<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2000
REGISTRATION NO. 333-93915
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ADVANTA EQUIPMENT RECEIVABLES
LIMITED LIABILITY COMPANIES
(ISSUER OF SECURITIES)
ADVANTA BANK CORP.
(TRANSFEROR TO THE LIMITED LIABILITY COMPANIES)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
UTAH 23-2597173
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
11850 SOUTH ELECTION ROAD
DRAPER, UTAH 84020
(801) 523-0858
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
PRINCIPAL EXECUTIVE OFFICES OF REGISTRANT)
------------------------
COLE SILVER, ESQ.
C/O ADVANTA BANK CORP.
1020 LAUREL OAK ROAD
VOORHEES, NEW JERSEY 08043
(609) 782-7300
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
CAMERON L. COWAN, ESQ.
ORRICK, HERRINGTON & SUTCLIFFE LLP
3050 K STREET, N.W.
WASHINGTON, D.C. 20007
(202) 339-8488
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. []
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. []
- ---------------
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. []
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. []
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED
TITLE OF AMOUNT TO BE AGGREGATE PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Equipment Receivables Asset-Backed
Notes............................. $1,000,000,000 100% $1,000,000,000 $264,000*
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- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Securities Act
* $264 of such amount was previously paid.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
AMENDED. WE MAY NOT SELL THESE SECURITIES UNTIL WE DELIVER A FINAL
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS. THIS PROSPECTUS
SUPPLEMENT IS NOT AN OFFER TO SELL NOR IS IT SEEKING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
REPRESENTATIVE FORM OF PROSPECTUS SUPPLEMENT
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 2000
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000- LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-
$[ ] CLASS A-1 NOTES
$[ ] CLASS A-2 NOTES
$[ ] CLASS A-3 NOTES
$[ ] CLASS A-4 NOTES
$[ ] CLASS B NOTES
$[ ] CLASS C NOTES
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE S-6 IN THIS
PROSPECTUS SUPPLEMENT AND ON PAGE 4 IN THE PROSPECTUS.
A note is not a deposit and neither the notes nor the underlying contracts
or receivables are insured or guaranteed by any governmental agency.
The notes offered in this prospectus supplement and the accompanying
prospectus are obligations of the issuer only. They are payable only from a
limited pool of assets. The notes are not obligations of Advanta Bank Corp.,
Advanta Corp. or any of their affiliates.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS
INTEREST PUBLIC DISCOUNT TO ISSUER
CLASS RATE PER NOTE PER NOTE PER NOTE
- ----- -------- -------- ------------ ---------
<S> <C> <C> <C> <C>
A-1............................. [ %] [ %] [ %] [ %]
A-2............................. [ %] [ %] [ %] [ %]
A-3............................. [ %] [ %] [ %] [ %]
A-4............................. [ %] [ %] [ %] [ %]
B............................... [ %] [ %] [ %] [ %]
C............................... [ %] [ %] [ %] [ %]
</TABLE>
The total price to public is [$ ,] the total amount of the
underwriting discount is [$ ,] and the total amount of proceeds before
deduction of expenses is [$ .]
CREDIT ENHANCEMENT
The Class B notes are subordinated to, and provide credit enhancement for,
the Class A notes. [The Class C notes are subordinated to, and provide credit
enhancement for, the Class A and the Class B notes.] The issuer also is issuing
[$ ] of [ %] [Class D] asset-backed notes. [The Class D notes are
subordinated to, and provide credit enhancement for, the Class A notes, the
Class B notes and the Class C notes.]
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
[UNDERWRITERS]
, 2000
<PAGE> 3
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
We provide information to you about the notes in two separate documents:
(a) the accompanying prospectus, which provides general information, some of
which may not apply to your series of notes and (b) this prospectus supplement,
which describes the specific terms of your series of notes.
If the terms of your series of notes as described in this prospectus
supplement vary from the terms described in the accompanying prospectus, you
should rely on the information in this prospectus supplement.
We include cross-references in this prospectus supplement and the
accompanying prospectus to captions in these materials where you can find
further related discussions. The following Table of Contents and the Table of
Contents included in the accompanying prospectus provide the pages on which
these captions are located.
------------------------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Terms...................... S-1
Issuer.............................. S-1
Limited Obligations................. S-1
Originator and Servicer............. S-1
Trustee............................. S-1
The Pledged Assets.................. S-1
The Contracts....................... S-1
The Notes........................... S-2
Payment Date........................ S-2
Issuance Date....................... S-2
Interest Payments................... S-2
Principal Payments.................. S-2
Stated Maturity..................... S-3
Subordination....................... S-3
Reserve Account..................... S-3
Flow of Funds....................... S-4
Optional Redemption................. S-4
[Class A-4 Special Redemption]...... S-4
Limited Ability to Remove Defaulted
Contracts........................ S-5
Federal Income Tax Status........... S-5
ERISA Considerations................ S-5
Ratings............................. S-5
Risk Factors.......................... S-6
You May Not Be Able to Sell Your
Notes............................ S-6
Security Interest in Most Equipment
Has Not Been Perfected........... S-6
Geographic Concentration of the
Contract Portfolio Causes
Increased Risk From Local
Economic Conditions and Natural
Disasters........................ S-6
Introduction.......................... S-7
The Issuer............................ S-7
Capitalization of the Issuer........ S-7
Management's Discussion and Analysis
of Financial Condition.............. S-8
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Use Of Proceeds....................... S-8
The Pledged Assets.................... S-8
General............................. S-8
Trust Estate........................ S-9
The Contracts....................... S-9
Statistical Information............... S-9
Servicing Portfolio Delinquency and
Default Information................. S-16
Historical Delinquency
Information...................... S-16
Historical Default Experience....... S-16
Description of the Notes.............. S-17
General............................. S-17
Payment Dates, Business Days and
Stated Maturity Date............. S-17
Determination Date and Collection
Periods.......................... S-17
Interest Payments................... S-17
Principal Payments.................. S-18
Flow of Funds....................... S-20
Optional Redemption................. S-21
Class A-4 Special Redemption........ S-22
Subordination Provisions............ S-22
Reserve Account..................... S-22
Reports to Noteholders.............. S-23
Payments Subsequent to an Event of
Default.......................... S-25
Prepayment and Yield Considerations... S-25
[Legal Investment].................... S-31
Underwriting.......................... S-32
Ratings of the Notes.................. S-33
Legal Matters......................... S-34
Reports to Noteholders................ S-34
Where You Can Find More Information... S-34
INDEX OF TERMS........................ S-35
Appendix A: Global Clearance,
Settlement and Tax Documentation
Procedures.......................... A-1
</TABLE>
i
<PAGE> 5
SUMMARY OF TERMS
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU NEED TO MAKE YOUR INVESTMENT DECISION. IT PROVIDES GENERAL,
SIMPLIFIED DESCRIPTIONS OF CALCULATIONS, CASH FLOWS AND OTHER MATTERS THAT, IN
SOME CASES, ARE HIGHLY TECHNICAL AND COMPLEX. MORE DETAIL IS PROVIDED IN OTHER
SECTIONS OF THIS PROSPECTUS SUPPLEMENT AND IN THE ACCOMPANYING PROSPECTUS.
TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, CAREFULLY READ THIS
ENTIRE DOCUMENT AND THE PROSPECTUS.
ISSUER
Advanta Equipment Receivables Series 2000-
LLC will issue the notes.
The issuer is a Nevada limited liability company. Its principal place of
business is , . Its telephone number is ( )
- .
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 and collateral
provided for the contracts. The contracts will be equipment leases and loan
agreements. We will identify all of the contracts at the time we issue the
notes.
ORIGINATOR AND SERVICER
Advanta Bank Corp. originated or acquired the contracts or acquired interests in
the contracts. Advanta Bank Corp. will transfer its interest in the scheduled
payments arising under the contracts to the issuer.
Advanta Bank Corp. or its successor will service the contracts for the issuer.
The servicer will collect payments on the contracts and enforce defaulted
contracts when necessary. The servicer may, but is not required to, make
advances to cover delinquent contract payments.
Advanta Bank Corp. is a Utah industrial loan corporation. Its principal place of
business is 11850 South Election Road, Draper, Utah 84020. Its telephone number
is (801) 523-0858.
The transfer and servicing agreement will permit Advanta Bank Corp. to assign
its rights and obligations as servicer to any affiliate of Advanta Corp. if the
rating agency condition is satisfied. Advanta Bank Corp. will service the
contracts through a subservicing arrangement with Advanta Business Services
Corp.
TRUSTEE
The trustee is . The trustee's address is .
Its telephone number is ( ) - .
THE PLEDGED ASSETS
We will pledge to the trustee, as security for the notes:
- the contracts listed on a schedule delivered to the trustee;
- the right to payments made on the contracts, except the excluded amounts and
except the residual receipts;
- the security interest, if any, in the underlying equipment;
- amounts held in the series accounts and earnings on the series accounts;
- recoveries on insurance policies and disposition of repossessed equipment;
- [credit enhancement for this series];
- our rights in the transfer and servicing agreement.
THE CONTRACTS
We will use the proceeds from the sale of the notes (i) to buy from Advanta Bank
Corp., a portfolio of contracts and related interests, [(ii) to make the initial
deposit to the reserve account] and (iii) to pay costs and expenses incurred in
issuing the notes.
S-1
<PAGE> 6
The contracts are primarily leases of small-ticket equipment.
The contracts include leases and loan agreements. Approximately [ %] of the
contracts, based on the statistical aggregate contract principal balance, are in
the form of loan agreements. The terms of the loan agreements differ from the
leases as described in the prospectus.
We will calculate the principal value of the contracts at any time by
discounting the contracts' remaining scheduled payments at the applicable
discount rate which is [ %].
The statistical characteristics of the contracts shown in this prospectus
supplement, however, are calculated as of [ ], [ ],
using a statistical discount rate of [ %].
The contracts had the following characteristics as of ,
:
- statistical aggregate contract principal balance: [$ ]
- statistical average contract principal balance: [$ ]
- number of contracts: [ ]
We expect some variance between this information and the portfolio on the day we
issue the notes. The characteristics of the portfolio on the date of issuance
will not vary by more than 5% from the information listed in the previous
paragraph.
We will make payments on the notes from collections on the contracts.
THE NOTES
In this document, we are offering [ ] classes of notes:
- [ %] Class A-1 notes with an initial principal balance of [$ ];
- [ %] Class A-2 notes with an initial principal balance of [$ ];
- [ %] Class A-3 notes with an initial principal balance of [$ ];
- [ %] Class A-4 notes with an initial principal balance of [$ ];
- [ %] Class B notes with an initial principal balance of [$ ]; and
- [ %] Class C notes with an initial principal balance of [$ ].
We also will issue [$ ] of [ %] [Class D] notes at the same time as
the offered notes. We are not offering the [Class D] notes by this document.
We will issue the notes under an indenture dated as of , .
The terms of the notes will be contained in the indenture.
PAYMENT DATE
We will pay interest and principal on the offered notes on the [15th] day of
each month if the [fifteenth] is a business day. If the [fifteenth] is not a
business day, then the payment will be on the next business day.
, will be the first payment date.
ISSUANCE DATE
We will issue the notes on or about , .
INTEREST PAYMENTS
[Interest on the notes will accrue from one payment date to and including the
day before the next payment date. For the first payment, interest will begin to
accrue on the day we issue the notes.]
The interest rate for each class of offered notes is specified on the cover page
and in this prospectus supplement summary under "Summary of Terms -- The Notes"
and under "Description of the Notes -- Interest Payments."
[Interest on the Class A-1 notes will be computed on the basis of actual days
elapsed and a 360-day year. Interest on the Class A-2 notes, Class A-3 notes,
Class A-4 notes, Class B notes, Class C notes and Class D notes will be computed
on the basis of a 360-day year comprised of twelve 30-day months.]
PRINCIPAL PAYMENTS
We will pay monthly principal on the notes from available funds only after
servicer advances are repaid and after trustee fees and expenses, servicing fees
and interest on all the Class A notes, the
S-2
<PAGE> 7
[Class B notes, the Class C and the Class D] notes are paid. Principal payments
will be made from remaining amounts.
Monthly principal payments due will be [an amount equal to the excess of the
outstanding principal balance over the aggregate contract principal balance as
of the related calculation date.]
We will pay principal monthly as follows:
- first to Class A-1, until it is paid in full, the entire monthly principal
amount to pay Class A-1;
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class A principal payment amount to pay Class A-2 until it is
paid in full; then to pay Class A-3 until it is paid in full and finally to
pay Class A-4 until it is paid in full;
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class B principal payment amount to Class B until Class B is
paid in full;
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class C principal payment amount to Class C until Class C is
paid in full;
- after Class A-1 is paid in full, a portion of the monthly principal amount
equal to the Class D principal payment amount to Class D until Class D is
paid in full unless the Class D floor exceeds the Class D target investor
principal amount;
- if the Class D floor exceeds the Class D target investor principal amount,
the difference between the monthly principal amount and the sum of the Class
A principal payment amount, Class B principal payment amount, Class C
principal payment amount and the Class D principal payment amount will be
paid sequentially to Class A-2, Class A-3, Class A-4, Class B notes, Class C
notes and Class D notes.
We refer you to "Description of the Notes -- Flow of Funds" in this prospectus
supplement for more detail on the payment of principal and interest.
STATED MATURITY
If the notes have not already been paid in full, we will be obligated to pay the
outstanding principal amount of the Class A-1 notes, Class A-2 notes, Class A-3
notes, Class A-4 notes, Class B notes, Class C notes and Class D notes in full
on their respective stated maturity dates.
The stated maturity dates are:
<TABLE>
<CAPTION>
STATED
CLASS MATURITY DATE
- ----- -------------
<S> <C>
A-1......................
A-2......................
A-3......................
A-4......................
[B....................... ]
[C....................... ]
[D....................... ]
</TABLE>
We expect that payment on the notes of each class will be made before the
payment date shown in the table above.
SUBORDINATION
The Class B notes will be subordinated to the Class A notes; the Class C notes
will be subordinated to the Class A notes and the Class B notes; and the Class D
notes will be subordinated to the Class A notes, the Class B notes and the Class
C notes.
- On each payment date, the trustee will use available funds to pay interest
on the Class A notes, then interest on the Class B notes, then interest on
the Class C notes [and finally interest on the Class D notes]; and
- On each payment date, the trustee will use the available funds to pay
principal on the Class A notes, then principal on the Class B notes, then
principal on the Class C notes and finally principal on the Class D notes.
We refer you to "Description of the Notes -- Subordination Provisions" in this
prospectus supplement for a more complete description of the subordination of
the Class B notes, the Class C notes and the Class D notes.
RESERVE ACCOUNT
The trustee will establish a reserve account. On the closing date, the issuer
will deposit into the reserve account an amount equal to [ %] of
S-3
<PAGE> 8
the initial aggregate contract principal balance. [Additional deposits will be
made from the flow of funds until the required reserve amount is on deposit.]
The trustee will use the amounts in the reserve account to pay the following
amounts if collections on the contracts are insufficient:
- amounts owed to the [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 greater of [ %] of the initial aggregate
contract principal balance and [ %] of the outstanding principal balance of
the notes.] The required reserve amount will not, however, exceed the
outstanding amount of the notes.
FLOW OF FUNDS
On each payment date, the trustee will make the following payments from the
available funds in the collection account. The available funds in the collection
account will include any amounts transferred from the reserve account. The
trustee will make payments in the following order of priority:
- first, to the trustee to pay fees and expenses;
- then, to the servicer to pay for any unrecoverable servicer advances;
- then, to the servicer to pay the servicer fee along with miscellaneous
amounts;
- then, to the Class A noteholders to pay the Class A note interest, ratably
with respect to each class of Class A notes;
- then, to the Class B noteholders to pay the Class B note interest;
- then to the Class C noteholders to pay Class C note interest;
- then, until the Class A-1 notes are paid in full, the entire monthly
principal amount to pay principal of the Class A-1 notes;
- when the Class A-1 notes have been paid in full, a portion of the monthly
principal amount equal to the Class A principal payment amount to pay
principal of the Class A-2 notes until paid in full, then to pay principal
of the Class A-3 notes until paid in full and finally to pay principal of
the Class A-4 notes until paid in full;
- when the Class A-1 notes have been paid in full, a portion of the monthly
principal amount equal to the Class B principal payment amount to pay
principal of the Class B notes and a portion of the monthly principal amount
equal to the Class C principal payment amount to pay principal of the Class
C notes,
- then to the reserve account in the amount needed to increase the amount in
the reserve account to the required reserve amount;
- then a portion of the monthly principal amount equal to the Class D
principal payment amount to pay principal of the Class D notes;
- then if the Class D floor is greater than the Class D target investor
principal amount, the difference between the monthly principal amount and
the sum of the Class A principal payment amount, the Class B principal
payment amount, the Class C principal payment amount and the Class D
principal payment amount to pay principal sequentially to Class A-2, Class
A-3, Class A-4, Class B and Class C;
- finally, to the issuer, any remaining available funds in the collection
account.
OPTIONAL REDEMPTION
The servicer has the option to direct the redemption of all remaining notes when
the aggregate contract principal balance is [ %] or less of the initial
aggregate contract principal balance.
If a redemption occurs, you will receive a final distribution equaling the
entire unpaid balance of your notes plus any accrued and unpaid interest. You
will not receive a redemption premium.
[CLASS A-4 SPECIAL REDEMPTION]
[The Class A-4 notes may be redeemed on any payment date, at a price equal to
the Class A-4 principal balance on that payment date, including any accrued and
unpaid interest, plus the Class A-4 special redemption premium. The Class A-4
special redemption premium is payable only to the holders of the Class A-4 notes
if the issuer exercises the Class A-4 special redemption;
S-4
<PAGE> 9
it is not payable in the event of an optional redemption as described in the
immediately preceding paragraph. If the Class A-4 special redemption occurs, it
will be treated as a purchase of the Class A-4 notes by the issuer and payments
on those notes will be made to the issuer.]
LIMITED ABILITY TO REMOVE DEFAULTED CONTRACTS
The issuer may, but has no obligation to, remove defaulted contracts from the
Series 2000-
trust estate. The issuer may remove contracts with a contract principal balance,
calculated as if the contracts were not defaulted, in the aggregate amount up to
[ %] of the initial aggregate contract principal balance. Upon removal of a
contract, the issuer must deposit the prepayment amount for a removed contract
into the collection account.
