class A percentage .................................................. S-22
Class A Underwriters ................................................ S-37
Class A-1 initial principal balance ................................. S-23
Class A-1 Note Factor ............................................... S-28
Class A-2 initial principal balance ................................. S-23
Class A-2 Note Factor ............................................... S-28
Class A-3 initial principal balance ................................. S-23
Class A-3 Note Factor ............................................... S-28
Class B initial principal balance ................................... S-23
Class B monthly principal payment amount ............................ S-22
Class B Note Factor ................................................. S-28
Class B percentage .................................................. S-22
Class B, C and D Underwriter ........................................ S-37
Class C initial principal balance ................................... S-23
Class C monthly principal payment amount ............................ S-22
Class C Note Factor ................................................. S-28
Class C percentage .................................................. S-22
Class D initial principal balance ................................... S-23
Class D monthly principal payment amount ............................ S-22
Class D Note Factor ................................................. S-28
Class D percentage .................................................. S-22
Class E initial principal balance ................................... S-23
Class E monthly principal payment amount ............................ S-22
Class E Note Factor ................................................. S-28
Class E percentage .................................................. S-22
Class F floor ....................................................... S-22
Class F initial principal balance ................................... S-23
Class F monthly principal payment amount ............................ S-22
Class F Note Factor ................................................. S-28
Class F percentage .................................................. S-22
closing date ........................................................ S-9
Collateral Factor ................................................... S-29
collection period ................................................... S-24
CPR ................................................................. S-30
Cumulative Net Loss Percentage ...................................... S-26
excluded amounts .................................................... S-11
Monthly Delinquency Percentage ...................................... S-26
monthly principal amount ............................................ S-20
notes ............................................................... S-9
offered notes ....................................................... S-9
overdue principal ................................................... S-20
payment date ........................................................ S-19
pledged assets ...................................................... S-10
required reserve amount ............................................. S-27
reserve account ..................................................... S-27
statistical calculation date ........................................ S-12
Three-Month Delinquency Percentage .................................. S-26
trigger event ....................................................... S-25
trust estate ........................................................ S-11
</TABLE>
S-40
<PAGE> 44
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),
Clearstream, Luxembourg 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 Clearstream, Luxembourg 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 Clearstream, Luxembourg or
Euroclear and DTC participants holding certificates will be effected on a
delivery-against-payment basis through the respective depositaries of
Clearstream, Luxembourg 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, Clearstream,
Luxembourg 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 Clearstream, Luxembourg 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 Clearstream,
Luxembourg 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 Clearstream, Luxembourg and Euroclear) will be settled
using the procedures applicable to U.S. corporate debt obligations in same-day
funds.
A-1
<PAGE> 45
Trading between Clearstream, Luxembourg 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.
Trading between DTC seller and Clearstream, Luxembourg 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 Clearstream,
Luxembourg and Euroclear) to the account of a Clearstream, Luxembourg customer
or a Euroclear participant, the purchaser will send instructions to Clearstream,
Luxembourg or Euroclear, as the case may be, before settlement date 12:30.
Clearstream, Luxembourg 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 Clearstream, Luxembourg 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 Clearstream, Luxembourg or
Euroclear cash debit will be valued instead as of the actual settlement date.
Clearstream, Luxembourg 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 Clearstream,
Luxembourg or Euroclear. Under this approach, they may take on credit exposure
to Clearstream, Luxembourg or Euroclear until the global securities are credited
to their accounts one day later.
As an alternative, if Clearstream, Luxembourg or Euroclear has extended
a line of credit to them, Clearstream, Luxembourg 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, Clearstream,
Luxembourg 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 Clearstream, Luxembourg 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 Clearstream, Luxembourg 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 Clearstream, Luxembourg or Euroclear seller and DTC
purchaser. Due to time zone differences in their favor, Clearstream, Luxembourg
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 Clearstream, Luxembourg or Euroclear, as the
case may be, before settlement date 12:30. In these cases, Clearstream,
Luxembourg 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 Clearstream, Luxembourg
customer or Euroclear participant the following business day, and receipt of the
cash proceeds in the Clearstream, Luxembourg 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 Clearstream,
Luxembourg 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 Clearstream, Luxembourg
customer's or Euroclear participant's account would instead be valued as of the
actual settlement date.
A-2
<PAGE> 46
U.S. FEDERAL INCOME TAX DOCUMENTATION REQUIREMENTS
A beneficial owner of global securities holding securities through
Clearstream, Luxembourg 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
generally applies to payments of interest (including original issue discount) on
registered debt issued by U.S. Persons, unless, (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
appropriate steps to obtain an exemption or reduced tax rate. See "Federal
Income Tax Consequences" in the prospectus for additional information.
A-3
<PAGE> 47
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
neither the notes nor the EACH ISSUER --
contracts are insured or
guaranteed by the Federal - will be a newly-created Nevada limited liability 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 primarily of equipment leases.
only of the limited liability
company which issued the note. EACH SERIES OF NOTES --
The notes do not represent
interests in or obligations of - will be an obligation only of the issuer created for that
Advanta Bank Corp. or any series;
affiliate, except the issuer.
- will be secured by and payable only from the limited
This prospectus may be used to assets of that issuer;
offer and sell any series of
notes only if accompanied by - may have one or more forms of enhancement; and
the prospectus supplement for
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.
March 13, 2000
<PAGE> 48
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> 49
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........................ 3
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....................... 7
Insolvency of Advanta Bank Corp. May
Result in an Inability to
Repurchase Contracts............. 8
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
Some Series May Allow Substitution
Which Will Increase Uncertainty
Concerning the Pool
Characteristics.................. 8
Book-Entry Registration Will Result
in Your Inability to Directly
Exercise Your Rights as a
Noteholder....................... 9
Limited Nature of Credit Ratings
Assigned to the Notes............ 9
Introduction.......................... 10
The Issuers........................... 10
The Originator and Servicer........... 11
The Pledged Assets.................... 11
Pledged Assets...................... 11
Excluded Amounts.................... 12
Residual Interest Retained by
Bank............................. 12
The Contracts....................... 12
Security Interest in the
Equipment........................ 14
Series Accounts..................... 14
Recoveries.......................... 15
Transfer and Administration
Agreement........................ 15
Advanta Bank Corp.'s Underwriting,
Origination and Servicing
Practices........................... 15
Contract Origination................ 15
Credit Review....................... 16
Collection/Servicing................ 17
Matters Related to Advanta Corp..... 18
Removal of Contracts.................. 18
Breach of Representations and
Warranties....................... 18
Defaulted Contracts................. 19
Upgrades and Trade-Ins.............. 19
Substitution of Contracts........... 20
Weighted Average Life of the Notes.... 20
Use of Proceeds....................... 20
</TABLE>
i
<PAGE> 50
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Notes.............. 21
General............................. 21
Interest Rates...................... 21
Book-Entry Registration............. 21
Definitive Notes.................... 24
Credit and Cash Flow Enhancement.... 25
The Transaction Documents............. 26
Transfer and Servicing Agreement.... 26
Accounts............................ 29
Servicing Compensation.............. 30
Servicer Not to Resign.............. 30
Merger or Consolidation of the
Servicer......................... 31
Transfer of Servicing to an
Affiliate........................ 31
Servicer Defaults................... 31
Servicer Termination................ 32
The Indenture....................... 32
Note Ratings.......................... 35
Legal Matters Affecting the
Contracts........................... 36
Considerations Relating to the
Users............................ 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Considerations Relating to Security
Interests in the Equipment....... 36
Considerations Relating to Ownership
Interests in the Equipment....... 36
Considerations Relating to Your
Interest in the Contracts and
Other Assets..................... 36
Considerations Relating to
Conservatorship, Receivership and
Bankruptcy....................... 38
Federal Income Tax Consequences....... 39
General............................. 39
Tax Characterization of the Issuer
and the Notes.................... 39
Consequences to Holders of the
Offered Notes.................... 40
State Tax Consequences................ 42
ERISA Considerations.................. 42
Plan of Distribution.................. 44
Legal Opinions........................ 44
</TABLE>
ii
<PAGE> 51
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 Nevada 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
except that Advanta Bank Corp. will retain the residual interest in the financed
equipment. 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 is 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:
- our interest in 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 amounts and
except any residual receipts;
- our security interest, if any, in the underlying equipment;
- amounts held in the accounts created under the indenture and earnings on the
accounts;
1
<PAGE> 52
- recoveries on insurance policies and disposition of equipment repossessed as
a result of a default;
- credit enhancement, if any, for the series; and
- the issuer's rights under the transfer and servicing agreement.