FEDERAL INCOME TAX STATUS
In the opinion of Orrick, Herrington & Sutcliffe LLP, special tax counsel to the
issuer, under existing law, [the Class A-1 notes, Class A-2 notes, the Class A-3
notes, the Class A-4 notes, the Class B notes and the Class C Notes] will be
characterized as indebtedness for federal income tax purposes. By your
acceptance of a note, you will agree to treat your note as debt for federal,
state and local income and franchise tax purposes. We refer you to "Federal
Income Tax Consequences" in the prospectus for additional information about the
application of federal income tax laws.
ERISA CONSIDERATIONS
Subject to important considerations described under "ERISA Considerations" in
the prospectus, [the Class A-1 notes, the Class A-2 notes, the Class A-3 notes,
the Class A-4 notes, the Class B notes and the Class C notes] are eligible for
purchase by persons investing assets of employee benefit plans or individual
retirement accounts. A fiduciary or other person contemplating purchasing the
notes on behalf of or with plan assets of any plan should consult with its
counsel regarding whether the purchase or holding of the notes could give rise
to a transaction prohibited or not otherwise permissible under ERISA or section
4975 of the Internal Revenue Code.
RATINGS
We will not issue the notes unless the rating agencies have assigned the
following ratings (or higher) to each class of notes:
<TABLE>
<CAPTION>
[RATING [RATING
CLASS AGENCY] AGENCY]
- ----- ------- -------
<S> <C> <C>
A-1................... [ ] [ ]
A-2................... [ ] [ ]
A-3................... [ ] [ ]
A-4................... [ ] [ ]
B..................... [ ] [ ]
C..................... [ ] [ ]
D..................... [ ] [ ]
</TABLE>
The ratings may be lowered, qualified or withdrawn by the rating agencies in
their discretion. The ratings are not recommendations to buy, sell or hold the
notes. They do not address any risk of prepayment or that payment will be made
at any time before the stated maturity.
S-5
<PAGE> 10
RISK FACTORS
You should carefully consider the following risk factors and the risk factors
included in the prospectus before deciding to invest in the notes offered by
this prospectus supplement.
YOU MAY NOT BE ABLE TO SELL If no public market develops, you, as a
YOUR NOTES noteholder, may not be able to liquidate your
investment in the notes prior to maturity.
There currently is no public market for the
notes, and we offer no assurance that one will
develop. The underwriters expect, but are not
obligated, to make a market in the notes. There
is no assurance, however, that any market will
be created or, if created, will continue.
SECURITY INTEREST IN MOST Financing statements in favor of Advanta Bank
EQUIPMENT HAS NOT BEEN Corp. have been filed only for equipment with
PERFECTED an original cost of $25,000 or more; such
equipment represents only approximately
[ %] of the statistical aggregate contract
principal balance. As a result, the security
interest in equipment that represents
approximately [ %] of the statistical
aggregate contract principal balance has not
and will not be perfected in favor of Advanta
Bank Corp., the issuer or the trustee.
GEOGRAPHIC CONCENTRATION OF As of the statistical calculation date,
THE CONTRACT PORTFOLIO CAUSES approximately [ %], [ %], [ %],
INCREASED RISK FROM LOCAL [ %] and [ %] of the contracts (based
ECONOMIC CONDITIONS AND NATURAL on the statistical aggregate contract principal
DISASTERS balance) were located in ,
, ,
and ,
respectively. No other state accounts for more
than % of the statistical aggregate
contract principal balance. Accordingly,
adverse economic conditions, natural disasters
or other factors particularly affecting any of
these states could have a disproportionate
affect on the performance of the portfolio.
S-6
<PAGE> 11
INTRODUCTION
On or about , , the "CLOSING DATE", Advanta Equipment
Receivables Series 2000- LLC will issue [$ ] of its equipment
receivables asset-backed notes, Series 2000- in [four] classes of
[Class A notes, including Class A-1, Class A-2, Class A-3 and Class A-4] and
[one class each of Class B, Class C and Class D notes.] Only the [Class A-1,
Class A-2, Class A-3, Class A-4, Class B and Class C] notes are being offered by
this prospectus supplement. The [Class A notes, Class B notes and Class C notes]
are, for Series 2000- , the "OFFERED NOTES." [The issuer will place the
Class D notes privately.] The [Class A-1 notes, the Class A-2 notes, the Class
A-3 notes, the Class A-4 notes, the Class B notes, the Class C notes and the
Class D] notes are collectively the "NOTES." Capitalized terms used in this
prospectus supplement are defined on the pages indicated in the table entitled
"Index of Terms" at the back of this prospectus supplement. 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 under the terms of the indenture, dated as of the
date of issuance of the notes between Advanta Equipment Receivables Series
2000- LLC, as the issuer, Advanta Bank Corp., as servicer, and
, as trustee. The specific terms of the notes will be set forth
in the indenture.
Advanta Equipment Receivables Series 2000- LLC will enter into a
transfer and servicing agreement dated the date of issuance of the notes with
Advanta Bank Corp., as transferor and as servicer. Pursuant to the transfer and
servicing agreement, Advanta Equipment Receivables Series 2000- LLC will
acquire Advanta Bank Corp.'s right, title and interest in the pledged assets.
THE ISSUER
The issuer is Advanta Equipment Receivables Series 2000- LLC.
Advanta Equipment Receivables Series 2000- LLC is a [single-member]
limited liability company formed under the laws of 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
, 2000 and a limited liability company operating agreement dated
, 2000. The principal office of the issuer is located at
.
CAPITALIZATION OF THE ISSUER
The following table illustrates the capitalization of the issuer as of the
closing date:
<TABLE>
<S> <C>
Class A-1 notes.............................................
Class A-2 notes.............................................
Class A-3 notes.............................................
Class A-4 notes.............................................
Class B notes...............................................
Class C notes...............................................
Class D notes...............................................
----------
$
==========
</TABLE>
S-7
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
As of the date of this prospectus supplement, the issuer does not have an
operating history. The proceeds of the sale of the notes will be used by the
issuer to acquire the contracts or Advanta Bank Corp.'s rights to the contracts,
to pay any costs and expenses and to make the initial deposit to the reserve
account. See "Use of Proceeds." The issuer is prohibited by its articles of
organization from engaging in any other business other than (i) the purchase of
equipment leases and lease receivables (including equipment), loan agreements
and other financing agreements from Advanta Bank Corp. and its affiliates, (ii)
the issuance of notes collateralized by its assets and (iii) engaging in acts
incidental, necessary or convenient to the foregoing and permitted under the law
of the state of Nevada. The issuer's ability to incur, assume or guaranty
indebtedness for borrowed money is also restricted by its limited liability
company agreement.
USE OF PROCEEDS
The issuer will apply the proceeds from the sale of the notes in the
following manner:
- to make the initial deposit to the reserve account, in the amount of
$ (equal to [ %] of the initial aggregate contract principal
balance);
- to acquire the portfolio of contracts (or interests in the contracts)
from Advanta Bank Corp.; and
- to pay costs and expenses.
To the extent that the value of the contracts and other rights and
interests acquired from Advanta Bank Corp. exceeds the amount of proceeds of the
notes available to purchase the assets, Advanta Bank Corp. will contribute the
balance of such assets to the capital of the issuer.
Advanta Bank Corp. has previously transferred finance contracts to
affiliates and the affiliates have pledged the contracts as security for or a
source of payment for notes issued by the affiliates. The issuer will use
proceeds from the sale of the notes to acquire contracts from Advanta Bank Corp.
and Advanta Bank Corp. will use proceeds from the sale of the contracts in part
to acquire the contracts from the current owners. All of the finance contracts
to be included in the portfolio are contracts originated or acquired by Advanta
Bank Corp.
THE PLEDGED ASSETS
GENERAL
The assets pledged ("PLEDGED ASSETS") by the issuer to the trustee to
secure the notes will consist of the issuer's right, title and interest in:
- 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 ,
except the excluded amounts, and all related security;
- the issuer's rights in the security interests granted by the users to
secure the payment obligations on the contracts;
- 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;
S-8
<PAGE> 13
- recoveries on insurance policies and disposition of repossessed
equipment; 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 insurance premiums, taxes, late charge fees for those contracts for
which a servicer advance has been made, any initial unpaid amounts and various
other incidental amounts.
TRUST ESTATE
Under the indenture, the issuer will pledge all of the pledged assets to
the trustee to secure the payment of the notes. The trustee will hold the
interests in the pledged assets. The trustee's interest will be known as the
"TRUST ESTATE."
THE CONTRACTS
The contracts are in the form of leases or loans. Loans may include
installment sale contracts.
Of the contracts, [ %], measured by the statistical aggregate contract
principal balance, are leases and the remaining [ %] are loan agreements.
The servicer has represented that, for accounting purposes, all of the
leases included as contracts are financing leases rather than "true" leases or
operating leases.
Approximately [ %] of the statistical aggregate contract principal balance
represents contracts in which Advanta Bank Corp. has acquired from vendors or
other lease financing entities and transferred to Advanta Equipment Receivables
Series 2000- LLC only a right to receive periodic lease payments made by the
users. With respect to such contracts, unless the user is in default, at the end
of the term of such lease Advanta Bank Corp. is required to reassign the
equipment to the vendor or other lease financing entity.
Statistical information concerning the contracts is included in this
prospectus supplement under the caption "Statistical Information."
STATISTICAL INFORMATION
The statistical information presented in this prospectus supplement
concerning the contracts reflects those cashflows from , and
onward related to the portfolio of contracts as of the opening of business on
, , and has been calculated using an assumed discount rate of
[ %] per year. The "AGGREGATE CONTRACT PRINCIPAL BALANCE" of the contracts as
of the statistical calculation date is $
using the statistical discount rate. The aggregate contract principal balance of
the contracts as of , is $ using the applicable discount
rate. The applicable discount rate is [ %], which was determined on the basis
of . As of the cut-off date, the total number of contracts
in the final pool was .
The statistical distribution of the characteristics of the contracts as of
the cut-off date using the applicable discount rate may vary somewhat from the
statistical distribution of the characteristics of the contracts as of the
statistical calculation date using the statistical discount rate as presented in
this prospectus supplement, because payments have been made on some contracts
and some contracts may be determined not to meet the eligibility requirements
for the final pool. During the period from the statistical calculation date to
the cut-off date, some contracts may have been added to the contracts included
in the pool.
The variance in the aggregate contract principal balance, average contract
principal balance and number of contracts of the final pool will not be greater
than 5% (plus or minus) compared to the characteristics that are described in
this prospectus supplement. The statistical characterization of the final pool
will be filed with the SEC on a current report on form 8-K.
S-9
<PAGE> 14
As used in the tables below, the statistical aggregate contract principal
balance is the aggregate of the contract principal balances of the related
contracts, calculated as of the statistical calculation date using the
statistical discount rate. Unless otherwise noted, all calculations of contract
principal balances with respect to the contracts and all statistical percentages
in this prospectus supplement are measured by the statistical aggregate contract
principal balance. Furthermore, in all instances in this prospectus supplement
where the statistical discount rate is used to calculate the contract principal
balances, the calculation is performed by discounts related to scheduled
payments at the same frequency as the payment interval of the related contract.
The percentages and balances set forth in each of the following tables may
not total due to rounding.
The following is statistical information relating to the contracts
calculated as of the statistical calculation date.
SUMMARY INFORMATION CONCERNING CONTRACTS
(As of , )
<TABLE>
<S> <C>
Number of Contracts.........................................
Statistical Aggregate Contract Principal Balance............ $
Statistical Average Contract Principal Balance.............. $
Statistical Minimum Contract Principal Balance.............. $
Statistical Maximum Contract Principal Balance.............. $
Aggregate Original Equipment Cost........................... $
Average Original Equipment Cost............................. $
Minimum Original Equipment Cost............................. $
Maximum Original Equipment Cost............................. $
Weighted Average Original Term in Months....................
Minimum Original Term in Months.............................
Maximum Original Term in Months.............................
Weighted Average Remaining Term in Months...................
Minimum Remaining Term in Months............................
Maximum Remaining Term in Months............................
Weighted Average Seasoning in Months........................
Largest User................................................ %
Loan Contracts.............................................. %
</TABLE>
S-10
<PAGE> 15
DISTRIBUTION OF CONTRACTS BY STATE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE OF ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
STATE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----- --------- ------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alabama............................. % $ % $ %
Alaska..............................
Arizona.............................
Arkansas............................
California..........................
Colorado............................
Connecticut.........................
Delaware............................
District of Columbia................
Florida.............................
Georgia.............................
Hawaii..............................
Idaho...............................
Illinois............................
Indiana.............................
Iowa................................
Kansas..............................
Kentucky............................
Louisiana...........................
Maine...............................
Maryland............................
Massachusetts.......................
Michigan............................
Minnesota...........................
Mississippi.........................
Missouri............................
Montana.............................
Nebraska............................
Nevada..............................
New Hampshire.......................
New Jersey..........................
New Mexico..........................
New York............................
North Carolina......................
North Dakota........................
Ohio................................
Oklahoma............................
Oregon..............................
Pennsylvania........................
Puerto Rico.........................
Rhode Island........................
South Carolina......................
South Dakota........................
Tennessee...........................
Texas...............................
Utah................................
Vermont.............................
Virgin Islands......................
Virginia............................
Washington..........................
West Virginia.......................
Wisconsin...........................
Wyoming.............................
--- --- ---- --- --- ----
Total........................... % $ % $ %
=== === ==== === === ====
</TABLE>
S-11
<PAGE> 16
DISTRIBUTION OF CONTRACTS BY CONTRACT PRINCIPAL BALANCE
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
CONTRACT PRINCIPAL BALANCE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- -------------------------- --------- ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.00 -- $ 100.00.... % $ % $ %
$ 100.01 -- $ 500.00....
$ 500.01 -- $ 1,000.00....
$ 1,000.01 -- $ 2,500.00....
$ 2,500.01 -- $ 5,000.00....
$ 5,000.01 -- $ 10,000.00....
$ 10,000.01 -- $ 25,000.00....
$ 25,000.01 -- $ 50,000.00....
$ 50,000.01 -- $100,000.00....
$100,000.01 -- $150,000.00....
Greater than $150,000.00......
--- --- -------- ---- --- ---
Total.................... % $ % $ %
=== === ======== ==== === ===
</TABLE>
DISTRIBUTION OF CONTRACTS BY ORIGINAL EQUIPMENT COST
<TABLE>
<CAPTION>
PERCENTAGE OF
STATISTICAL
AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL EQUIPMENT EQUIPMENT
ORIGINAL EQUIPMENT COST CONTRACTS CONTRACTS STATISTICAL BALANCE COST COST
- ----------------------- --------- ------------- ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 100.01 -- $ 500.00.... % $ % $ %
$ 500.01 -- $ 1,000.00....
$ 1,000.01 -- $ 2,500.00....
$ 2,500.01 -- $ 5,000.00....
$ 5,000.01 -- $ 10,000.00....
$ 10,000.01 -- $ 25,000.00....
$ 25,000.01 -- $ 50,000.00....
$ 50,000.01 -- $100,000.00....
$100,000.01 -- $150,000.00....
Greater than $150,000.00......
--- --- -------- ---- --- ---
Total.................... % $ % $ %
=== === ======== ==== === ===
</TABLE>
S-12
<PAGE> 17
DISTRIBUTION OF CONTRACTS BY
REMAINING MONTHS TO STATED MATURITY
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
REMAINING TERM (MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ----------------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12.............. % $ % $ %
13 -- 24..............
25 -- 36..............
37 -- 48..............
49 -- 60..............
61 -- 72..............
------- ----- -------- ----- -------- ------
Total............ % $ % $ %
======= ===== ======== ===== ======== ======
</TABLE>
DISTRIBUTION OF CONTRACTS BY
ORIGINAL CONTRACT TERM
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
ORIGINAL TERM (MONTHS) CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ---------------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
0 -- 12............. % $ % $ %
13 -- 24.............
25 -- 36.............
37 -- 48.............
49 -- 60.............
61 -- 72.............
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
DISTRIBUTION OF CONTRACTS BY PAYMENT FREQUENCY
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
PAYMENT TYPE CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- ------------ --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Monthly.............. % $ % $ %
Non-monthly..........
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
S-13
<PAGE> 18
DISTRIBUTION OF CONTRACTS BY PURCHASE OPTION
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE OF CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF NUMBER OF PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
PURCHASE OPTION CONTRACTS CONTRACTS BALANCE BALANCE COST COST
- --------------- --------- ------------- ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Nominal Buyout....... % $ % $ %
Fair Market Value....
Stated Residual......
Other(1).............
------- ----- -------- ----- -------- -----
Total........... % $ % $ %
======= ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) "Other" includes loans and contracts in which the issuer will obtain only
the right to scheduled payments.
S-14
<PAGE> 19
DISTRIBUTION OF CONTRACTS BY EQUIPMENT TYPE
<TABLE>
<CAPTION>
PERCENTAGE
STATISTICAL OF STATISTICAL
AGGREGATE AGGREGATE PERCENTAGE OF
PERCENTAGE CONTRACT CONTRACT AGGREGATE ORIGINAL
NUMBER OF OF NUMBER PRINCIPAL PRINCIPAL EQUIPMENT EQUIPMENT
EQUIPMENT DESCRIPTION CONTRACTS OF CONTRACTS BALANCE BALANCE COST COST
- --------------------- --------- ------------ ----------- -------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Microcomputers and Printers.... $ $ %
Copiers........................
Surveillance System............
Telephones.....................
Automotive Equipment...........
Medical Equipment..............
Security/Alarm System..........
Restaurant Equipment...........
Point of Sale Items............
Mailing Machines...............
A/V Equipment..................
Software.......................
Computer Peripherals...........
Heavy Machinery................
Furniture......................
Construction Equipment.........
Vending Equipment..............
Forklifts......................
Laundry Equipment..............
Welding Equipment..............
Commercial/Industrial
Cleaning.....................
Printing Press.................
Stenograph.....................
Photography Equipment..........
Landscaping Equipment..........
Cash Registers.................
Sewing and Embroidery..........
Freezer/Refrigerator/Restaurant...
Fax Machines...................
Ice Machine....................
Mobile Communications..........
Woodworking Equipment..........
Air Compressors................
Pressure Washers...............
Scales.........................
Signs/Display..................
Commercial Fitness Equipment...
Water Coolers..................
Theft Security.................
Safes..........................
Other..........................