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 but not be limited to 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, other assets pledged to your series and from any credit
enhancement described in the prospectus supplement for 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 or currency fluctuation 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
2
<PAGE> 53
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 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.
3
<PAGE> 54
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 The rate of principal payments on any series of
MAY CAUSE EARLY PAYMENT OF notes is unpredictable. The amount and timing
NOTES AND YOU MAY NOT BE of principal payments on your notes will depend
ABLE TO REINVEST AT A on, among other things, the rate of payment on
COMPARABLE RATE 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 Advanta Bank Corp. will service the Contracts
THE CONTRACTS MAY RESULT IN through a subservicing arrangement with our
DELAYED PAYMENTS, LOSSES OR affiliate, Advanta Business Services Corp.
ACCELERATED PAYMENTS
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
pledge to 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
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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 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 State laws may limit or delay recoveries on the
MAY RESTRICT OR DELAY RECOVERY contracts. State laws impose requirements and
EFFORTS AND ADVERSELY AFFECT restrictions relating to foreclosure sales and
THE RECOVERY OF THE FULL AMOUNT obtaining deficiency judgments. As a result,
DUE ON THE CONTRACTS 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 A user's obligation to make payments on a
EQUIPMENT ARE NOT PERFECTED contract is, in most cases, secured by a
AND OTHER CREDITORS MAY HAVE security interest granted to Advanta Bank Corp.
RIGHTS TO THE EQUIPMENT 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 $25,000 or more.
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
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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 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 The subservicer will hold any promissory notes
NOT DELIVERED TO THE TRUSTEE, that related to the contracts which are in the
THE SECURITY INTEREST IN LOANS form of loans. Because these promissory notes
ARE NOT PERFECTED 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 Advanta Bank Corp. will represent in each
WERE HELD TO BE MERELY A GRANT transfer and servicing agreement that, except
OF A SECURITY INTEREST, OTHER with respect to excluded payments, the transfer
INTERESTS MAY HAVE PRIORITY of the contracts to the issuer is either a sale
OVER YOUR NOTES 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:
- by 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; if this form of lien exists, it
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.
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IF A CONSERVATOR OR RECEIVER The Federal Deposit Insurance Act, as amended
IS APPOINTED FOR THE BANK, by the Financial Institutions Reform, Recovery
ASSETS COULD BE SOLD AT A LOSS, and Enforcement Act of 1989, provides that a
PAYMENT MAY BE ACCELERATED, security interest granted by Advanta Bank Corp.
DELAYED OR REDUCED AND in the contracts and other assets would be
PROTECTIONS PROVIDED TO respected if:
NOTEHOLDERS MAY BE
OVERRIDDEN
- the transfer and servicing agreement
complies with the regulatory requirements
of the FDIA;
- 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
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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 We will make representations and warranties
CORP. MAY RESULT IN AN regarding the contracts. In the event that a
INABILITY TO REPURCHASE representation or warranty concerning a
CONTRACTS specific contract is breached and the breach is
not cured within a 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 If the issuer were to become a debtor in a
REDUCE OR DELAY YOUR PAYMENTS 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 To the extent users default on the contracts,
MAY REDUCE PAYMENTS TO YOU 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 Your notes are debt of the issuer of your
SUFFICIENT, DEFAULTS WILL series only. Your notes are secured by and
OCCUR 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 If the user does not pay the amount due on a
THE EQUIPMENT MAY REDUCE THE contract, the only other source of monies to
VALUE OF THE COLLATERAL 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.
SOME SERIES MAY ALLOW Some series may allow the issuer to substitute
SUBSTITUTION WHICH WILL new contracts for a limited amount of contracts
INCREASE UNCERTAINTY CONCERNING originally included in the series pool. In
THE POOL CHARACTERISTICS those series, if any, where substitution is
allowed, the issuer will not be required to do
so. If a contract becomes defaulted or, for any
other reason substitution is permitted, there
will be no assurance that the issuer will, in
fact, elect to substitute another contract in
its place. If a substitute contract is
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provided, it most likely will not have all of
the same characteristics of the original
contract. As a result, the substitution may
increase the uncertainty in the payment
patterns of the contracts as well as change the
overall characteristics of the series pool.