-- -- --- -- --- --
Total..................... % % %
== == === == === ==
</TABLE>
S-15
<PAGE> 20
SERVICING PORTFOLIO DELINQUENCY AND DEFAULT INFORMATION
The following delinquency and default information relates to all equipment
financing contracts serviced by Advanta Bank Corp. or by Advanta Business
Services Corp. for the periods shown. Prior to October 1, 1998, Advanta Business
Services Corp. was in the business of originating and servicing equipment
leases. As of October 1, 1998 Advanta Bank Corp. assumed the origination of
equipment leases. Advanta Business Services continues to service the leases it
originated. Advanta Bank Corp. services the leases it originates through a
subservicing arrangement with Advanta Business Services. Therefore, the
following delinquency and default information, for periods prior to October 1,
1998 relates to the Advanta Business Services servicing portfolio and the
information from and after October 1, 1998 combines the servicing portfolios of
Advanta Business Services and Advanta Bank Corp.
HISTORICAL DELINQUENCY INFORMATION
Delinquency information for all equipment financing contracts in the
Advanta Bank Corp. and Advanta Business Services servicing portfolios is set
forth below.
HISTORICAL DELINQUENCY EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED 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
No. of Delinquent Days
- -------------------------
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 rent owing on
the leases.
HISTORICAL DEFAULT EXPERIENCE
Loss information for all equipment financing contracts in the Advanta Bank
Corp. and Advanta Business Services servicing portfolios is set forth below.
HISTORICAL LOSS EXPERIENCE -- SERVICING PORTFOLIO
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MONTHS YEAR ENDED
ENDED ------------------------------------------------------------
, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998 1997 1996
--------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Average Receivables
Outstanding(1).............. $ $800,696 $676,817 $652,607 $551,645
Net Losses.................... $ $ 25,584 $ 16,217 $ 15,293 $ 10,356
Net Losses as a Percentage of
Average Receivables......... (2) 3.20% 2.40% 2.34% 1.88%
</TABLE>
- ---------------
(1) Equals the arithmetic average of each month's receivable balance within the
period specified. The "receivable balance" is equal to the aggregate future
payments owing on all equipment financing contracts in the servicer's
servicing portfolio.
(2) Annualized.
S-16
<PAGE> 21
DESCRIPTION OF THE NOTES
GENERAL
The notes will be issued pursuant to the indenture. The notes will be
available only in book-entry form. The holders of the notes are those entities
registered as the owner of a note or notes on the registration books maintained
by the trustee. Unless and until definitive notes are issued under the limited
circumstances described in this prospectus supplement or the accompanying
prospectus, any references to actions taken by noteholders or holders refer to
actions taken by DTC from its participants' instructions, and all references in
this prospectus supplement to distributions, notices, reports and statements to
noteholders or holders shall refer to distributions, notices, reports and
statements to DTC or Cede & Co., as the registered holder of the book-entry
notes, as appropriate, for distribution to the ultimate owners of interests in
the notes pursuant with DTC procedures.
The offered notes will be issued in minimum denominations of $1,000 and
integral multiples of $1,000 in excess thereof, except that one note of each
class can be issued in another denomination.
PAYMENT DATES, BUSINESS DAYS AND STATED MATURITY DATE
Payments of principal and interest on the notes will be made on the [15th]
day of each month, or if the [15th] day is not a business day, the next
succeeding business day, beginning on , , (each a
"PAYMENT DATE") to record holders on the calendar day immediately prior to each
payment date for any definitive note, the record date is the last day of the
immediately previous calendar month. The indenture defines a "BUSINESS DAY" to
be any day except a Saturday, a Sunday or a day on which banks in New York, New
York or Salt Lake City, Utah 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 . The stated maturity date for the Class A-2 notes will
be the payment date in . The stated maturity date for the
Class A-3 notes will be the payment date in . The stated
maturity date for the Class A-4 notes will be the payment date in
. The stated maturity date for the Class B notes will be the payment
date in . [The stated maturity date for the Class C notes
will be the payment date in .] [The stated maturity date for
the Class D notes will be the payment date in .] If all
payments on the contracts are made as scheduled, final payment with respect to
each class of the notes would occur prior to its respective stated maturity
date. The issuer expects that the notes of each class will be paid prior to the
respective stated maturity date for such class.
DETERMINATION DATE AND COLLECTION PERIODS
On the third business day before each payment date, the servicer will
determine the amount of payments received on the contracts for the immediately
preceding calendar month and which will be available for distribution on the
payment date.
INTEREST PAYMENTS
On each payment date, the interest due on the Class A-1 notes, Class A-2
notes, Class A-3 notes, the Class A-4 notes, the Class B notes, [the Class C
notes and the Class D notes] will be the interest that has accrued since the
last payment date, or in the case of the , payment
date, since the closing date at the applicable interest rate. The applicable
interest rate will be applied to the unpaid principal amounts remaining after
the principal payments made on the preceding payment date. In each case, the
Class A-1 note interest, the Class A-2 note interest, the Class A-3 note
interest, the Class A-4 note interest, the Class B note interest, [the Class C
note interest and the Class D note]
S-17
<PAGE> 22
interest shall include any interest due on each class on any preceding payment
date and not paid plus interest on any overdue amount.
- The interest rates applicable to the seven classes of notes are:
- The Class A-1 notes will bear interest at [ %] per annum.
- The Class A-2 notes will bear interest at [ %] per annum.
- The Class A-3 notes will bear interest at [ %] per annum.
- The Class A-4 notes will bear interest at [ %] per annum.
- The Class B notes will bear interest at [ %] per annum.
[- The Class C notes will bear interest at [ %] per annum.]
[- The Class D notes will bear interest at [ %] per annum.]
[Interest on the Class A-1 notes will be calculated on the basis of actual
days and a 360-day year. Interest on the Class A-2 notes, Class A-3 notes, Class
A-4 notes, Class B notes, Class C notes and Class D notes will be calculated on
the basis of a year of 360 days and twelve 30-day months.]
PRINCIPAL PAYMENTS
For any payment date the "MONTHLY PRINCIPAL AMOUNT" will be the excess of
(a) the outstanding principal balance of all notes as of the immediately prior
payment date and after taking into account payments made on that preceding
payment date over (b) the aggregate contract principal balance as of the related
calculation date.
On each payment date until all Class A-1 notes are paid, the entire amount
of the Monthly Principal Amount will be applied to pay the Class A-1 notes. [On
subsequent payment dates, the remaining Class A, the Class B notes, the Class C
notes and Class D notes] will be entitled to receive payments of principal, to
the extent funds are available for them, in the priorities set forth in the
indenture and described below and under "Description of the Notes -- Flow of
Funds."
On each payment date, if sufficient funds are available, the principal will
be paid to the noteholders in the following priority:
(a) The Class A principal payment amount which, until the Class A-1
notes have been paid in full will be equal to the full amount of the
monthly principal amount, will be paid to the Class A-1 notes, the Class
A-2 notes, the Class A-3 notes and the Class A-4 notes sequentially until
the Class A principal balance has been reduced to zero. No principal will
be paid on the Class A-2 notes, the Class A-3 and the Class A-4 notes until
the full amount of the Class A-1 notes has been paid, no principal will be
paid to the Class A-3 notes until the full amount of the Class A-1 notes
and the Class A-2 notes has been paid and no principal will be paid to the
Class A-4 notes until the full amount of the Class A-1 notes, the Class A-2
notes and the Class A-3 notes has been paid.
(b) When the full amount of the Class A-1 notes have been paid, then
that portion of the monthly principal amount equal to the Class B principal
payment amount will be paid to the Class B notes on each payment date until
the Class B principal balance has been reduced to zero.
(c) When the full amount of the Class A-1 notes have been paid, then
that portion of the monthly principal amount equal to the Class C principal
amount will be paid to the Class C notes on each payment date until the
Class C principal balance has been reduced to zero.
(d) When the full amount of the Class A-1 notes have been paid, then
that portion of the monthly principal amount equal to the Class D principal
amount will be paid to the Class D notes on each payment date until the
Class D principal balance has been reduced to zero.
S-18
<PAGE> 23
(e) If for any payment date, the Class D Floor exceeds the Class D
Target Investor Principal Amount, the additional principal for such payment
date, to the extent of amounts remaining in available funds, will be used
first to pay the Class A-2 notes until they are paid in full, then to pay
the Class A-3 notes until they are paid in full then to pay the Class A-4
notes until they are paid in full, then to pay the Class B notes until they
are paid in full and finally to pay the Class C notes until they are paid
in full.
The "CLASS A PRINCIPAL PAYMENT AMOUNT" is (a) for any payment date on which
all or a portion of the Class A-1 notes remain outstanding after making payments
on such day, the monthly principal amount; (b) for any payment date on which the
outstanding principal of Class A-1 notes is reduced to $0, the sum of (1) the
amount necessary to reduce the Class A-1 notes to $0 and (2) the amount
necessary to reduce the sum of the outstanding principal amount of the Class A-2
notes, Class A-3 notes and the Class A-4 notes to the Class A Target Investor
Principal Amount; or (c) on any subsequent payment date, the amount necessary to
reduce the sum of the outstanding principal amount of the Class A-2 notes, Class
A-3 notes and Class A-4 notes to the Class A Target Investor Principal Amount.
The "CLASS A TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class A percentage and (b) the
aggregate contract principal balance as of each calculation date.
The "CLASS B PRINCIPAL PAYMENT AMOUNT" is (a) for any payment date on which
all or a portion of the Class A-1 notes remain outstanding after giving effect
to payments on such day, $0 and (b) on any subsequent payment date, the amount
necessary to reduce the aggregate outstanding principal amount of the Class B
notes to the greater of the Class B Target Investor Principal Amount and the
Class B Floor.
The "CLASS B TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class B Percentage and (b) the
aggregate contract principal balance as of the related calculation date.
The "CLASS C PRINCIPAL PAYMENT AMOUNT" is (a) for any payment date on which
all or a portion of the Class A-1 notes remain outstanding after giving effect
to payments on such day, $0 and (b) on any subsequent payment date, the amount
necessary to reduce the aggregate outstanding principal amount of the Class C
notes to the greater of the Class C Target Investor Principal Amount and the
Class C Floor.
The "CLASS C TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class C Percentage and (b) the
aggregate contract principal balance as of the related calculation date.
The "CLASS D PRINCIPAL PAYMENT AMOUNT" is (a) for any payment date on which
all or a portion of the Class A-1 notes remain outstanding after giving effect
to payments on such day, $0 and (b) on any subsequent payment date, the amount
necessary to reduce the aggregate outstanding principal amount of the Class D
notes to the greater of the Class D Target Investor Principal Amount and the
Class D Floor.
The "CLASS D FLOOR" with respect to each payment date means (a) [ %] of
the initial aggregate contract principal balance, plus (b) the Cumulative Loss
Amount as of such payment date, minus (c) the sum of the amounts on deposit in
the reserve account after netting all payments and withdrawals on any payment
date.
The "CLASS D TARGET INVESTOR PRINCIPAL AMOUNT" with respect to each payment
date is an amount equal to the product of (a) the Class D Percentage and (b) the
aggregate contract principal balance as of the related calculation date.
The "CLASS A PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the sum of the initial principal amount of the Class A-2, Class A-3 and
Class A-4 notes divided by (ii) the initial aggregate contract principal balance
minus the initial principal amount of the Class A-1 notes, and being
approximately [ %].
S-19
<PAGE> 24
The "CLASS B PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class B notes divided by (ii) the
initial aggregate contract principal balance minus the initial principal amount
of the Class A-1 notes, and being approximately [ %].
The "CLASS C PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class C notes divided by (ii) the
initial aggregate contract principal balance minus the initial principal amount
of the Class A-1 notes, and being approximately [ %].
The "CLASS D PERCENTAGE" means a fraction, expressed as a percentage, of
(i) the initial principal balance of the Class C notes divided by (ii) the
initial aggregate contract principal balance minus the initial principal amount
of the Class A-1 notes, and being approximately [ %].
The outstanding Class A-1 note principal balance for any payment date
equals the class A-1 initial principal balance less any principal payments
previously made on the Class A-1 notes; the outstanding Class A-2 note principal
balance for any payment date equals the Class A-2 initial principal balance less
any principal payments previously made on the Class A-2 notes; the outstanding
Class A-3 note principal balance for any payment date equals the Class A-3
initial principal balance less any principal payments previously made on the
Class A-3 notes; and the outstanding Class A-4 note principal balance for any
payment date equals the Class A-4 initial principal balance less any principal
payments previously made on the Class A-4 notes. The outstanding Class B note
principal balance for any payment date shall be equal to the Class B initial
principal balance less any principal payments previously made on the Class B
notes. The outstanding Class C note principal balance for any payment date shall
be equal to the Class C initial principal balance less any principal payments
previously made on the Class C Notes. The outstanding Class D note principal
balance for any payment date shall be equal to the Class D initial principal
balance less any principal payments previously made on the Class D notes. The
outstanding principal balance for any date is the sum of the Class A principal
balance, the Class B principal balance, the Class C principal balance and the
Class D principal balance as of the same date.
The "CLASS A-1 INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS A-2
INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS A-3 INITIAL PRINCIPAL
BALANCE" is [$ ]. The "CLASS A-4 INITIAL PRINCIPAL BALANCE" is
[$ ]. The "CLASS B INITIAL PRINCIPAL BALANCE" is [$ ]. The
"CLASS C INITIAL PRINCIPAL BALANCE" is [$ ]. The "CLASS D INITIAL
PRINCIPAL BALANCE" is [$ ].
The additional principal means, with respect to each payment date, an
amount equal to the monthly payment amount less the Class A principal payment
amount and the Class B principal payment amount.
The "CUMULATIVE LOSS AMOUNT" means, with respect to each payment date, an
amount equal to the excess, if any, of (a) the remainder of (i) the outstanding
principal balance minus (ii) the lesser of (A) monthly principal amount and (B)
available funds after providing for reimbursement of servicer advances and the
servicer fee payments to the servicer and payments of interest on the notes on
such payment date over (b) the aggregate contract principal balance as of the
related calculation date.
The "CALCULATION DATE" for a collection period is the close of business on
the last day of that collection period.
FLOW OF FUNDS
The transfer and servicing agreement will require that the trustee
establish a collection account and that the servicer deposit to the collection
account, any collections or receipts received by the servicer on the contracts,
other than any residual receipts and excluded amounts, no later than two
business days following the servicer's receipt and identification of such
amounts.
Under the terms of the transfer and servicing agreement, "AVAILABLE FUNDS"
for a payment date means:
- amounts collected during the immediately preceding calendar month 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
defaulted contracts or
S-20
<PAGE> 25
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:
- to the trustee to pay trustees fees and expenses;
- 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, in equal amounts based
on interest due with respect to each class of Class A notes;
- to the holders of the Class B notes, accrued and unpaid Class B note
interest for the related interest accrual period;
- to the holders of the Class C notes, accrued and unpaid Class C note
interest for the related interest accrual period;
- from the available funds then remaining in the collection account, until
the Class A-1 principal balance has been reduced to zero, to the Class
A-1 noteholders, the Class A principal payment amount; after the Class
A-1 principal balance has been reduced to zero, then until the Class A-2
principal balance has been reduced to zero, to the Class A-2 noteholders,
the Class A principal payment amount; after the Class A-1 principal
balance and the Class A-2 principal balance have been reduced to zero,
then until the Class A-3 principal balance has been reduced to zero, to
the Class A-3 noteholders, the Class A principal payment amount; after
the Class A-1 principal balance, the Class A-2 principal balance and the
Class A-3 principal balance have been reduced to zero, then until the
Class A-4 principal balance has been reduced to zero, to the Class A-4
noteholders, the Class A principal payment amount;
- until the Class B principal balance has been reduced to zero, to the
Class B noteholders, the Class B principal payment amount;
- until the Class C principal balance has been reduced to zero, to the
Class C noteholders;
- to the reserve account, the amount needed to increase the amount in the
reserve account to the required reserve amount for any payment date;
- if on a payment date, the Class D Floor is greater than the Class D
Investor Principal Amount, an amount equal to the additional principal to
be paid in order to the Class A-2 noteholders, Class A-3 noteholders,
Class A-4 noteholders, Class B noteholders and Class C noteholders;
- until the Class D principal balance has been reduced to zero, to the
Class D noteholders;
- to the issuer, as owner of the pledged assets, any remaining available
funds on deposit in the collection account.
OPTIONAL REDEMPTION
The servicer will have the option to direct the redemption of all, but not
less than all, of the notes of all classes on any payment date on which the
aggregate contract principal balance as of the relevant calculation date is less
than or equal to [ %] of the initial aggregate contract principal balance.
When
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<PAGE> 26
funds are deposited to cover a redemption, the trustee will pay the outstanding
principal balances of the notes that were called for redemption and all accrued
and unpaid interest by the payment date set for redemption.
CLASS A-4 SPECIAL REDEMPTION
Pursuant to the indenture, the Class A-4 notes can be redeemed on a payment
date, at the option of the issuer at a price equal to the sum of (i) the then
Class A-4 principal balance and accrued and unpaid interest on the Class A-4
principal balance and (ii) the Class A-4 special redemption premium described in
the next paragraph.
The "CLASS A-4 SPECIAL REDEMPTION PREMIUM" will equal the excess, if any,
discounted as described below, of (i) the amount of interest that may accrue on
the aggregate outstanding principal balance of the Class A-4 notes at the Class
A-4 interest rate during the period beginning on and including the payment date
on which the premium is required to be paid to but excluding the Class A-4
stated maturity date, over (ii) the amount of interest that would have accrued
on the aggregate outstanding Class A-4 principal balance over the same period at
a per annum rate of interest equal to the bond equivalent yield to maturity on
the determination date preceding such payment date of a United States Treasury
security, which is trading in the public securities market, maturing on a date
closest to the date equal to the remaining average life of the Class A-4 notes
minus [ %]. Any excess shall be discounted to the present value to the
payment date at the applicable yield described in clause (ii) of the previous
sentence. For these purposes only, (i) the Class A-4 principal balance for which
interest will be deemed to accrue, and (ii) the average weighted life of the
Class A-4 notes, shall be determined based upon the amortization of the
aggregate contract principal balance remaining at such payment date at a rate of
[ %] CPR and no losses.
If the Class A-4 notes are redeemed pursuant to a Class A-4 special
redemption, the Class A-4 notes will be deemed to have been purchased by the
issuer. In a purchase, the issuer will be entitled to receive payments of
principal and interest on the Class A-4 notes, and the Class A-4 principal
balance will thereafter continue to amortize as described in this prospectus
supplement.