BOOK-ENTRY REGISTRATION WILL You will own only an indirect beneficial
RESULT IN YOUR INABILITY TO interest in the notes. The notes will not be
DIRECTLY EXERCISE YOUR RIGHTS registered in your name. The notes will be
AS A NOTEHOLDER 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
Clearstream, Luxembourg 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
Clearstream, Luxembourg. 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 Each credit rating assigned to your notes
RATINGS ASSIGNED TO THE 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 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.
The table entitled "Index of Terms" at the back of this prospectus lists
the pages on which certain terms used in this prospectus are defined.
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 and 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 Nevada limited liability company.
Advanta Bank Corp. will be the sole member of each issuer. The limited liability
companies will each be managed by a board of managers. Each board of managers
will be elected by Advanta Bank Corp. as the sole member of the limited
liability company; however, the organizational documents of the limited
liability companies will require that two members of the board of managers be
independent and not related to Advanta Bank Corp. or any of its affiliates.
Each issuer will operate under the terms of its Articles of Organization
and its limited liability company operating agreement. The organizational
documents 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.;
- pledging the assets to secure the limited liability company's
obligations;
- entering into agreements such as the transfer and servicing agreement and
the indenture and performing its obligations under those agreements;
- 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 unanimous approval
of all members of the board of managers including the independent managers.
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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
origination of equipment leases and financing arrangements. Advanta Leasing
Holding Corp. is also a wholly-owned subsidiary of Advanta Corp.
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; however, 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" for that series 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 at the time of issuance of the series of notes; the contracts
pledged to secure a series of notes will be specifically described in the
related prospectus supplement; the contracts included in a portfolio will
be agreements which relate to 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 or, to the
extent we own any of the equipment, that equipment, and, the assets
pledged by the issuers will not include the residual interest in the
equipment or any ownership 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 us
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;
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- credit enhancement, if any, provided for the series; and the
- the issuer's rights in the transfer and servicing agreement.
EXCLUDED AMOUNTS
The pledged assets will not include certain payments made by the users.
"EXCLUDED AMOUNTS" are:
- late payment charges if the servicer has made a servicer advance to cover
the late payment;
- payments to cover taxes and other charges imposed by governmental
authorities;
- payments to cover insurance premiums;
- indemnity payments;
- extension fees and other incidental charges collected with respect to a
contract; and
- payments made to cover amounts which had become due but had not been paid
prior to the cut-off date for the series.
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, including any
ownership interest it may have in the equipment 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 ownership interest, if any in the financed
equipment and the residual receipts and the right to receive and retain the
residual receipts. The "RESIDUAL RECEIPTS" are all residual proceeds received by
the bank or 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 the purchase option price at the end of 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 bank or 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. will have no further rights
under the contract or in the related equipment. 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.
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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.
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 at the same frequency as the payment interval of the related contract
and at 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 servicer.
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.
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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, if any, 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.
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 becomes 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, if any, in the
equipment 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 of $25,000 or
more. 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 -- Considerations
Relating to Security Interest in the Equipment" 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.
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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.
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
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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 cost 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.
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
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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 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).
- 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.
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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
Breach by the Originator. Under the terms of the transfer and servicing
agreement and the indenture, upon discovery by the originator, 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, a breach of the representation and warranty that any contract is an
eligible contract, the party discovering a breach shall inform the other
parties. Unless the breach has been cured by the last day of the second month
following the month of the discovery of the breach by the originator or receipt
by the originator of written notice from the trustee or the servicer of the
breach, the originator shall be obligated to reacquire any contract materially
and adversely affected by the breach. The reacquisition is to take place as of
the last day of the second month following the month of discovery by the
originator or receipt of notice from the trustee or the servicer (or, at the
originator's option, as of the last day of the first month after the month of
the discovery).
In consideration of the reacquisition of a contract, the originator is to
remit the Prepayment Amount to the servicer for deposit into the collection
account. The sole remedy for the breach of representations and warranties by the
originator shall be to require the originator to reacquire the contract. Some
series, if so described in the related prospectus, may allow the issuer to
substitute a contract rather than making a payment. See the caption "The
Transaction Documents -- Transfer and Servicing Agreement" in this prospectus.
Acquisition by the Servicer. If any of the following occurs, the servicer
will be obligated to acquire the affected contract:
- the servicer extends the date for final payment by the user on a
contract beyond the date one month prior to the final scheduled
payment date for the series to which the contract is pledged;
- the servicer fails to maintain perfection of the security interest
created by a contract in the financed equipment if the related
equipment had an original cost of $25,000 or more;
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- the servicer (i) releases equipment securing any contract from the
security interest granted by the contract except when the contract
has been paid or released after default and realization upon the
equipment, or (ii) impairs the rights of the issuer, the trustee or
the noteholder in any contract or (iii) increases the number of
scheduled payments due under a contract except in accordance with
the terms of the transfer and servicing agreement.
For breaches described in the preceding paragraph, the sole remedy of the
issuer, the trustee and the noteholders is to require the servicer to acquire
the contract.
If a breach described above occurs, the servicer is to inform the trustee
and the originator promptly upon the discovery of the breach. Unless the breach
has been cured by the last day of the second month following the discovery (or,
at the originator's election, the last day of the first following month), the
servicer is required to acquire any Contract materially and adversely affected
by the breach. In consideration of the acquisition of any contract by the
servicer, the servicer is to remit the Prepayment Amount for deposit into the
collection account.
DEFAULTED CONTRACTS
In addition, in some series, the issuer may, at its option, remove a
limited amount of defaulted contracts from the trust estate. The aggregate
amount, if any, of defaulted contracts which the issuer may remove from the
trust estate for any series will be described in the prospectus supplement for
that series. The issuer shall have no obligation to remove any defaulted
contract. Upon removal of a defaulted contract from the trust estate, the issuer
shall, unless substitution is permitted as described in the related prospectus
supplement, 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 on the defaulted
contracts. The issuer may then sell the contracts provided that any proceeds of
the sale on any defaulted contract are 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.
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SUBSTITUTION OF CONTRACTS
Some series may permit the issuer to remove contracts and substitute other
contracts under limited circumstances. If substitution is permitted it may be
permitted with respect to defaulted contracts, contracts which the issuer would
otherwise be required to reacquire due to a breach of representations or
warranties or for any other reason which will be described in the related
prospectus supplement. If substitution is permitted the terms and conditions
under which it may occur will described in the related prospectus supplement.
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 include prepayments in full, partial prepayments,
liquidations due to default and receipts of proceeds from physical damage and
term life insurance policies and the reacquisition of contracts by the
originator or acquisition of contracts by the servicer.
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 the series
to which the contracts are pledged. 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.
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DESCRIPTION OF THE NOTES
GENERAL
Each series of notes will be issued pursuant to an indenture. The indenture
will be substantially 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.
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 Clearstream, Luxembourg, formerly known
as 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. Clearstream, Luxembourg and Euroclear will hold omnibus positions
on behalf of Clearstream, Luxembourg customers and Euroclear participants,
respectively, through customers' securities accounts in Clearstream,
Luxembourg'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
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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.
Transfers between participants will occur in the ordinary way in accordance
with DTC rules. Transfers between Clearstream, Luxembourg 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 Clearstream,
Luxembourg 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. Clearstream, Luxembourg customers
and Euroclear participants may not deliver instructions directly to the
depositaries.
Because of time-zone differences, credits of securities received in
Clearstream, Luxembourg 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 Clearstream, Luxembourg customers on that
business day. Cash received in Clearstream, Luxembourg or Euroclear as a result
of sales of securities by or through a Clearstream, Luxembourg 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 Clearstream, Luxembourg 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.
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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.
Clearstream Banking ("CLEARSTREAM, LUXEMBOURG"), societe anonyme, was
incorporated under the laws of Luxembourg as Cedel S.A. and subsequently changed
its name to Cedelbank. On January 18, 2000, following a merger by its parent,
Cedelbank was renamed Clearstream Banking. Clearstream, Luxembourg holds
securities for its customers and facilitates the clearance and settlement of
securities transactions between Clearstream, Luxembourg customers through
electronic book-entry changes in accounts of Clearstream, Luxembourg customers,
thus eliminating the need for physical movement of certificates. Transactions
may be settled in Clearstream, Luxembourg in any of 36 currencies, including
United States dollars. Clearstream, Luxembourg provides to Clearstream,
Luxembourg customers, among other things, services for safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Clearstream, Luxembourg interfaces with
domestic markets in several countries. As a registered bank in Luxembourg,
Clearstream, Luxembourg is subject to regulation by the Luxembourg Commission
for the Supervision of the Financial Sector. Clearstream, Luxembourg 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 Clearstream, Luxembourg is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodial
relationship with a Clearstream, Luxembourg customer, either directly or
indirectly.