SUBORDINATION PROVISIONS
Credit enhancement for Class A noteholders is provided by the subordination
of the Class B notes, the Class C notes and the Class D notes and by the reserve
account.
The cash flow and subordination provisions of the indenture provide that
available funds on each payment date will be used to fund payments to the
noteholders (and to repay servicer advances and to pay the fees and expenses of
the trustee and the servicer) with (i) interest on the Class D notes being paid
only after the interest on the Class A, Class B and Class C notes, (ii) interest
on the Class C notes being paid only after the interest on the Class A and Class
B notes, (iii) interest on the Class B notes being paid only after interest on
the Class A notes, (iv) principal on the Class B, Class C and Class D notes
commencing only after the Class A-1 notes are paid in full and (v) when the
Class A-1 notes have been paid in full, the Class D principal payment amount
being paid in each month only after the Class C principal payment amount, the
Class B principal payment amount and the Class A principal payment amount, the
Class C principal payment amount being paid in each month only after the Class B
principal payment amount and the Class A principal payment amount and the Class
B principal payment amount being paid in each month only after the Class A
principal payment amount.
RESERVE ACCOUNT
The noteholders will have the benefit of funds on deposit in an account
called the "RESERVE ACCOUNT" to the extent that, on any payment date, there is a
shortfall in the amount available to repay the servicer advances and to pay the
servicer fee owing the servicer or to make interest and principal payments on
the notes. The reserve account will be funded by an initial deposit of [ %]
of the initial aggregate contract principal balance. [After the initial deposit,
additional deposits will be made to the reserve account on
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<PAGE> 27
each payment date, if the amount on deposit in the reserve account is less than
the required reserve amount.] See "Flow of Funds" in this prospectus supplement.
The "REQUIRED RESERVE AMOUNT" on a payment date equals the lesser of (i) the
greater of [ %] of the initial aggregate contract principal balance and
[ %] of the aggregate outstanding note balance and (ii) the aggregate
principal amount of the notes. Amounts on deposit in the reserve account in
excess of the required reserve amount will be disbursed to the issuer in
accordance with the provisions of the indenture.]
Amounts on deposit in the reserve account on any payment date shall be
withdrawn therefrom and transferred to the collection account if the available
funds (exclusive of the amounts transferred from the reserve account but after
taking into account any transfer to the collection account from the residual
account) for that payment date are insufficient to fund in full the items
described above under "-- Flow of Funds" which items are of a higher priority
than the funding of the reserve account.
If, on any payment date, the aggregate amounts on deposit in the collection
account and reserve account are greater than or equal to the sum of (i) the
remaining principal balance of the Class A notes, the Class B notes, the Class C
notes and the Class D notes, (ii) the accrued and unpaid interest, (iii) the
accrued and unpaid servicing fee and (iv) the unreimbursed servicer advances,
the amount on deposit in the reserve account will be deposited in the collection
account and used to repay in full the Class A notes, the Class B notes, the
Class C notes and the Class D notes.
REPORTS TO NOTEHOLDERS
On each payment date, the trustee will forward to the rating agencies and,
with each payment to the noteholders, a statement prepared by the servicer
setting forth the following information (per $1,000 of initial note principal
amount for (a) and (b) below):
(a) The amount of the payment allocable to the Class A-1 principal
payment amount, Class A-2 principal payment amount, Class A-3 principal
payment amount, Class A-4 principal payment amount, the Class B principal
payment amount, the Class C principal amount or the Class D principal
amount, as applicable;
(b) The amount of the payment allocable to that noteholder's portion
of Class A note interest, Class B note interest, Class C interest or Class
D interest, as applicable;
(c) The aggregate amount of fees and compensation received by the
servicer pursuant to the indenture for the collection period;
(d) The Class A-1 principal balance, the Class A-2 principal balance,
the Class A-3 principal balance, the Class A-4 principal balance, the Class
B principal balance, the Class C principal balance, the Class D principal
balance, the Class A-1 Note Factor, the Class A-2 Note Factor, the Class
A-3 Note Factor, the Class A-4 Note Factor, the Class B Note Factor, the
Class C Note Factor, the Class D Note Factor, the aggregate contract
principal balance and the Collateral Factor, after taking into account all
distributions made on that Payment Date;
(e) The total unreimbursed servicer advances with respect to the
related collection period;
(f) The aggregate contract principal balance for all contracts that
became defaulted contracts during the related collection period, calculated
immediately prior to the time the contracts became defaulted contracts;
(g) The amount on deposit in the reserve account;
(h) 31-60, 61-90 and greater than 90 days delinquencies as of the end
of the related collection period; and
(i) Prepayment amounts received during the related collection period.
The "CLASS A-1 NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date
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<PAGE> 28
representing the ratio of (x) the Class A-1 principal balance which will be
outstanding on the next payment date, after taking into account all
distributions to be made on that payment date to (y) the Class A-1 initial
principal balance.
The "CLASS A-2 NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class A-2 principal balance which will be outstanding on the next
payment date, after taking into account all distributions and to be made on that
payment date to (y) the Class A-2 initial principal balance.
The "CLASS A-3 NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class A-3 principal balance which will be outstanding on the next
payment date, after taking into account all distributions to be made on that
payment date to (y) the Class A-3 initial principal balance.
The "CLASS A-4 NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class A-4 principal balance which will be outstanding on the next
payment date, after taking into account all distributions to be made on that
payment date to (y) the Class A-4 initial principal balance.
The "CLASS B NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class B principal balance which will be outstanding on the next payment
date, after taking into account all distributions to be made on that payment
date to (y) the Class B initial principal balance.
The "CLASS C NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class C principal balance which will be outstanding on the next payment
date, after taking into account all distributions to be made on that payment
date to (y) the Class C initial principal balance.
The "CLASS D NOTE FACTOR" is the seven digit decimal number that the
servicer will compute or cause to be computed for each collection period and
will make available on the related determination date representing the ratio of
(x) the Class D principal balance which will be outstanding on the next payment
date, after taking into account all distributions to be made on that payment
date to (y) the Class D initial principal balance.
The "COLLATERAL FACTOR" is the seven digit decimal number that the servicer
will compute or cause to be computed for each collection period and will make
available on the related determination date representing the ratio of (x) the
aggregate contract principal balance as of the immediately preceding calculation
date to (y) the initial aggregate contract principal balance.
In addition, by , of each calendar year following
any year during which the notes are outstanding, commencing
, , the trustee will furnish to each noteholder of record at any time
during the preceding calendar year, information as to the aggregate of amounts
reported pursuant to items (a) and (b) above for the preceding calendar year to
enable noteholders to prepare their federal income tax returns.
S-24
<PAGE> 29
PAYMENTS SUBSEQUENT TO AN EVENT OF DEFAULT
Subsequent to an event of default and following any acceleration of the
notes pursuant to the indenture, any moneys that may then be held or thereafter
received by the trustee shall be applied in the following order of priority:
First, to the trustee for the payment of all fees, costs and expenses
including conversion costs due to the trustee, including the reasonable
fees and expenses of any counsel to the trustee;
Second, to the payment of all accrued and unpaid interest on the
outstanding principal balance of the Class A-1 notes, Class A-2 notes,
Class A-3 notes and Class A-4 notes in equal proportion to their interests
to the date of payment of the accrued and unpaid, to the extent permitted
by applicable law, interest on any overdue interest and principal to the
date of payment thereof at the Class A-1 interest rate, the Class A-2
interest rate, the Class A-3 interest rate and the Class A-4 interest rate,
respectively;
Third, to the payment of the outstanding principal balance of the
Class A-1 notes to the date of payment when the balance is reduced to zero;
Fourth, to the payment of the outstanding principal balance of the
Class A-2 notes to the date of payment when the balance is reduced to zero;
Fifth, to the payment of the outstanding principal balance of the
Class A-3 notes to the date of payment when the balance is reduced to zero;
Sixth, to the payment of the outstanding principal balance of the
Class A-4 notes to the date of payment when the balance is reduced to zero;
Seventh, to the payment of all accrued and unpaid interest on the
outstanding principal balance of the Class B notes to the date of payment
thereof, to the extent permitted by applicable law, interest on any overdue
interest and principal to the date of payment thereof the Class B interest
rate;
Eighth, the payment of the outstanding principal balance of the Class
B notes to the date of payment when the balance is reduced to zero;
Ninth, to the payment of all accrued and unpaid interest on the
outstanding principal balance of the Class C notes to the date of payment
thereof, to the extent permitted by applicable law, interest on any overdue
interest and principal to the date of payment thereof the Class C interest
rate;
Tenth, to the payment of the outstanding principal balance of the
Class C notes to the date of payment when the balance is reduced to zero;
Eleventh, to the payment of the outstanding principal balance of the
Class D notes to the date of payment when the balance is reduced to zero;
and
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.
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<PAGE> 30
The leases do not allow prepayment at the option of the user. Under the
indenture, the servicer may generally allow prepayments of leases. No prepayment
of a contract that is a lease will be allowed in an amount less than the
prepayment amount.
The effective yield to noteholders will depend upon, among other things,
the price at which the notes are purchased, and the amount of and rate at which
principal, including both scheduled and nonscheduled payments thereof, is paid
to the noteholders.
The following chart sets forth the percentage of the initial principal
balance of the Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and
Class D notes which would be outstanding on the payment dates set forth below
assuming a CPR of [ %], [ %], [ %], [ %], [ %], [ %] and
[ %], respectively, and were calculated using the statistical discount rate
[ %]. The charts were calculated assuming no losses related to the
contracts. This information is hypothetical and is set forth for illustrative
purposes only.
This information is based upon assumptions which may or may not be
accurate. Actual payment experience may vary significantly from the following
tables.
The conditional payment rate or "CPR" assumes that a fraction of the
aggregate contract principal balance is prepaid on each calculation date, which
implies that each contract is equally likely to prepay. This fraction, expressed
as a percentage, is annualized to arrive at the CPR for the contract pool. The
CPR equals the monthly prepayments divided by the previous month's outstanding
discounted present value of the contracts minus the payment of all scheduled
payments on the contracts during that collection period. The CPR further assumes
that all contracts are the same size and amortize at the same rate and that each
contract will be either paid as scheduled or prepaid in full. The amounts set
forth below are based upon the timely receipt of scheduled payments as of the
statistical calculation date, assumes that the issuers exercise their options to
redeem the notes when the aggregate contract principal balance amortizes to less
than [ %] of the initial aggregate contract principal balance and assumes
the closing date is , and the first payment date is
, . In addition, it is assumed, for the purposes of
these charts only, that the issuers issue the notes in the following amounts and
at the following interest rates:
<TABLE>
<CAPTION>
ASSUMED INITIAL ASSUMED
CLASS PRINCIPAL AMOUNT INTEREST RATE
- ----- ---------------- -------------
<S> <C> <C>
A-1......................................................... $ %
A-2......................................................... $ %
A-3......................................................... $ %
A-4......................................................... $ %
B........................................................... $ %
C........................................................... $ %
D........................................................... $ %
</TABLE>
S-26
<PAGE> 31
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-1 NOTES BALANCE OF THE CLASS A-2 NOTES
------------------------------------ ------------------------------------
CPR CPR
------------------------------------ ------------------------------------
PAYMENT DATE 0% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</TABLE>
- ---------------
(1) The weighted average life of a Class A-1 note or Class A-2 note is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such class of notes by the number of
years from the closing date to the relevant payment date, (b) adding the
results and (c) dividing the sum by the initial principal amount of the
applicable class.
S-27
<PAGE> 32
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS A-3 NOTES BALANCE OF THE CLASS A-4 NOTES
------------------------------------ ------------------------------------
CPR CPR
------------------------------------ ------------------------------------
PAYMENT DATE 0% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</TABLE>
- ---------------
(1) The weighted average life of a Class A-3 note or a Class A-4 note is
determined by (a) multiplying the amount of cash distributions in reduction
of the outstanding principal amount of such class of notes by the number of
years from the closing date to the relevant payment date, (b) adding the
results and (c) dividing the sum by the initial principal amount of the
applicable class.
S-28
<PAGE> 33
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS B NOTES BALANCE OF THE CLASS C NOTES
------------------------------------ ------------------------------------
CPR CPR
------------------------------------ ------------------------------------
PAYMENT DATE 0% % % % 0% % % %
- ------------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date.................. % % % % % % % %
Weighted Average Life(1) to
Call (in years).............
Weighted Average Life(1) to
Maturity (in years).........
</TABLE>
- ---------------
(1) The weighted average life of a Class B note or a Class C note is determined
by (a) multiplying the amount of cash distributions in reduction of the
outstanding principal amount of such class of notes by the number of years
from the closing date to the relevant payment date, (b) adding the results
and (c) dividing the sum by the initial principal amount of the applicable
class.
S-29
<PAGE> 34
<TABLE>
<CAPTION>
PERCENTAGE OF THE INITIAL PRINCIPAL
BALANCE OF THE CLASS D NOTES
------------------------------------
CPR
------------------------------------
PAYMENT DATE 0% % % %
- ------------ ------ ------ ------ ------
<S> <C> <C> <C> <C>
Closing Date................................................ % % % %
Weighted Average Life(1) to Call (in years).................
Weighted Average Life(1) to Maturity (in years).............
</TABLE>
- ---------------
(1) The weighted average life of a Class D note is determined by (a) multiplying
the amount of cash distributions in reduction of the outstanding principal
amount of such class of notes by the number of years from the closing date
to the relevant payment date, (b) adding the results and (c) dividing the
sum by the initial principal amount of the Class D note.
S-30
<PAGE> 35
AGGREGATE MONTHLY SCHEDULED PAYMENTS
The following table sets forth the scheduled payments. For the purposes of
this table we have assumed there are no delinquencies, losses or prepayments on
the contracts. The information set forth below is not a prediction of the actual
payments that will be received. The information regarding delinquencies and
defaults set forth under the caption "Servicing Portfolio Delinquency and
Default Information" in this prospectus supplement, as well as the information
under "Risk Factors" in this prospectus supplement and in the prospectus should
be reviewed together with the information set forth below.
<TABLE>
<CAPTION>
MONTH AGGREGATE SCHEDULED PAYMENTS
- ----- ----------------------------
<S> <C>
</TABLE>
[LEGAL INVESTMENT]
[The Class A-1 notes will be an "eligible security" under Rule 2a-7 enacted
pursuant to the Investment Company Act of 1940, as amended.]
S-31
<PAGE> 36
UNDERWRITING
Under the terms and subject to the conditions set forth in the underwriting
agreement for the sale of the offered notes, Advanta Bank Corp. and the issuer
have agreed to sell and the underwriters named below have agreed to purchase the
offered notes as set forth below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-1 NOTES CLASS A-1 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-2 NOTES CLASS A-2 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-3 NOTES CLASS A-3 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS A-4 NOTES CLASS A-4 NOTES
- ----------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS B NOTES CLASS B NOTES
- --------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF THE
UNDERWRITERS OF THE CLASS C NOTES CLASS C NOTES
- --------------------------------- -----------------------
<S> <C>
............................. $
............................. $
--------
$
========
</TABLE>
The issuer has been advised by , as representative of the
underwriters, that the underwriters propose initially to offer the offered notes
to the public at the respective public offering prices set forth on the cover
page of this prospectus supplement, and to certain dealers at such price, less a
concession not in excess of [ %] per Class A-1 note, [ %] per Class A-2
note, [ %] per Class A-3 note, [ %] per Class A-4 note, [ %] per
Class B note and [ %] per Class C note. The underwriters may allow and such
dealers may reallow to other dealers a discount not in excess of [ %] per
Class A-1 note, [ %] per Class A-2 note, [ %] per Class A-3 note,
[ %] per Class A-4 note, [ %] per Class B note and [ %] per Class C
note.
S-32
<PAGE> 37
<TABLE>
<CAPTION>
UNDERWRITERS'
DISCOUNTS AND AMOUNT PER $1,000
CLASS COMMISSIONS OF PRINCIPAL TOTAL AMOUNT
----- ------------- ----------------- ------------
<S> <C> <C> <C>
A-1.............................................. % $ $
A-2.............................................. % $ $
A-3.............................................. % $ $
A-4.............................................. % $ $
B................................................ % $ $
C................................................ % $ $
Total............................................ % $ $
</TABLE>
Additional offering expenses are estimated to be [$ ].
Each underwriter will represent and agree that:
(a) it has not offered or sold, and, prior to the expiry of six months
from the closing date, will not offer or sell, any offered notes to persons
in the United Kingdom, except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of investments (as
principal or agent) for purposes of their business, or otherwise in
circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995;
(b) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 with respect to anything done by it in
relation to the offered notes in, from or otherwise involving the United
Kingdom; and
(c) it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with the issue
of the offered notes to a person of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions)
Order 1996 or persons to whom such document may otherwise lawfully be
issued, distributed or passed on.
(d) it is a person of a kind described in Article II(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996.
The originator and the issuer have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the securities act. The
issuer has been advised by the representative that the underwriters presently
intend to make a market in the offered notes, as permitted by applicable laws
and regulations. The underwriters are not obligated, however, to make a market
in the offered notes and any such market making may be discontinued at any time
at the sole discretion of the underwriters. No assurance can be given as to the
liquidity of, or trading markets for, the offered notes.
In connection with the offering of the offered notes, the underwriters and
selling group members and their respective affiliates may engage in transactions
that stabilize, maintain or otherwise affect the market price of the offered
notes. Such transactions may include stabilization transactions effected in
accordance with Rule 104 of Regulation M, pursuant to which such person may bid
for or purchase the offered notes for the purpose of stabilizing its market
price.
RATINGS OF THE NOTES
It is a condition to the issuance of the notes that the Class A-1 notes be
rated at least " ," the Class A-2 notes be rated at least " ," the Class
A-3 notes be rated at least " ," the Class A-4 notes be rated at least
" ," the Class B notes be rated at least " ," the Class C notes be rated
at least ' ," and the Class D notes be rated at least by and the Class
A-1 notes be rated at least " ," the Class A-2 notes be rated at least
" ," the Class A-3 notes be rated at least " ,"the Class A-4 notes be
rated at least ' ," the Class B notes be rated at least " ," the Class C
notes be rated at least " " and the Class D notes be rated at least " ,"
by , respectively.
S-33
<PAGE> 38
Each rating will reflect only the views of the particular rating agency and
will be based primarily on the amount of subordination, the availability of
funds on deposit in the reserve account and the rating agency's opinion of the
credit quality of the contracts and the other pledged assets included in the
trust estate. The ratings are not a recommendation to purchase, hold or sell the
related notes, inasmuch as ratings do not comment as to market price or
suitability for a particular investor. There is no assurance that any rating
will continue for any period of time or that it will not be lowered or withdrawn
entirely by the related rating agency if, in its judgment, circumstances so
warrant. A revision or withdrawal of a rating may have an adverse affect on the
market price of the notes. The rating of the notes addresses the likelihood of
the timely payment of interest and the ultimate payment of principal on the
notes by each class's stated maturity date. The rating does not address the rate
of prepayments that may be experienced on the contracts and, therefore, does not
address the effect of the rate of prepayments on the return of principal to the
noteholders. See "Risk Factors -- Limited Nature of Credit Ratings Assigned to
the Notes" in the prospectus.
LEGAL MATTERS
Legal matters relating to the validity of the issuance of the notes will be
passed upon for the issuer by Orrick, Herrington & Sutcliffe LLP, Washington,
D.C. Legal matters related to Nevada law will be passed upon for the issuer by
. Legal matters for the bank will be passed upon by
. Legal matters will be passed upon for the underwriters by
.
REPORTS TO NOTEHOLDERS
The servicer will prepare monthly and annual reports that will contain
information about the notes. The financial information contained in the reports
will be prepared in accordance with generally accepted accounting principles.
Unless and until definitive notes are issued, the reports will be sent to Cede,
the nominee of DTC, 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-34
<PAGE> 39
INDEX OF TERMS
<TABLE>
<S> <C>
aggregate contract principal
balance........................... S-9
available funds..................... S-20
business day........................ S-17
calculation date.................... S-20
Class A Percentage.................. S-19
Class A Principal Payment Amount.... S-19
Class A Target Investor Principal
Amount............................ S-19
Class A-1 initial principal
balance........................... S-20
Class A-1 Note Factor............... S-23
Class A-2 initial principal
balance........................... S-20
Class A-2 Note Factor............... S-24
Class A-3 initial principal
balance........................... S-20
Class A-3 Note Factor............... S-24
Class A-4 initial principal
balance........................... S-20
Class A-4 Note Factor............... S-24
Class A-4 special redemption
premium........................... S-22
Class B initial principal balance... S-20
Class B Note Factor................. S-24
Class B Percentage.................. S-20
Class B Principal Payment Amount.... S-19
Class B Target Investor Principal
Amount............................ S-19
Class C initial principal balance... S-20
Class C Note Factor................. S-24
Class C Percentage.................. S-20
Class C Principal Payment Amount.... S-19
Class C Target Investor Principal
Amount............................ S-19
Class D Floor....................... S-19
Class D initial principal balance... S-20
Class D Note Factor................. S-24
Class D Percentage.................. S-20
Class D Principal Payment Amount.... S-19
Class D Target Investor Principal
Amount............................ S-19
closing date........................ S-7
Collateral Factor................... S-24
CPR................................. S-26
Cumulative Loss Amount.............. S-20
excluded amounts.................... S-9
Monthly Principal Amount............ S-18
Notes............................... S-7
offered notes....................... S-7
payment date........................ S-17
pledged assets...................... S-8
required reserve amount............. S-22
reserve account..................... S-22
trust estate........................ S-9
</TABLE>
S-35
<PAGE> 40
APPENDICES
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Global Clearance, Settlement and Tax Documentation
A Procedures.................................................. A-1
</TABLE>
S-36
<PAGE> 41
APPENDIX A:
GLOBAL CLEARANCE, SETTLEMENT AND TAX DOCUMENTATION PROCEDURES
Except in limited circumstances, the globally offered Equipment Receivables
Asset-Backed Notes, Series 2000- or global securities will be available
only in book-entry form. Investors in the global securities may hold such global
securities through any of Depository Trust Company (DTC), 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> 42
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
A-2
<PAGE> 43
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.
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, under currently applicable law,
(i) each clearing system, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business in the
chain of intermediaries between such beneficial owner and the U.S. entity
required to withhold tax complies with applicable certification requirements and
(ii) such beneficial owner takes one of the following steps to obtain an
exemption or reduced tax rate:
Exemption for non-U.S. Persons (form W-8). Beneficial owners of
certificates that are non-U.S. persons generally can obtain a complete exemption
from the withholding tax by filing a signed Form W-8 (certificate of foreign
status). If the information shown on form W-8 changes, a new form W-8 must be
filed within 30 days of such change.
Exemption for non-U.S. Persons with effectively connected income (form
4224). A non-U.S. person, including a non-U.S. corporation or bank with a U.S.
branch, for which the interest income is effectively connected with its conduct
of a trade or business in the United States, can obtain an exemption from the
withholding tax by filing form 4224 (Exemption from Withholding of Tax on Income
Effectively Connected with the Conduct of a Trade or Business in the United
States).
Exemption or reduced rate for non-U.S. Persons resident in treaty countries
(form 1001). Non-U.S. persons that are certificate owners residing in a country
that has a tax treaty with the United States can obtain an exemption or reduced
tax rate (depending on the treaty terms) by filing form 1001 (Ownership,
Exemption or Reduced Rate Certificate). If the treaty provides only for a
reduced rate, withholding tax will be imposed at that rate unless the filer
alternatively files form W-8. Form 1001 may be filed by the Certificate Owner or
his agent.
Exemption for U.S. Persons (form W-9). U.S. persons can obtain a complete
exemption from the withholding tax by filing form W-9 (Payer's Request for
Taxpayer Identification Number and Certification).
U.S. Federal Income Tax Reporting Procedure. The certificate owner of a
global security or, in the case of a form 1001 or a form 4224 filer, his agent,
files by submitting the appropriate form to the person through whom it holds
(the clearing agency, in the case of persons holding directly on the books of
the clearing agency). Form W-8 and form 1001 are effective for three calendar
years and form 4224 is effective for one calendar year.
U.S. person means (i) a citizen or resident of the United States, (ii) a
corporation or partnership organized in or under the laws of the United States
or any political subdivision thereof or (iii) an estate or trust the income of
which is includible in gross income for United States tax purposes, regardless
of its source. This summary does not deal with all aspects of U.S. Federal
income tax withholding that may be relevant to foreign holders of the global
securities. Investors are advised to consult their own tax advisors for specific
tax advice concerning their holding and disposing of the global securities.
Further, the U.S. Treasury Department has recently finalized new regulations
that will revise some aspects of the current system for withholding on amounts
paid to foreign persons. Under these regulations, interest or OID paid to a
nonresident alien would continue to be exempt from U.S. withholding taxes
(including backup withholding) provided that the holder complies with the new
certification procedures.
A-3
<PAGE> 44
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-LLC
ISSUER
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES, SERIES 2000-
$[ ] [ %] CLASS A-1 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-2 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-3 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS A-4 EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS B EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
$[ ] [ %] CLASS C EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
------------------------
PROSPECTUS SUPPLEMENT
------------------------
[UNDERWRITERS]
You should rely only on the information contained in this prospectus
supplement and the accompanying prospectus. We have not authorized anyone to
provide you with different information.
We are not offering the Class A notes, the Class B notes and the Class C
notes in any state where the offer is not permitted.
Dealers will deliver a prospectus and prospectus supplement when acting as
underwriters of the Class A notes, the Class B notes and the Class C notes and
with respect to their unsold allotments or subscriptions. In addition, all
dealers selling the Class A notes, the Class B notes and the Class C notes will
deliver a prospectus and prospectus supplement until , .
<PAGE> 45
The information in this prospectus is not complete and may be amended. We
may not sell these securities until we deliver a final prospectus and
accompanying prospectus supplement. This prospectus is not an offer to
sell nor is it seeking an offer to buy these securities in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2000
PROSPECTUS
ADVANTA EQUIPMENT RECEIVABLES LIMITED LIABILITY COMPANIES
EQUIPMENT RECEIVABLES ASSET-BACKED NOTES
ADVANTA BANK CORP.
ORIGINATOR AND SERVICER
CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 IN THIS PROSPECTUS.
<TABLE>
<S> <C>
A note is not a deposit and EACH ISSUER --
neither the notes nor the
contracts are insured or - will be a newly-created Nevada limited liability company;
guaranteed by the Federal
Deposit Insurance Corporation - will issue only one series of notes; and
or any other governmental
agency. - will acquire from Advanta Bank Corp. a portfolio of assets
consisting primarily of equipment leases.
Each note is the obligation
only of the limited liability EACH SERIES OF NOTES --
company which issued the note.
The notes do not represent - will be an obligation only of the issuer created for that
interests in or obligations of series;
Advanta Bank Corp. or any
affiliate, except the issuer. - will be secured by and payable only from the limited
assets of that issuer;
This prospectus may be used to
offer and sell any series of - may have one or more forms of enhancement; and
notes only if accompanied by
the prospectus supplement for - may include one or more classes of notes and enhancement.
that series.
THE NOTEHOLDERS --
- will receive interest and principal payments only from
collections on the contracts.
</TABLE>
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE NOTES OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
, 2000
<PAGE> 46
IMPORTANT NOTICE ABOUT INFORMATION PRESENTED IN THIS
PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT
We provide information to you about the notes in two separate documents:
(a) this prospectus, which provides general information, some of which may not
apply to your series of notes and (b) the accompanying prospectus supplement,
which describes the specific terms of your series of notes.
If the terms of your series of notes vary between the accompanying
prospectus supplement and this prospectus, you should rely on the information in
the accompanying prospectus supplement.
We include cross-references in the accompanying prospectus supplement and
this prospectus to captions in these materials where you can find further
related discussions. The following table of contents and the table of contents
included in the accompanying prospectus supplement provide the pages on which
these captions are located.
------------------------
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
Series.............................. 1
Issuers............................. 1
Originator and Servicer............. 1
Trustee............................. 1
The Pledged Assets.................. 1
The Contracts....................... 2
The Notes........................... 2
Credit and Cash Flow Enhancement.... 2
Federal Income Tax Matters.......... 2
ERISA Considerations................ 2
Note Ratings........................ 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>
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<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>
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<TABLE>
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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
</TABLE>
<TABLE>
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Legal Matters Affecting the
Contracts........................... 36
Considerations Relating to the
Users............................ 36
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
Consequences to Holders of the
Offered Notes.................... 39
State Tax Consequences................ 42
ERISA Considerations.................. 42
Plan of Distribution.................. 44
Legal Opinions........................ 44
</TABLE>
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<PAGE> 49
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION AND DOES NOT CONTAIN ALL OF THE
INFORMATION THAT YOU NEED TO MAKE YOUR INVESTMENT DECISION. IT PROVIDES GENERAL,
SIMPLIFIED DESCRIPTIONS OF CALCULATIONS, CASH FLOWS AND OTHER MATTERS THAT, IN
SOME CASES, ARE HIGHLY TECHNICAL AND COMPLEX. MORE DETAIL IS PROVIDED IN OTHER
SECTIONS OF THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
TO UNDERSTAND ALL OF THE TERMS OF THE OFFERING OF THE NOTES, CAREFULLY READ THIS
ENTIRE DOCUMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT.
SERIES
The notes will be issued in series from time to time. Each series of notes will
be issued by a new limited liability company. The notes of each series will be
payable from a separate portfolio of contracts and interests in contracts
originated or acquired by Advanta Bank Corp. and transferred to the issuer.
ISSUERS
Each issuer will be a newly-formed 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:
- the contracts listed on a schedule we will deliver to the issuer and the
trustee;
- the right to payments made on the contracts, except the excluded payments
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;
- recoveries on insurance policies and disposition of repossessed equipment;
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- 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 office equipment, telecommunications
equipment, automotive repair equipment, surveillance equipment and furniture.
The users of the equipment and the obligors on the contracts are businesses and
business owners throughout the United States.
The leases are triple-net leases. This means that the lessee is required to pay
all taxes, maintenance and insurance associated with the equipment.
The leases cannot be cancelled by the lessees. Payments due under the leases are
unconditional obligations of the lessee without right of offset. The servicer
may, however, allow prepayments.
The contracts which are pledged to your series of notes will be specifically
described in the related prospectus supplement.
THE NOTES
Each series of notes will be offered by a prospectus supplement which will set
forth the specific terms of the notes.
Each series will include two or more classes of notes.
The notes represent non-recourse asset-backed debt obligations of the issuer.
The notes of your series will be secured by and payable only from the portfolio
of contracts and other assets pledged to your series.
CREDIT AND CASH FLOW ENHANCEMENT
Credit enhancement, if any, for your series will be described in the related
prospectus supplement. Credit enhancement for a series or any class or classes
of notes may include any one or more of the following:
- subordination of one or more classes of notes to other classes of notes,
- reserve accounts,
- over-collateralization,
- letters of credit,
- credit or liquidity facilities,
- surety bonds,
- guaranteed investment contracts,
- swaps or other interest rate 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 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.
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<PAGE> 51
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.
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<PAGE> 52
RISK FACTORS
You should carefully consider the following risk factors and the risk factors in
the accompanying prospectus supplement before deciding to invest in the notes
offered by this prospectus and the accompanying prospectus supplement.
PREPAYMENTS ON THE CONTRACTS The rate of principal payments on any series of
MAY CAUSE EARLY PAYMENT notes is unpredictable. The amount and timing
OF 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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<PAGE> 53
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 more than
$25,000
If the security interest is not perfected
another party (such as a creditor of the user)
may acquire rights in the equipment superior to
those of Advanta Bank Corp., your issuer and
the trustee for your series. This may adversely
affect the ability of the servicer to realize
on the equipment in the event of the user's
default, which may cause you to experience
delays in payments and losses on your
investment.
If any lease is a true lease, rather than a
financing lease, under applicable commercial
law, the originator rather than the user will
retain the ownership interest in the equipment.
This
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<PAGE> 54
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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<PAGE> 55
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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<PAGE> 56
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 originally included in the series pool. In
CONCERNING THE POOL those series, if any, where substitution is
CHARACTERISTICS 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
8
<PAGE> 57
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 provide 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 any required amounts under the contract or
to return the equipment, including any amounts relating to a security deposit
applied by the servicer as residual receipts, plus any other amounts which are
received by the 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 monthly at one-twelfth of the applicable discount rate. A defaulted
contract has a Contract Principal Balance of $0. The applicable discount rate
for a series will be set forth in the related prospectus supplement.
The scheduled payments for any contract are the periodic rental or loan
payments, not including any insurance or tax amounts set forth, in the contract
and due from the user.
Some of the contracts permit the user to assign or sublease the equipment
if the servicer consents to the assignee or sublessee in accordance with the
terms of that contract. Despite any assignment or sublease, the original user
remains liable as the lessee under that contract and the contract remains part
of the pledged assets.
The leases are triple-net leases, meaning that the user assumes all
responsibility with respect to the equipment which secures the lease, including
the obligation to pay all costs relating to its operation, maintenance, repair
and insurance.
Purchase Options. The contracts typically require a residual payment at
the end of the term most of which payments are in the form of a purchase option.
These purchase options are exercisable at varying amounts. If a user under a
contract with a purchase option does not exercise its purchase option, the user
is required either to continue the lease of the equipment on a month-to-month
basis or to return the equipment to the 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 in excess of
$25,000. As a result, it is possible that another creditor of the user could
obtain a security interest in the equipment superior to the security interest
held by the issuer.
See the caption "Legal Matters Affecting the Contracts -- 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 transferor 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 in excess of $25,000;
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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, the issuer may, at its option, remove a limited amount of
defaulted contracts from the trust estate. The aggregate amount 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 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 all accounts, general intangibles, instruments, chattel paper,
documents, money, letters of credit, advices of credit, deposit accounts,
certificates of deposit, investment property, goods and other property
consisting of, arising from or related to any of the following:
(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 collections and proceeds of the contracts and related security
after the cut-off date for the series including scheduled payments under
the contracts, prepayments, recoveries, investment earnings on accounts
held by the trustee and insurance proceeds received by the servicer, the
trustee or the issuer,
(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
and
(6) all proceeds of the foregoing.
The transfer and servicing agreement will provide that the assets conveyed
to the issuer do not include the bank's residual interest in the equipment.
Representations Concerning the Contracts. In each transfer and servicing
agreement, the bank, as originator of the contracts, will represent and warrant,
that for each contract transferred under that agreement, on the closing date for
that series or, where indicated, the cut-off date for that series, the following
are true:
- The contract is with an obligor whose billing address is in the United
States or its territories and possessions and requires all payments under
the contract are to be made in United States dollars;
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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 be
due and payable or if the originator shall concurrently be contesting the
validity of the claim in good faith by appropriate proceedings that have
stayed enforcement of the claim and shall have set aside on its books
adequate reserves;
- The contract is in full force and effect in accordance with its terms and
contains enforceable provisions such that the right and remedies of the
holder thereof shall be adequate for realization against the equipment,
if any, thereunder and of the benefits of any security granted
thereunder;
- The contract does not provide for the substitution, exchange, or addition
of any other items of equipment pursuant to such contract which would
result in any reduction or extension of payments due thereunder;
- The contract by its terms is due and payable on or within 84 months and
has not had its payment terms extended other than in compliance with the
credit and collection policy of Advanta Bank Corp.;
- The contract is in substantially the form of one of the standard form
contracts that Advanta Bank Corp. uses or a form reviewed and accepted by
Advanta Bank Corp.;
- The contract (a) does not preclude the pledge, transfer or assignment
thereof, (b) does not require the consent of the user to the pledge,
assignment or transfer thereof, and (c) does not contain a
confidentiality provision that purports to restrict the ability of the
trustee (or any prior pledgor or owner thereof) to exercise its rights
under the transaction documents with respect thereto, including, without
limitation, its right to review the contract;
- The contract or interest in the contract was (a) originated or purchased
by the originator in the ordinary course of its business, (b) approved
and purchased or funded in the ordinary course of the originator's
business and (c) if purchased from a broker or vendor, has been
re-underwritten by the
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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.
Additional representations may be required for eligible contracts for any
series. 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 receivables that it
services for itself or others. The servicer's duties will include calculating,
billing, collection and posting of all payments, responding to inquiries of
users, investigating delinquencies, 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 indenture; 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
38
<PAGE> 87
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.
CONSEQUENCES TO HOLDERS OF THE OFFERED NOTES
Treatment of the Notes as Debt. Special tax counsel is of the opinion
that, although no transaction closely comparable to that contemplated herein has
been the subject of any Treasury regulation, revenue ruling or judicial decision
and hence the matter cannot be free from doubt, the notes offered by this
prospectus will be characterized as debt for United States federal income tax
purposes. Additionally, the issuer will agree by entering into the indenture,
and the noteholders will agree by their purchase and holding of notes, to treat
the notes as debt for United States federal income tax purposes.