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
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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 Clearstream, Luxembourg or Euroclear
will be credited to the cash accounts of Clearstream, Luxembourg 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." Clearstream, Luxembourg 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 Clearstream,
Luxembourg 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, Clearstream, Luxembourg and Euroclear have agreed to the
foregoing procedures in order to facilitate transfers of notes among
participants of DTC, Clearstream, Luxembourg 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.
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.
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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.
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.
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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, and to all of the
conveyed assets and all monies due or to become due in respect of the conveyed
assets. The conveyed assets do not include the bank's residual interest in the
equipment.
The conveyed assets as described in the transfer and servicing agreement
will be the following:
(1) 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,
(2) all right, title and interest in collections and proceeds of the
contracts and proceeds of security provided for the contracts, which
amounts are received 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,
(3) all of the bank's security interest, if any, in the equipment
granted by the users pursuant to the contracts,
(4) the interest of the bank, if any, in the trust accounts created
for the series and all instruments, monies, securities, documents or other
property held or credited to the accounts,
(5) the interest of the bank with respect to the contracts from claims
on any physical damage, credit life or disability insurance policies
covering financed equipment or users with respect to the financed
equipment,
(6) all accounts, general intangibles, instruments, chattel paper,
documents, money, letters of credit, advices of credit, deposit accounts,
certificates of deposit, investment property and goods consisting of,
arising from or related to any of the foregoing and
(7) 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 each contract transferred under that agreement is an eligible contract. An
"ELIGIBLE CONTRACT" is a contract for which, on closing date for that series or,
where indicated, the cut-off date for that series, each of 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 to be made in United States dollars;
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- 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;
- 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.;
- 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 the cut-off date for the series, 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 at
of the option of the user;
- The contract creates a valid and enforceable security interest or
ownership interest in favor of the originator in the related equipment,
if any, which security interest has, for equipment with an initial cost
of more than $25,000, been perfected;
- 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
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
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originator in the ordinary course of the originator's business and in
compliance with its underwriting policies;
- The contract relates to a piece of equipment which is located in the
United States of America, its territories or possessions;
- 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.
For any series, additional representations may be required for eligible
contracts. The 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
month -- 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 contracts 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, reporting tax information to users,
accounting for collections, and furnishing monthly and annual statements to the
trustee with respect to distributions.
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 contracts that it services for itself or
others.
Extensions, Rebates and Adjustments. The transfer and servicing agreements
will provide that the servicer may grant extensions, rebates or adjustments on a
contract; provided, however, that if the servicer extends the date for final
payment by the user of any contract beyond the date one month prior to the final
scheduled payment date for the related series, the servicer shall promptly
acquire the contract from the issuer and pay the Prepayment Amount into the
collection account.
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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 transfer and servicing
agreement provides that, in the event 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, amounts 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 the servicing fee rate for the
series 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 rate for a series will
be set forth in the related prospectus supplement. The servicer will also be
entitled to the excluded amounts.
The servicing fee will compensate the servicer for customary equipment
contract servicing activities to be performed by the servicer, additional
administrative services performed by the servicer and expenses paid by the
servicer.
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.
SERVICER NOT TO RESIGN
Generally, the transfer and servicing agreement will provide that Advanta
Bank Corp. may not resign from its obligations and duties as servicer under the
transfer and servicing agreement. However, Advanta
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Bank Corp. may resign as servicer and transfer its duties, obligations, rights
and privileges to a successor and the successor shall become the servicer if:
- the servicer determines that its performance of its duties is no longer
permissible under applicable law; or
- the servicer transfer is to an affiliate of Advanta Bank Corp.
The servicer can only be removed if a servicer default has occurred as
discussed below.
MERGER OR CONSOLIDATION 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.