If, contrary to the opinion of special tax counsel, the IRS successfully
asserted that a class of notes did not represent debt for United States federal
income tax purposes, those notes might be treated as equity interests in the
issuer or some other entity for such purposes. If so treated, investors could be
treated for such purposes either as partners in a partnership or, alternatively,
as shareholders in a taxable corporation. 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
39
<PAGE> 88
particular circumstances. The following discussion assumes that the
characterization of the notes as debt is correct.
Interest and Original Issue Discount. Generally, stated interest on a note
will be includible in gross income as it accrues or is received in accordance
with a noteholder's usual method of tax accounting. If a class of notes is
issued with original issue discount or OID, the provisions of Sections 1271
through 1273 and 1275 of the Code will apply to those notes. Under those
provisions, a holder of such a note (including a cash basis holder) generally
would be required to include the OID on a note in income for federal income tax
purposes on a constant yield basis, resulting in the inclusion of OID in income
in advance of the receipt of cash attributable to that income. In general, a
note will be treated as having OID to the extent that its "stated redemption
price" exceeds its "issue price," if such excess equals or exceeds 0.25 percent
multiplied by the weighted average life of the note (determined by taking into
account the number of complete years following issuance until payment is made
for each partial principal payment). Under Section 1272(a)(6) of the Code,
special provisions apply to debt instruments on which payments may be
accelerated due to prepayments of other obligations securing those debt
instruments. However, no regulations have been issued interpreting those
provisions, and the manner in which those provisions would apply to the notes is
unclear, but the application of Section 1272(a)(6) could affect the rate of
accrual of OID and could have other consequences to holders of the notes.
Additionally, the IRS could take the position based on Treasury regulations that
none of the interest payable on a note is "unconditionally payable" and hence
that all of such interest should be included in the Note's stated redemption
price at maturity. If upheld, such treatment should not significantly affect tax
liabilities for most holders of the notes, but potential noteholders should
consult their own tax advisors concerning the impact to them in their particular
circumstances. The issuer intends to take the position that interest on the
notes constitutes "qualified stated interest" and that the above consequences do
not apply.
One 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-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.
40
<PAGE> 89
Market Premium. A holder of a note who purchases an interest in a note at
a premium may elect to amortize the premium against interest income over the
remaining term of the note in accordance with the provisions of Section 171 of
the Code.
Disposition of the Notes. Upon the sale, exchange, or retirement of a
note, the holder of the note generally will recognize taxable gain or loss in an
amount equal to the difference between the amount realized on the sale (other
than amounts attributable to accrued interest) and the holder's adjusted tax
basis in the note. The holder's adjusted tax basis in the note generally will
equal the cost of the note to such holder, increased by any market or original
issue discount previously included in income by such holder with respect to the
note, and decreased by the amount of any bond premium previously amortized and
any payments of principal or OID previously received by such holder with respect
to such note. Subject to the discussion of "short-term obligations" above, any
such gain or loss generally will be capital gain or loss, except to the extent
of accrued market discount not previously included in income, and will be
long-term capital gain or loss if at the time of sale the note has been held for
more than one year.
Foreign Holders. Under United States federal income tax law now in effect,
payments of interest by the issuer to a holder of a note who, as to the United
States, is a nonresident alien individual or a foreign corporation (a "foreign
person") generally will be considered "portfolio interest," and generally will
not be subject to United States federal income tax and withholding tax, provided
the interest is not effectively connected with the conduct of a trade or
business within the United States by the foreign person and the foreign person
(i) is not for United States federal income tax purposes (a) actually or
constructively a "10 percent shareholder" of the issuer, (b) a "controlled
foreign corporation" with respect to which the issuer is a "related person"
within the meaning of the Code, or (c) a bank extending credit pursuant to a
loan agreement entered into in the ordinary course of its trade or business, and
(ii) provides the person who is otherwise required to withhold United States tax
with respect to the notes with an appropriate statement on IRS form W-8 or a
substitute (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 and address. If a note is held through a
securities clearing organization or certain other financial institutions (as is
expected to be the case unless definitive notes are issued), the organization or
institution may provide the relevant signed statement generally to the
withholding agent; in that case, however, the signed statement generally must be
accompanied by an IRS form W-8 or substitute (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 (i) such gain is
not effectively connected with the conduct of a trade or business in the United
States by the foreign person, and (ii) in the case of an individual foreign
person, such individual is not present in the United States for 183 days or more
in the taxable year.
Backup Withholding. Payments of principal and interest, as well as
payments of proceeds from the sale, retirement or disposition of a note, may be
subject to "backup withholding" tax under Section 3406 of the Code at 31% if a
recipient of such payments fails to furnish to the payor certain identifying
information. Any amounts deducted and withheld would be allowed as a credit
against such recipient's United States federal income tax, provided appropriate
proof is provided under rules established by the IRS. Furthermore, certain
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
41
<PAGE> 90
institutions. Holders of the notes should consult their tax advisors regarding
their qualification for exemption from backup withholding and the procedure for
obtaining such an exemption.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY, MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S
PARTICULAR TAX SITUATION, AND DOES NOT PURPORT TO ADDRESS THE ISSUES DESCRIBED
WITH THE DEGREE OF SPECIFICITY THAT WOULD BE PROVIDED BY A TAXPAYER'S OWN TAX
ADVISOR. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL TAX
LAWS.
STATE TAX CONSEQUENCES
Because of the differences in state and local tax laws and their
applicability to different investors, it is not possible to summarize the
potential state and local tax consequences of holding the notes. However,
purchasers of notes should be aware that if some of the notes were classified as
interests in a partnership rather than as debt for applicable state and local
tax purposes, certain states and localities might assert that the partnership is
doing business therein and subject the affected holders to taxation as a result
of holding the affected notes. In addition, the issuer, as a 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 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.
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<PAGE> 91
If the originator, the issuer or the servicer is a party in interest with
respect to the prospective plan investor, any plan fiduciary or other plan
investor considering whether to purchase or hold the notes should consult with
its counsel regarding the availability of exemptive relief under U.S. Department
of Labor -- or DOL -- Prohibited Transaction Class Exemption- or PTCE-96-23,
relating to transactions determined by "in-house asset managers"; 95-60,
relating to transactions involving insurance company general accounts, 91-38,
relating to transactions involving bank collective investment funds, 90-1,
relating to transactions involving insurance company pooled separate accounts;
or 84-14, relating to transactions determined by independent "qualified
professional asset managers," or any other prohibited transaction class
exemption issued by the DOL.
A purchaser of the notes should be aware, however, that even if the
conditions specified in one or more of the above-referenced class exemptions are
met, the scope of the exemptive relief provided by the exemption might not cover
all acts which might be construed as prohibited transactions. In such case, an
individual prohibited transaction exemption must be requested and obtained from
the DOL pursuant to section 408(a) of ERISA in order to effect the transaction.
In addition, under DOL regulation section 2510.3-101, the purchase with
plan assets of equity interests in the trust estate could sometimes cause the
contracts and other property and rights included in the trust estate to be
considered plan assets of the investing plan which would then subject the issuer
and the trust estate to the fiduciary responsibility provisions of ERISA and the
prohibited transaction provisions of ERISA and section 4975 of the Code.
Nevertheless, because the notes (a) are expected to be treated as indebtedness
under local law and will, in the opinion of special tax counsel, be treated as
debt, rather than equity, for federal tax purposes (see "Federal Income Tax
Consequences -- Consequences to Holders of the Notes"), and (b) should not be
deemed to have any "substantial equity features," purchases of the notes with
plan assets should not be treated as equity investments and, therefore, the
contracts and other assets included in the trust estate should not be deemed to
be plan assets of the investing plans. Those conclusions are based, in part,
upon the traditional debt features of the notes, including the reasonable
expectation of purchasers of the notes that the notes will be repaid when due,
as well as the absence of conversion rights, warrants and other typical equity
features.
The notes may not be purchased or held by any plan, or any person investing
plan assets of any plan, if any of the originator, the issuer, the servicer, the
trustee or any of their affiliates:
- has investment or administrative discretion with respect to the plan
assets used to effect such purchase;
- has authority or responsibility to give, or regularly gives, investment
advice regarding plan assets, for a fee and pursuant to an agreement or
understanding that such advice (1) will serve as a primary basis for
investment decisions with respect to such plan assets, and (2) will be
based on the particular investment needs of such plan; or
- unless PTCE 95-60, 91-38 or 90-1 is applicable, is an employer
maintaining or contributing to such plan. Each purchaser or holder of the
notes or any interest therein will be deemed to have represented by its
purchase and holding thereof that it is not subject to the foregoing
limitation.
Any plan fiduciary or other plan investor considering whether to purchase
any notes on behalf of or with plan assets of any plan should consult with its
counsel and refer to this prospectus supplement for guidance regarding the ERISA
considerations applicable to the notes offered hereby.
Certain employee benefit plans, such as governmental plans, as defined in
section 3(32) of ERISA, and church plans, as defined in section 3(33) of ERISA
for which the election provided by section 410(d) of the Code has not been made,
are not subject to the requirements of ERISA or section 4975 of the Code.
Accordingly, assets of those plans may be invested in the notes without regard
to the ERISA considerations described herein, subject to the provisions of other
applicable federal and state law. However, any such plan that is qualified and
exempt from taxation under sections 401(a) and 501(a) of the Code is subject to
the prohibited transaction rules set forth in section 503 of the Code.
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<PAGE> 92
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 & 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> 93
INDEX OF TERMS
<TABLE>
<S> <C>
Clearstream, Luxembourg................. 23
Code.................................... 39
Contract Principal Balance.............. 13
defaulted contract...................... 19
Eligible Deposit Account................ 30
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> 94
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is an itemized list of the estimated expenses to be incurred
in connection with the offering of the securities being offered hereunder other
than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Statement Fee.................................. $ 264,000*
Printing and Engraving Expenses............................. $ 100,000
Trustee's Fees and Expenses................................. $ 20,000
Legal Fees and Expenses..................................... $ 300,000
Blue Sky Fees and Expenses.................................. $ 20,000
Accountants' Fees and Expenses.............................. $ 100,000
Rating Agency Fees.......................................... $ 400,000
Miscellaneous Fees and Expenses............................. $ 20,000
Total....................................................... $1,224,000
</TABLE>
- ---------------
* Actual.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Indemnification. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts under
certain circumstances.
Article VII of the By-laws of Advanta Bank Corp. provides that all officers
and directors of the corporation shall be indemnified by the corporation from
and against all expenses, liabilities or other matters arising out of their
status as an officer or director for their acts, omissions or services rendered
in such capacities.
The form of the Underwriting Agreement, filed as Exhibit 1.1 to this
Registration Statement, provides that Advanta Bank Corp. will indemnify and
reimburse the underwriter(s) and each controlling person of the underwriter(s)
with respect to certain expenses and liabilities, including liabilities under
the Securities Act of 1933 or other federal or state regulations or under the
common law, which arise out of or are based on certain material misstatements or
omissions in the Registration Statement, the Prospectus or the Prospectus
Supplement. In addition, the Underwriting Agreement provides that the
underwriter(s) will similarly indemnify and reimburse Advanta Bank Corp. and the
issuer of the respective series of notes with respect to certain material
misstatements or omissions in the Registration Statement which are based on
certain written information furnished by the underwriter(s) for use in the
Registration Statement, the Prospectus or the Prospectus Supplement.
Insurance. As permitted under the laws which govern the organization of
Advanta Bank Corp., the by-laws of Advanta Bank Corp. permit the board of
directors to purchase and maintain insurance on behalf of the registrant's
agents, including its officers and directors, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not such registrant would have the power to indemnify them against
such liability under applicable law.
II-1
<PAGE> 95
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes*
4.1 Form of Indenture
4.2 Form of Transfer and Servicing Agreement
4.3 Form of Limited Liability Company Operating Agreement
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to validity
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 8.1)
24.1 Powers of Attorney for Advanta Bank Corp.*
25.1 Statement of Eligibility of Trustee (Form T-1)
</TABLE>
- ---------------
* Previously filed
ITEM 17. UNDERTAKINGS.
The undersigned Advanta Bank Corp., on behalf of each of the Limited
Liability Companies, hereby undertakes as follows:
(a) That insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended, may be permitted to directors, officers
and controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of
the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection
with the securities being registered, the Registrant will, unless in the
opinion of their counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of
whether such indemnification by them is against public policy as expressed
in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(b) (1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement; provided, however, that (b)(1)(i) and (b)(1)(ii)
will not apply if the information required to be included in a
post-effective amendment thereby is contained in periodic reports filed
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in this Registration Statement.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered that remain unsold at the
termination of the offering.
II-2
<PAGE> 96
(c) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of its respective annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the Registration Statement shall be
deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Advanta Bank Corp., on behalf of each of the Limited Liability Companies,
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, reasonably believes that the security
rating requirement contained in Transaction Requirement B.5 of Form S-3 will be
met by the time of the sale of the securities registered hereunder and has duly
caused this Amendment No. 1 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Draper, State of Utah,
on February 22, 2000.
ADVANTA BANK CORP.,
as Registrant
By: /s/ MARK HALES
------------------------------------
Name: Mark Hales
Title: Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to the Registration Statement has been signed on February
22, 2000 below by the following persons in the capacities with respect to
Advanta Bank Corp. indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ MARK HALES President and Director
- ----------------------------------------------------- (Principal Executive Officer and Principal
Mark Hales Accounting Officer)
/s/ PHILIP M. BROWNE* Director
- -----------------------------------------------------
Philip M. Browne
/s/ DENNIS ALTER* Chairman of the Board and Director
- -----------------------------------------------------
Dennis Alter
/s/ WILLIAM WIRTHLIN* Director
- -----------------------------------------------------
William Wirthlin
/s/ FRED P. GONZALES* Director
- -----------------------------------------------------
Fred P. Gonzales
/s/ CALVIN M. BOARDMAN* Director
- -----------------------------------------------------
Calvin M. Boardman
By: /s/ MARK HALES
-------------------------------------------------
Mark Hales
Attorney-in-Fact
</TABLE>
- ---------------
*Note: A Power of Attorney appointing Mark Hales, Philip M. Browne, and Michael
Coco or any of them acting singly, to execute the Registration Statement and any
amendments thereto on behalf of the above-named individuals previously was filed
with the Securities and Exchange Commission.