TRANSFER OF SERVICING TO AN AFFILIATE
Notwithstanding any restrictions on the servicer's ability to resign or
transfer the servicing function, if the servicer is Advanta Bank Corp. or an
affiliate of Advanta Bank Corp., the servicer may, at its option, 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 transfer and servicing agreement; and
- the entity assuming the servicer position shall deliver to the trustee
written evidence that the credit ratings then assigned to the notes
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.
SERVICER DEFAULTS
The following events and conditions are defined in each transfer and
servicing agreement as "SERVICER DEFAULTS":
- failure by the Servicer
(1) to deliver to the trustee for deposit into the collection account or
any other trust account as provided for a series, any required
payment, or
(2) to direct the trustee to make any required distribution from the
collection account or any other trust account
and, in either case, the failure continues for a period of five business
days after written notice of the failure is received by the servicer from
the trustee or after the servicer discovers the failure;
- failure on the part of the servicer to perform or observe in any material
respect any other term, covenant or agreement in the transfer and
servicing agreement or in any related agreement and the failure
materially and adversely affects the noteholders and the failure has been
unremedied for
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60 calendar days after receipt by the servicer of a written notice from
the trustee or from the holders of not less than 25% of the principal
amount of notes outstanding and entitled to vote; and
- events of voluntary or involuntary insolvency or bankruptcy relating to
the servicer.
SERVICER TERMINATION
So long as a servicer default under the transfer and servicing agreement
has not been remedied, then the trustee or the holders of 25% 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 may terminate
all of the rights and obligations of the servicer (except the servicer's
indemnification obligations) under the transfer and servicing agreement. Upon
the receipt by the servicer of the written notice, all authority and power of
the servicer under the transfer and servicing agreement 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 transfer and
servicing agreement.
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, investment property, 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, except excluded
amounts, and except that the issuers will not receive and will not pledge
any residual interest in the equipment;
- 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;
- the transfer and servicing agreement and the issuer's rights to enforce
the transfer and servicing agreement;
- all money, securities, investment property, instruments, 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 "collateral" or 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 any
note 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 or
agreement of the issuer in the indenture or any representation or
warranty of the issuer made in the indenture proves to have been
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incorrect in any material respect as of the time when it was made, and
continuance of the default or failure to cure the incorrect statement for
a period of 30 days after the earliest of (i) the trustee's giving
written notice to the issuer or (ii) the holders of 25% of the then
outstanding principal balance of the notes entitled to vote giving
written notice to the issuer and the trustee; or
- voluntary or involuntary insolvency or bankruptcy events relating to the
issuer or to Advanta Bank Corp.
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 a majority of the then outstanding
principal balance of the notes entitled to vote, shall 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 entitled to vote 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 in the indenture 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 entitled to vote.
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
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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
the excluded amounts and unpaid servicing fees) 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 priorities
and provisions specified for the series and described in the related
prospectus supplement; and
Finally: to the issuer.
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 entitled to vote 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 the 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
- correct or amplify the description of the property subject to the lien of
the indenture, subject additional property to the lien of the indenture
or confirm the property to the trustee,
- evidence the succession, in compliance with the terms of the indenture,
of another entity 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,
- 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
concerning matters or questions arising under the indenture if such
action, as evidenced by a written opinion of counsel, will not, adversely
affect in any material respect the interests of the holders of the notes,
or
- make any other change to or eliminate any provisions of the indenture or
modifying the rights of the holders of the notes provided that the change
will not, as evidenced by a written opinion of counsel, 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 the consent of the holders of not less than a
majority in outstanding principal balance of the notes entitled to vote but no
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modification may be made which would do any of the following unless each
affected noteholder has consented:
- reduce the percentage of the holders of the notes which is required for
amendments or waivers;
- make revisions which would change the provisions of the indenture
restricting the ability of the issuer, the transferor and any affiliates
to vote as a holder of notes;
- reduce the percentage of the holders of the notes required to direct the
sale or liquidation of the trust estate;
- modify the provisions of the indenture relating to amendments which
require noteholder consent, except to increase the percentages;
- modify provisions to affect the calculation of any payment of interest or
principal on the notes; or
- permit the creation of a lien ranking prior to or on a parity with the
lien of the indenture.
NOTE 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.
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.
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.
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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 pledged to 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.
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
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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 amounts and the residual interest in the
equipment, 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. 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
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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 Department of Financial Institutions 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 assert 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 shall 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 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
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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 of this
prospectus, 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.
TAX CHARACTERIZATION OF THE ISSUER AND THE NOTES
Treatment of the Issuer as an Entity Not Subject to Tax. 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, the issuer will not be classified as an
association or as a publicly traded partnership taxable as a corporation for
federal income tax purposes. As a result, the Issuer will not be subject to
federal income tax. However, as discussed above, this opinion is not binding on
the IRS and no assurance can be given that this characterization will prevail.
The precise tax characterization of the Issuer for federal income tax
purpose is not certain. It might be viewed as merely holding assets on behalf of
the transferor as collateral for notes issued by the Originator. On the other
hand, the Issuer could be viewed as a separate entity for tax purposes issuing
its own notes. This distinction, however, should not have a significant tax
effect on noteholders except as stated below under "Possible Alternative
Characterizations."
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.
Possible Alternative Characterizations. 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
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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. 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.
CONSEQUENCES TO HOLDERS OF THE OFFERED NOTES
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 or 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-
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term obligations in an amount not exceeding the deferred interest income, until
such deferred interest income is realized. For purposes of determining the
amount of OID subject to these rules, all interest payments on a short-term
obligation, including stated interest, are included in the short-term
obligation's stated redemption price at maturity.
Market Discount. A holder of a note who purchases an interest in a note at
a discount that exceeds any OID not previously includible in income may be
subject to the "market discount" rules of Sections 1276 through 1278 of the
Code. These rules provide, in part, that gain on the sale or other disposition
of a note and partial principal payments on a note (in each case, other than a
"short-term obligation") are treated as ordinary income to the extent of accrued
market discount. The market discount rules also provide for deferral of interest
deductions with respect to debt incurred to purchase or carry a note that has
market discount.
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-8BEN or a
substitute (or applicable successor) 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, address and certain other information. 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-8BEN or substitute (or
applicable successor) 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
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<PAGE> 92
(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 and Information Reporting. 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 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.
Information may also be required to be provided to the IRS concerning payments,
unless an exception applies. Holders of the notes should consult their tax
advisors regarding their qualification for exemption from backup withholding and
information reporting 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 Nevada LLC, is not
subject to income or franchise taxes imposed by the state of Nevada, but the
issuer could be taxable in other states and localities by reason of its
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
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<PAGE> 93
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.
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
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<PAGE> 94
- 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.
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.
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 Nevada law will be passed upon for each issuer by Woodburn and Wedge,
Reno, Nevada, for the bank by Van Cott, Bagley, Cornwall & McCarthy, Salt Lake
City, Utah and with respect to certain federal tax matters, by Orrick,
Herrington & Sutcliffe LLP, Washington, D.C.
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<PAGE> 95
INDEX OF TERMS
<TABLE>
<S> <C>
Clearstream, Luxembourg................. 23
Code.................................... 39
Contract Principal Balance.............. 13
defaulted contract...................... 19
Eligible Deposit Account................ 30
eligible contract....................... 26
excluded amounts........................ 12
</TABLE>
<TABLE>
<S> <C>
monthly servicing fee................... 30
pledged assets.......................... 11
Prepayment Amount....................... 13
residual interest....................... 12
residual receipts....................... 12
servicer defaults....................... 31
users................................... 12
</TABLE>
45
<PAGE> 96
$385,607,000
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-1 LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-1
$181,285,000 __% CLASS A-1 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$63,269,000 __% CLASS A-2 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$84,623,000 __% CLASS A-3 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$28,215,000 __% CLASS B EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$18,810,000 __% CLASS C EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$9,405,000 __% CLASS D EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
-------------------
PROSPECTUS SUPPLEMENT
-------------------
Underwriters of the Class A notes
PRUDENTIAL SECURITIES
BARCLAYS CAPITAL
MORGAN STANLEY DEAN WITTER
Underwriter of the Class B, C and D notes
PRUDENTIAL SECURITIES
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, the Class C
notes or the Class D 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, the Class C notes or
the Class D notes and with respect to their unsold allotments or subscriptions.
In addition, all dealers selling the Class A notes, the Class B notes, the Class
C notes or the Class D notes will deliver a prospectus and prospectus supplement
until , 2000.