II-4
<PAGE> 98
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement for the Offered Notes *
4.1 Form of Indenture
4.2 Form of Transfer and Servicing Agreement
4.3 Form of Limited Liability Company Operating Agreement
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to validity
8.1 Opinion of Orrick, Herrington & Sutcliffe LLP with respect
to tax matters
23.1 Consent of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.2 Consent of Orrick, Herrington & Sutcliffe LLP (included in
its opinion filed as Exhibit 8.1)
24.1 Powers of Attorney for Advanta Bank Corp.*
25.1 Statement of Eligibility of Trustee (Form T-1)
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 4.1
OH&S Draft
02/16/00
- --------------------------------------------------------------------------------
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC,
Issuer
Class A-1 [____%] Asset Backed Notes
Class A-2 [____%] Asset Backed Notes
Class A-3 [____%] Asset Backed Notes
Class A-4 [____%] Asset Backed Notes
Class B [____%] Asset Backed Notes
Class C [____%] Asset Backed Notes
Class D Asset Backed Notes
-------------------------
INDENTURE
Dated as of __________ __, 2000
-------------------------
-------------------------,
Trustee
- --------------------------------------------------------------------------------
<PAGE> 2
-------------------------------
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE
ACT OF 1939 AND INDENTURE PROVISIONS*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Indenture Section
--------------- -----------------
<S> <C>
310(a)(1)................................................................................... 6.11
(a)(2)................................................................................... 6.11
(a)(3)................................................................................... 6.10
(a)(4)................................................................................... Not Applicable
(b)...................................................................................... 6.08(a)(1)
(c)...................................................................................... Not Applicable
311(a)...................................................................................... 6.12
(b)...................................................................................... 6.12
312(a)...................................................................................... 7.01(a)
(b)...................................................................................... 7.02(b)
(c)...................................................................................... 7.02(c)
313(a)...................................................................................... 7.04
(b)...................................................................................... 7.04
(c)...................................................................................... 7.04
(d)...................................................................................... 7.04
314(a)...................................................................................... 3.09, 7.03(a)
(b)...................................................................................... 3.06
(c)(1)................................................................................... 2.09, 8.04(b)
(c)(2)................................................................................... 2.09, 8.04(b), 11.01(a)
(c)(3)................................................................................... 2.09, 8.04(b), 11.01(a)
(d)(1)................................................................................... 2.09, 8.04(b), 11.01(a)
(d)(2)................................................................................... Not Applicable
(d)(3)................................................................................... Not Applicable
(e)...................................................................................... 11.01(a)
315(a)...................................................................................... 6.01(b)
(b)...................................................................................... 6.05
(c)...................................................................................... 6.01(b)
(d)...................................................................................... 6.01(b)
(d)(1)................................................................................... 6.01(b)
(d)(2)................................................................................... 6.01(c)
(d)(3)................................................................................... 6.01(c)
(e)...................................................................................... 5.13
316(a)(1)(A)................................................................................ 5.11
316(a)(1)(B)................................................................................ 5.12
316(a)(2)................................................................................... Not Applicable
316(b)...................................................................................... 5.07
317(a)(1)................................................................................... 5.03
317(a)(2)................................................................................... 5.03
317(b)...................................................................................... 5.03
318(a)...................................................................................... 11.07
</TABLE>
- -----------------------------
* This reconciliation and tie shall not, for any purpose, be deemed to be part
of the within indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GRANTING CLAUSE..............................................................................................3
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. (a) Definitions..........................................................................4
Section 1.02. Incorporation by Reference of Trust Indenture Act........................................12
Section 1.03. Calculations of Interest.................................................................12
ARTICLE II
THE NOTES
Section 2.01. Form.....................................................................................13
Section 2.02. Execution, Authentication and Delivery...................................................13
Section 2.03. Temporary Notes..........................................................................13
Section 2.04. Registration; Registration of Transfer and Exchange......................................14
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes...............................................15
Section 2.06. Persons Deemed...........................................................................16
Section 2.07. Interest Rates; Maturity Dates; Payment of Principal and Interest; Defaulted Interest....16
Section 2.08. Cancellation.............................................................................18
Section 2.09. Release of Collateral....................................................................18
Section 2.10. Book-Entry Interests.....................................................................18
Section 2.11. Notices to Clearing Agency...............................................................19
Section 2.12. Definitive Notes.........................................................................19
ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest........................................................21
Section 3.02. Maintenance of Office or Agency..........................................................21
Section 3.03. Money for Payments To Be Held in Trust...................................................21
Section 3.04. Existence................................................................................22
Section 3.05. Protection of Trust Estate...............................................................23
</TABLE>
-i-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 3.06. Opinions as to Trust Estate..............................................................23
Section 3.07. Performance of Obligations; Servicing of Contracts.......................................23
Section 3.08. Negative Covenants.......................................................................25
Section 3.09. Statements as to Compliance..............................................................26
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms......................................26
Section 3.11. Successor or Transferee..................................................................27
Section 3.12. No Other Business........................................................................28
Section 3.13. No Borrowing.............................................................................28
Section 3.14. Servicer's Obligations...................................................................28
Section 3.15. Guarantees, Loans, Advances and Other Liabilities........................................28
Section 3.16. Capital Expenditures.....................................................................28
Section 3.17. Notice of Events of Default..............................................................28
Section 3.18. Further Instruments and Acts.............................................................28
ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture..................................................29
Section 4.02. Application of Trust Money...............................................................30
Section 4.03. Repayment of Moneys Held by Paying Agent.................................................30
ARTICLE V
REMEDIES
Section 5.01. Events of Default........................................................................31
Section 5.02. Acceleration of Maturity; Rescission and Annulment.......................................32
Section 5.03. Collection of Indebtedness and Suits for Enforcement
by Trustee...............................................................................32
Section 5.04. Remedies; Priorities.....................................................................34
Section 5.05. Optional Preservation of the Contracts...................................................36
Section 5.06. Limitation of Suits......................................................................37
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and Interest....................37
</TABLE>
-ii-
<PAGE> 5
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 5.08. Restoration of Rights and Remedies.......................................................37
Section 5.09. Rights and Remedies Cumulative...........................................................38
Section 5.10. Delay or Omission Not a Waiver...........................................................38
Section 5.11. Control by Noteholders...................................................................38
Section 5.12. Waiver of Past Default...................................................................38
Section 5.13. Undertaking for Costs....................................................................39
Section 5.14. Waiver of Stay or Extension Laws.........................................................39
Section 5.15. Action on Notes..........................................................................39
Section 5.16. Performance and Enforcement of Certain Obligations.......................................39
ARTICLE VI
THE TRUSTEE
Section 6.01. Duties of Trustee........................................................................41
Section 6.02. Rights of Trustee........................................................................42
Section 6.03. Individual Rights of Trustee.............................................................42
Section 6.04. Trustee's Disclaimer.....................................................................43
Section 6.05. Notice of Defaults.......................................................................43
Section 6.06. Reports by Trustee to Holders............................................................43
Section 6.07. Compensation and Indemnity...............................................................43
Section 6.08. Replacement of Trustee...................................................................44
Section 6.09. Successor Trustee by Merger..............................................................45
Section 6.10. Appointment of Co-Trustee or Separate Trustee............................................45
Section 6.11. Eligibility; Disqualification............................................................46
Section 6.12. Preferential Collection of Claims Against................................................46
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Trustee Names and Addresses of Noteholders.............................47
Section 7.02. Preservation of Information; Communications to Noteholders...............................47
Section 7.03. Reports by Issuer........................................................................47
</TABLE>
-iii-
<PAGE> 6
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 7.04. Reports by Trustee.......................................................................48
ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money......................................................................49
Section 8.02. Collection and Reserve Accounts..........................................................49
Section 8.03. General Provisions Regarding Accounts....................................................49
Section 8.04. Release of Trust Estate..................................................................50
Section 8.05. Opinion of Counsel.......................................................................50
ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders...................................52
Section 9.02. Supplemental Indentures with Consent of Noteholders......................................53
Section 9.03. Execution of Supplemental Indentures.....................................................54
Section 9.04. Effect of Supplemental Indenture.........................................................54
Section 9.05. Conformity With Trust Indenture Act......................................................54
Section 9.06. Reference in Notes to Supplemental Indentures............................................55
ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption...............................................................................56
Section 10.02. Form of Redemption Notice................................................................56
Section 10.03. Notes Payable on Redemption Date.........................................................57
ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions etc.................................................58
Section 11.02. Form of Documents Delivered to Trustee...................................................59
Section 11.03. Acts of Noteholders......................................................................60
Section 11.04. Notices, etc. to Trustee, Issuer and Rating Agencies.....................................60
</TABLE>
-iv-
<PAGE> 7
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 11.05. Notices to Noteholders; Waiver...........................................................61
Section 11.06. Alternate Payment and Notice Provisions..................................................61
Section 11.07. Conflict with Trust Indenture Act........................................................62
Section 11.08. Effect of Headings and Table of Contents.................................................62
Section 11.09. Successors and Assigns...................................................................62
Section 11.10. Separability.............................................................................62
Section 11.11. Benefits of Indenture....................................................................62
Section 11.12. Legal Holidays...........................................................................62
Section 11.13. GOVERNING LAW............................................................................62
Section 11.14. Counterparts.............................................................................62
Section 11.15. Recording of Indenture...................................................................63
Section 11.16. Trust Obligation.........................................................................63
Section 11.17. No Petition..............................................................................63
Section 11.18. Inspection...............................................................................63
Section 11.19. Restrictions on Transfer of Class D Notes................................................63
Section 11.20. Tax Treatment............................................................................63
</TABLE>
-v-
<PAGE> 8
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A - List of Contracts [Deemed Incorporated].........................................................A-1
EXHIBIT B - Form of Transfer and Servicing Agreement........................................................B-1
EXHIBIT C - Form of Depository Agreement....................................................................C-1
EXHIBIT D - Form of Note....................................................................................D-1
EXHIBIT E - Form of Class D Note Transferee Certificate.....................................................E-1
</TABLE>
vi
<PAGE> 9
This INDENTURE dated as of __________ __, 2000 is hereby executed by and
between ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC, a Nevada limited
liability company (the "Issuer") and _________________________, (the "Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A-1 [____%] Asset
Backed Notes, Class A-2 [____%] Asset Backed Notes, Class A-3 [____%] Asset
Backed Notes, Class A-4 [____%] Asset Backed Notes, Class B [____%] Asset Backed
Notes, Class C [____%] Asset Backed Notes and Class D Asset Backed Notes,
(collectively, the "Notes"):
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing Date, as Trustee for
the benefit of the Holders of the Notes, all of the Issuer's right, title and
interest, whether now owned or hereafter acquired, in, to and under all
accounts, money, chattel paper, securities, instruments, documents, deposit
accounts, certificates of deposit, letters of credit, advices of credit,
banker's acceptances, uncertificated securities, investment property, general
intangibles, contract rights, goods and other property consisting of, arising
from or relating to (a) the Contracts listed on the List of Contracts and all
obligations of the Obligors thereunder, including all monies (including accrued
interest but excluding Excluded Amounts) due or to become due thereon on or
after the Cut-off Date (provided that the Issuer has not received and this Grant
does not include any interest in the Residual Interests related to the
Contracts); (b) the Issuer's security interest in the Financed Equipment; (c)
any and all Collections and Related Security with respect to the Contracts; (d)
all balances, monies, securities, investment property, instruments and other
property received or held from time to time in the Collection Account and the
Reserve Account, and in all interest, dividends, earnings, income and other
distributions from time to time received, receivable or otherwise distributed to
or in respect thereto; (e) the Transfer and Servicing Agreement and the Issuer's
rights to enforce the provisions of, and to benefit from the representations,
warranties and covenants made in the Transfer and Servicing Agreement; and (f)
all present and future claims, demands, causes and chose in action in respect of
any or all of the foregoing and all payments on or under and all proceeds of
every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds, products, rents, receipts or profits of the conversion,
voluntary or involuntary, into cash or other property, all cash and non-cash
proceeds, and other property consisting of, arising from or relating to all or
any part of any of the foregoing or any proceeds thereof (collectively, the
"Collateral").
The foregoing Grant is made in trust to secure the payment of principal of
and interest on, and any other amounts owing in respect of, the Notes and to
secure compliance with the provisions of this Indenture, all as provided in this
Indenture. This Indenture shall be deemed to be and hereby is a security
agreement within the meaning of Article 8 of the UCC as in effect in the States
of New York, Utah and Nevada.
The Trustee, as Trustee on behalf of the Holders of the Notes, acknowledges
such Grant, accepts the trusts under this Indenture in accordance with the
provisions of this Indenture and agrees to perform its duties as expressly set
forth in this Indenture.
3
<PAGE> 10
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. (a) Definitions. Except as otherwise specified herein or as
the context may otherwise require, the following terms have the respective
meanings set forth below for all purposes of this Indenture.
"Act" has the meaning specified in Section 11.03(a).
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Authorized Officer" means any manager of the Issuer or any officer of the
Managing Member who is authorized to act for the Issuer in matters relating to
the Issuer and who is identified on the list of Authorized Officers, containing
the specimen signature of each such Person, delivered to the Trustee on the
Closing Date (as such list may be modified or supplemented from time to time
thereafter).
"Basic Documents" means this Indenture, the Transfer and Servicing
Agreement, the Underwriting Agreement and other documents and certificates
delivered in connection therewith.
"Book-Entry Interest" means a beneficial interest in the Notes or any Class
of Notes ownership and transfers of which shall be made through book entries by
a Clearing Agency as described in Section 2.10.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in the City of New York and Salt
Lake City, Utah, and in such other location as the Corporate Trust Office may be
located are authorized or obligated by law, regulation or executive order to
remain closed.
"Class A Monthly Principal Payment Amount" has the meaning specified in the
Transfer and Servicing Agreement.
"Class A Notes" means, collectively, the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes.
"Class A-1 Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class A-1 [____%] Asset Backed Note.
"Class A-1 Note Interest Rate" means [____%] per annum.
"Class A-1 Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on
4
<PAGE> 11
the books of a Person maintaining an account with such Clearing Agency (directly
as a Clearing Agency Participant or as an indirect participant, in each case in
accordance with the rules of such Clearing Agency).
"Class A-1 Noteholder" means any Holder of a Class A-1 Note.
"Class A-2 Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class A-2 [___%] Asset Backed Note.
"Class A-2 Note Interest Rate" means [____%] per annum.
"Class A-2 Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-2 Noteholder" means any Holder of a Class A-2 Note.
"Class A-3 Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class A-3 [___%] Asset Backed Note.
"Class A-3 Note Interest Rate" means [____%] per annum.
"Class A-3 Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-3 Noteholder" means any Holder of a Class A-3 Note.
"Class A-4 Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class A-4 [___%] Asset Backed Note.
"Class A-4 Note Interest Rate" means [____%] per annum.
"Class A-4 Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class A-4 Noteholder" means any Holder of a Class A-4 Note.
"Class B Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class B [___%] Asset Backed Note.
5
<PAGE> 12
"Class B Note Interest Rate" means [____%] per annum.
"Class B Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class B Noteholder" means any Holder of a Class B Note.
"Class B Noteholders' Principal Payment Amount" with respect to any Payment
Date has the meaning specified in the Transfer and Servicing Agreement.
"Class C Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class C [___%] Asset Backed Note.
"Class C Note Interest Rate" means [____%] per annum.
"Class C Note Owner" means, with respect to a Book-Entry Interest, the
Person who is the owner of such Book-Entry Interest, as reflected on the books
of the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, in each case in accordance with the rules of such Clearing
Agency).
"Class C Noteholder" means any Holder of a Class C Note.
"Class C Noteholders' Principal Payment Amount" with respect to any Payment
Date has the meaning specified in the Transfer and Servicing Agreement.
"Class D Note" means any Note, substantially in the form of Exhibit D,
designated therein as a Class D Asset Backed Note.
"Class D Noteholder" means the Holder of any Class D Note.
"Class D Noteholders' Principal Payment Amount" with respect to any Payment
Date has the meaning specified in the Transfer and Servicing Agreement.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means ___________ __, 2000.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
6
<PAGE> 13
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Collection Account" means the account by that name established by the
Servicer pursuant to the Transfer and Servicing Agreement and held by the
Trustee.
"Collections" has the meaning specified in the Transfer and Servicing
Agreement.
"Contract" means any lease agreement or other contract or agreement pledged
to the Trustee on the Closing Date and identified on the List of Contracts.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered, which
office at date of the execution of this Agreement is located at
_____________________ Attention: _____________________.
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.10.
"Depository Agreement" means the agreement among the Issuer, the Trustee
and The Depository Trust Company, as the initial Clearing Agency, dated as of
the Closing Date, substantially in the form of Exhibit C.
"Payment Date" means the 15th day of each calendar month, or, if any such
date is not a Business Day, the next succeeding Business Day, commencing
__________ __, 2000.
"Event of Default" has the meaning specified in Section 5.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary, Assistant
Secretary, the Treasurer or Assistant Treasurer of such corporation; with
respect to any partnership, any general partner thereof and with respect to any
limited liability company the officers described in the Limited Liability
Company Agreement and each Executive Officer of the Managing Member.
"Grant" means to mortgage, pledge, bargain, warrant, alienate, remise,
release, convey, assign, transfer, create, and grant a lien upon and a security
interest in and right of set-off against, deposit, set over and confirm pursuant
to this Indenture. A Grant of the Collateral or of any other agreement or
instrument shall include all rights, powers and options (but none of the
obligations) of the Granting party thereunder, including the immediate and
continuing right to claim for, collect, receive and give receipt for principal
and interest payments in respect of the Collateral and all other moneys payable
thereunder, to give and receive notices and other communications, to make
waivers or other agreements, to exercise all rights and options, to bring
Proceedings in the name of the Granting party or otherwise and generally to do
and receive
7
<PAGE> 14
anything that the Granting party is or may be entitled to do or receive
thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indenture" means this Indenture as amended or supplemented from time to
time.
"Independent" means, when used with respect to any specified Person, that
the Person (a) is in fact independent of the Issuer, any other obligor upon the
Notes, the Transferor and any Affiliate of any of the foregoing Persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Transferor or any Affiliate
of any of the foregoing Persons and (c) is not connected with the Issuer, any
such other obligor, the Transferor or any Affiliate of any of the foregoing
Persons as an officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Trustee under the circumstances described in, and otherwise complying with,
the applicable requirements of Section 11.01, made by an Independent appraiser
or other expert appointed by an Issuer Order, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
Indenture and that the signer is Independent within the meaning thereof.
"Investor Note Owners" means, collectively, the Class A-1 Note Owners, the
Class A-2 Note Owners, the Class A-3 Note Owners, the Class A-4 Note Owners, the
Class B Note Owners and the Class C Note Owners.
"Investor Notes" means all Notes except the Class D Notes.
"Issuer" means Advanta Equipment Receivables Series 2000-__ LLC or any
successor thereto and, for purposes of any provision contained herein and
required by the TIA, each other obligor on the Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Trustee.
"List of Contracts" means a printed or electronic list of Contracts,
certified by an Authorized Officer and attached hereto as Exhibit A.
"Maturity Date" for each Class of Notes means the date specified in Section
2.07 of this Indenture.
"Note Interest Rate" means the per annum interest rate borne by a Note.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.04.
"Notes" means, collectively, the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes and
the Class D Notes.
8
<PAGE> 15
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Issuer, under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.01, and delivered to
the Trustee.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer, the Transferor or any Affiliate thereof and who shall be
satisfactory to the Trustee, and which opinion or opinions shall be addressed to
the Trustee as Trustee, shall comply with any applicable requirements of Section
11.01, and shall be in form and substance reasonably satisfactory to the
Trustee.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore cancelled by the Note Registrar or delivered to
the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Notes (provided, however,
that if such Notes are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor, satisfactory
to the Trustee, has been made); and
(iii) Notes in exchange for or in lieu of other Notes which have been
authenticated and delivered pursuant to this Indenture unless proof
satisfactory to the Trustee is presented that any such Notes are held by a
bona fide purchaser;
provided that in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Transferor or any Affiliate of
any of the foregoing Persons shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the Trustee actually knows to be so owned
shall be so disregarded; provided, however, that at anytime following an Event
of Default, in determining whether the Holders of the requisite Outstanding
Amount of the Notes have given any request, demand, authorization, direction,
notice, consent or waiver hereunder or under any Basic Document, Class D Notes
shall be disregarded and deemed not to be Outstanding. Notes so owned that have
been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Notes and that the pledgee is not the Issuer, any other
obligor upon the Notes, the Transferor or any Affiliate of any of the foregoing
Persons. In making any such determination, the Trustee may rely on the
representations of the pledgee and shall not be required to undertake any
independent investigation.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
a class of Notes, as applicable, Outstanding at the date of determination.
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"Paying Agent" means the Trustee or any Person that meets the eligibility
standards for the Trustee specified in Section 6.11 and is authorized by the
Issuer to make the payments to and distributions from the Collection Account and
the Reserve Account, including payment of principal of or interest on the Notes
on behalf of the Issuer.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, business
trust, trust (including any beneficiary thereof), unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.05 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means _______________ and _______________. If no such
organization or successor is any longer in existence, "Rating Agency" shall be a
nationally recognized statistical rating organization or other comparable Person
designated by the Issuer, notice of which designation shall be given to the
Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Servicer and the Issuer in
writing that such action will not result in a reduction or withdrawal of the
then current rating of any Class of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date, (i)
if the Notes are held in book-entry form, the close of business on the calendar
day (whether or not such day is a Business Day) immediately preceding such
Payment Date or Redemption Date or (ii) if the Notes are held in definitive
form, the last calendar day (whether or not such day is a Business Day) of the
month preceding the month in which such Payment Date or Redemption Date occurs.
"Redemption Date" means the Payment Date specified by the Servicer or the
Issuer pursuant to Section 10.01, as applicable.
"Redemption Price" means in the case of a redemption of the Notes pursuant
to Section 10.01, an amount equal to the principal amount of the Notes redeemed
plus accrued and unpaid interest thereon at the related Note Interest Rate to
but excluding the Redemption Date.
"Registered Holder" means the Person in whose name a Note is registered in
the Note Register on the applicable Record Date.
"Related Security" as defined in the Transfer and Servicing Agreement.
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"Reserve Account" means the account or accounts by that name established by
the Servicer under Section __ of the Transfer and Servicing Agreement held by
the Trustee pursuant to Section 8.02(a).
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office including any Vice President, Managing
Director, Assistant Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
"Servicer" means Advanta Bank Corp. and any successors thereto.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.07(e).
"Transfer and Servicing Agreement" means the Transfer and Servicing
Agreement dated as of ______ __, 2000, among the Issuer and the Transferor, in
its capacity as Transferor and as Servicer.
"Transferor" means Advanta Bank Corp. and any successor thereto.
"Trust Estate" means the Collateral and all money, instruments, documents,
securities, contract rights, general intangibles and other property that are
subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including, without limitation, all
property and interests Granted to the Trustee), including all proceeds thereof.
"Trustee" means ___________, a __________ [banking corporation] as Trustee
under this Indenture, or any successor Trustee under this Indenture.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as in
force on the date hereof, unless otherwise specifically provided.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
(b) Other Definitional Provisions. (1) Capitalized terms used herein and
not otherwise defined have the meanings assigned to them in the Transfer and
Servicing Agreement.
(2) All terms defined in this Agreement shall have the defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(3) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any
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such certificate or other document, and accounting terms partly defined in this
Agreement or in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under generally
accepted accounting principles. To the extent that the definitions of accounting
terms in this Agreement or in any such certificate or other document are
inconsistent with the meanings of such terms under generally accepted accounting
principles, the definitions contained in this Agreement or in any such
certificate or other document shall control.
(4) The words "hereof," "herein," "hereunder," and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(5) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
Section 1.02. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"Trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by Commission rule have
the meaning assigned to them by such definitions.
Section 1.03. Calculations of Interest. [Interest on the Class A-1 notes
will be calculated on the basis of actual days and a 360-day year. Interest on
the Class A-2 notes, Class A-3 notes, Class A-4 notes, Class B notes, Class C
notes and Class D notes will be calculated on the basis of a year of 360 days
and twelve 30-day months.]
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ARTICLE II
THE NOTES
Section 2.01. Form. The Notes of each Class, together with the Trustee's
certificate of authentication, shall be in substantially the forms set forth in
Exhibit D, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes. Any
portion of the text of any Note may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Note.
The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
Each Note shall be dated the date of its authentication. The terms of the
Notes set forth in Exhibit D are part of the terms of this Indenture.
Section 2.02. Execution, Authentication and Delivery. The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
Notes bearing the manual or facsimile signature of individuals who were at
any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
The Trustee shall, upon written order of the Transferor, authenticate and
deliver Notes for original issue in an aggregate principal amount of
$___________. The aggregate principal amount of Notes outstanding at any time
may not exceed such amount except as provided in Section 2.05. The Trustee shall
be entitled to conclusively rely upon such written order as authority to so
authenticate and deliver the Notes without further inquiry of any Person.
Each Note shall be dated the date of its authentication. The Notes shall be
issuable as registered Notes in the minimum denomination of $1,000 and in
integral multiples thereof provided, however, that a single Note of any Class
may be issued in a denomination of less than $1,000.
No Note shall be entitled to any benefit under this Indenture or be valid
or obligatory for any purpose, unless there appears on such Note a certificate
of authentication substantially in the form provided for herein executed by the
Trustee by the manual signature of one of its authorized signatories, and such
certificate upon any Note shall be conclusive evidence, and the only evidence,
that such Note has been duly authenticated and delivered hereunder.
Section 2.03. Temporary Notes. Pending the preparation of definitive Notes,
the Issuer may execute, and upon receipt of an Issuer Order the Trustee shall
authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or
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otherwise produced, of the tenor of the definitive Notes in lieu of which they
are issued and with such variations not inconsistent with the terms of this
Indenture as the officers executing such Notes may determine, as evidenced by
their execution of such Notes.
If temporary Notes are issued, the Issuer will cause definitive Notes to be
prepared without unreasonable delay. After the preparation of definitive Notes,
the temporary Notes shall be exchangeable for definitive Notes upon surrender of
the temporary Notes at the office or agency of the Issuer to be maintained as
provided in Section 3.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes, the Issuer shall execute, and
the Trustee shall authenticate and deliver in exchange therefor, a like
principal amount of definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as definitive Notes.
Section 2.04. Registration; Registration of Transfer and Exchange. The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee shall be the initial "Note Registrar" for the purpose of registering
Notes and transfers of Notes as herein provided. Upon any resignation of any
Note Registrar, the Issuer shall promptly appoint a successor or, if it elects
not to make such an appointment, assume the duties of Note Registrar.
If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to conclusively rely upon a certificate executed on
behalf of the Note Registrar by an Executive Officer thereof as to the names and
addresses of the Holders of the Notes and the principal amounts and number of
such Notes.
Upon surrender for registration of transfer of any Note at the office or
agency of the Issuer to be maintained as provided in Section 3.02, if the
requirements of Section 8-401(1) of the UCC are met the Issuer shall execute,
and upon receipt of such surrendered Note the Trustee shall authenticate and the
Noteholder shall obtain from the Trustee, in the name of the designated
transferee or transferees, one or more new Notes of the same Class in any
authorized denominations, of a like aggregate principal amount.
At the option of the Holder, Notes may be exchanged for other Notes of the
same class in any authorized denominations, of a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, if the requirements of
Section 8-401(1) of the UCC are met, the Issuer shall execute, and upon receipt
of such surrendered Note the Trustee shall authenticate and the Noteholder shall
obtain from the Trustee, the Notes which the Noteholder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
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Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed by, or be accompanied by a written instrument of
transfer in form satisfactory to the Trustee (or with respect to Class D Notes,
in the form of Exhibit E) duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing, with such signature guaranteed by a
commercial bank or trust company located, or having a correspondent located, in
The City of New York or the city in which the Corporate Trust Office is located,
or by a member firm of a national securities exchange, and such other documents
as the Trustee may require.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Issuer may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.03 or 9.06 not involving any transfer.
The preceding provisions of this section notwithstanding, the Issuer shall
not be required to make, and the Note Registrar need not register, transfers or
exchanges of Notes for a period of 20 days preceding the due date for any
payment with respect to the Note.
Section 2.05. Mutilated, Destroyed, Lost or Stolen Notes. If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee such security or indemnity as may be required
by it to hold the Issuer and the Trustee harmless, then, in the absence of
written notice to the Issuer, the Note Registrar or the Trustee that such Note
has been acquired by a bona fide purchaser, and provided that the requirements
of Section 8-405 of the UCC are met, the Issuer shall execute and upon its
written request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated, destroyed, lost or stolen Note, a replacement
Note of the same class; provided, however, that if any such destroyed, lost or
stolen Note, but not a mutilated Note, shall have become or within twenty days
shall be due and payable, or shall have been called for redemption, instead of
issuing a replacement Note, the Issuer may pay such destroyed, lost or stolen
Note when so due or payable or upon the Redemption Date without surrender
thereof. If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the preceding
sentence, a bona fide purchaser of the original Note in lieu of which such
replacement Note was issued presents for payment such original Note, the Issuer
and the Trustee shall be entitled to recover such replacement Note (or such
payment) from the Person to whom it was delivered or any Person taking such
replacement Note from such Person to whom such replacement Note was delivered or
any assignee of such Person, except a bona fide-purchaser, and shall be entitled
to recover upon the security or indemnity provided therefor to the extent of any
loss, damage, cost or expense incurred by the Issuer or the Trustee in
connection therewith.
Upon the issuance of any replacement Note under this Section, the Issuer
may require the payment by the Holder of such Note of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of the Trustee)
connected therewith.
Except as set forth in the first paragraph of this Section 2.05, every
replacement Note issued pursuant to this Section in replacement of any
mutilated, destroyed, lost or stolen Note
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shall constitute an original additional contractual obligation of the Issuer,
whether or not the mutilated, destroyed, lost or stolen Note shall be at any
time enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
Section 2.06. Persons Deemed. Prior to due presentment for registration of
transfer of any Note, the Issuer, the Trustee and any agent of the Issuer or the
Trustee may treat the Person in whose name any Note is registered (as of the day
of determination) as the owner of such Note for the purpose of receiving
payments of principal of and interest, if any, on such Note and for all other
purposes whatsoever, whether or not such Note be overdue, and neither the
Issuer, the Trustee nor any agent of the Issuer or the Trustee shall be affected
by notice to the contrary.
Section 2.07. Interest Rates; Maturity Dates; Payment of Principal and
Interest; Defaulted Interest. (a) The Investor Notes shall bear interest from
and including the Closing Date to but excluding the date on which the final
principal payment is made at the following rates:
-- The Class A-1 Notes shall bear interest at the Class A-1 Note Interest
Rate;
-- The Class A-2 Notes shall bear interest at the Class A-2 Note Interest
Rate;
-- The Class A-3 Notes shall bear interest at the Class A-3 Note Interest
Rate;
-- The Class A-4 Notes shall bear interest at the Class A-4 Note Interest
Rate;
-- The Class B Notes shall bear interest at the Class B Note Interest
Rate; and
-- The Class C Notes shall bear interest at the Class C Note Interest
Rate.
The Class D Notes shall initially not bear interest.
Principal of the Notes shall be payable on each Payment Date as provided in
the flow of funds set forth in Section ___ of the Transfer and Servicing
Agreement. To the extent not paid prior to such date, the Notes of each class
shall be due and payable on the following dates and such dates shall be the
"Maturity Date" for the respective Class:
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Class Maturity Date
----- -------------
Class A-1 __________________
Class A-2 __________________
Class A-3 __________________
Class A-4 __________________
Class B __________________
Class C __________________
Class D __________________
Any installment of interest or principal, if any, or any other amount,
payable on any Note which is punctually paid or duly provided for by the Issuer
on the applicable Payment Date shall be paid to the Person in whose name such
Note (or one or more Predecessor Notes) is registered on the Record Date, by
check mailed first-class, postage prepaid to such Person's address as it appears
on the Note Register on such Record Date, (i) except that with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated by such
nominee, (ii) except that with respect to [Class D Notes] registered in the name
of the Transferor, payment will be made by wire transfer in immediately
available funds to the account designated by the Transferor and (iii) except for
(A) the final installment of principal payable with respect to such Note on a
Payment Date and (B) the Redemption Price for any Note called for redemption
pursuant to Section 10.01, in each case which shall be payable as provided
below. The funds represented by any such checks returned undelivered shall be
held in accordance with Section 3.03.
(b) The entire unpaid principal amount of the Notes shall be due and
payable, if not previously paid, on the date on which an Event of Default shall
have occurred and be continuing and the Notes have become due and payable in the
manner provided in Section 5.02. All principal payments on each class of Notes
shall be made pro rata to the Noteholders of such Class entitled thereto. Upon
written notice to the Trustee by the Issuer, the Trustee shall notify the Person
in whose name a Note is registered at the close of business on the second Record
Date preceding the Payment Date on which the Issuer expects that the final
installment of principal of and interest on such Note will be paid. Such notice
shall be mailed no later than thirty days prior to such final Payment Date and
shall specify that such final installment will be payable only upon presentation
and surrender of such Note and shall specify the place where such Note may be
presented and surrendered for payment of such installment. Notices in connection
with redemptions of Notes shall be mailed to Noteholders as provided in Section
10.02.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Note Interest Rate in any lawful manner.
The Issuer may pay such defaulted interest to the persons who are Noteholders on
a subsequent special record date, which date shall be fixed or
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caused to be fixed by the Issuer and shall be at least five Business Days prior
to the payment date. The Issuer shall fix or cause to be fixed any such payment
date, and, at least 15 days before any such special record date, the Issuer
shall mail to each Noteholder a notice that states the special record date, the
payment date and the amount of defaulted interest to be paid.
Section 2.08. Cancellation. All Notes surrendered for payment, registration
of transfer, exchange or redemption shall, if surrendered to any Person other
than the Trustee, be delivered to the Trustee and shall, following its receipt
thereof, be promptly cancelled by the Trustee. The Issuer may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Issuer may have acquired in any manner whatsoever,
and all Notes so delivered shall, following its receipt thereof, be promptly
cancelled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes cancelled as provided in this Section, except as
expressly permitted by this Indenture. All cancelled Notes may be held or
disposed of by the Trustee in accordance with its standard retention or disposal
policy as in effect at the time unless the Issuer shall direct by an Issuer
Order that they be destroyed or returned to it; provided that such Issuer Order
is timely and the Notes have not been previously disposed of by the Trustee.
Section 2.09. Release of Collateral. Subject to Section 11.01, the Trustee
shall release property from the lien of this Indenture only upon receipt of an
Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel
and Independent Certificates in accordance with TIAss.ss.314(c) and 314 (d)(1)
or an Opinion of Counsel in lieu of such Independent Certificates to the effect
that the TIA does not require any such Independent Certificates.
Section 2.10. Book-Entry Interests. The Investor Notes, upon original
issuance, will be issued in the form of a typewritten, word processing system
produced or printed Note or Notes representing the Book-Entry Interests, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Issuer. Such Notes shall initially be registered on the Note
Register in the name of Cede & Co., the nominee of the initial Clearing Agency,
and no Class A-1 Note Owner, Class A-2 Note Owner, Class A-3 Note Owner, Class
A-4 Note Owner, Class B Note Owner or Class C Note Owner will receive a
Definitive Note representing such Class A-1 Note Owner, Class A-2 Note Owner,
Class A-3 Note Owner, Class A-4 Note, Class B Note Owner or Class C Note Owner's
interest in such Note, except as provided in Section 2.12. Unless and until
definitive, fully registered Notes (the "Definitive Notes") have been issued to
Class A-1 Note Owner, Class A-2 Note Owner, Class A-3 Note Owner, Class A-4 Note
Owner, Class B Note Owner or Class C Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal with
the Clearing Agency for all purposes of this Indenture (including the
payment of principal of and interest on the Investor Notes and the giving
of instructions or directions hereunder) as the sole holder of the Investor
Notes, and shall have no obligation to the Class A-1 Note Owners, Class A-2
Note Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class B Note
Owners or Class C Note Owners;
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(iii) to the extent that the provisions of this Section conflict with
any other provisions of this Indenture, the provisions of this Section
shall control;
(iv) the rights of Class A-1 Note Owners, Class A-2 Note Owners, Class
A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners or Class C Note
Owners shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such Class A-1
Note Owners, Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note
Owners, Class B Note Owners or Class C Note Owners and the Clearing Agency
and/or the Clearing Agency Participants pursuant to the Depository
Agreement. Unless and until Definitive Notes are issued pursuant to Section
2.12, the initial Clearing Agency will make book-entry transfers among the
Clearing Agency Participants and receive and transmit payments of principal
of and interest on the Notes to such Clearing Agency Participants; and
(v) whenever this Indenture requires or permits actions to be taken
based upon instructions or directions of Holders of Notes evidencing a
specified percentage of the Outstanding Amount of the Notes, the Clearing
Agency shall be deemed to represent such percentage only to the extent that
it has received instructions to such effect from Class A-1 Note Owners,
Class A-2 Note Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class
B Note Owners or Class C Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such instructions to the
Trustee.
Section 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Holders of the Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes, the Class A-4 Notes, the Class B Notes or the Class C Notes is
required under this Indenture, unless and until Definitive Notes shall have been
issued to Class A-1 Note Owners, Class A-2 Note Owners, Class A-3 Note Owners,
Class A-4 Note Owners, Class B Note Owners or Class C Note Owners pursuant to
Section 2.12, the Trustee shall give all such notices and communications
specified herein to be given to Holders of the Investor Notes to the Clearing
Agency, and shall have no obligation to the Class A-1 Note Owners, Class A-2
Note Owners, Class A-3 Note Owners, Class A-4 Note Owners, Class B Note Owners
or Class C Note Owners.
Section 2.12. Definitive Notes. (a) The Class D Notes shall be issued in
definitive, fully-registered form and (b) if (i) the Issuer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Investor Notes and the Issuer
is unable to locate a qualified successor, or (ii) the Issuer at its option
advises the Trustee in writing that it elects to terminate the book-entry system
through the Clearing Agency, or (iii) after the occurrence of an Event of
Default or a Servicer Default, Investor Note Owners representing beneficial
interests aggregating a majority of the Outstanding Amount of the Investor Notes
advise the Clearing Agency in writing that the continuation of a book-entry
system through the Clearing Agency is no longer in the best interests of the
Investor Note Owners then the Clearing Agency shall notify all Investor Note
Owners and the Trustee of the occurrence of any such event and of the
availability of Definitive Notes to the Investor Note Owners. Upon surrender to
the Trustee of the Note or Notes representing the Book-Entry Interests by the
Clearing Agency, accompanied by registration instructions, the Issuer shall
execute and the Trustee shall authenticate the Definitive Notes in accordance
with the
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instructions of the Clearing Agency. None of the Issuer, the Note Registrar or
the Trustee shall be liable for any delay in delivery of such instructions and
may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive Notes to Investor Note Owners, the
Trustee shall recognize the Holders of such Definitive Notes as Noteholders.
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ARTICLE III
COVENANTS
Section 3.01. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest, if any, on the Notes in accordance
with the terms of the Notes and this Indenture. Without limiting the foregoing,
the Issuer will cause amounts to be distributed from the Collection Account on
each Payment Date as provided in Section 8.02(c). Amounts properly withheld
under the Code by any Person from a payment to any Noteholder of interest and/or
principal and/or premium shall be considered as having been paid by the Issuer
to such Noteholder for all purposes of this Indenture.
Section 3.02. Maintenance of Office or Agency. The Issuer will maintain in
the Borough of Manhattan, in the City of New York an office or agency where
Notes may be surrendered for registration of transfer or exchange, and where
notices and demands to or upon the Issuer in respect of the Notes and this
Indenture may be served. The Issuer hereby initially appoints the Trustee to
serve as its agent for the foregoing purposes. The Issuer will give prompt
written notice to the Trustee of the location, and of any change in the
location, of any such office or agency. If at any time the Issuer shall fail to
maintain any such office or agency or shall fail to furnish the Trustee with the
address thereof, such surrenders, notices and demands may be made or served at
the Corporate Trust Office, the Trustee shall be entitled to conclusively rely
upon, and the Issuer hereby appoints the Trustee as its agent to receive, all
such surrenders, notices and demands.
Section 3.03. Money for Payments To Be Held in Trust. As provided in
Section 8.02, all payments of amounts due and payable with respect to any Notes
that are to be made from amounts withdrawn from the Collection Account shall be
made on behalf of the Issuer by the Trustee or by another Paying Agent, and no
amounts so withdrawn from the Collection Account for payments of Notes shall be
paid over to the Issuer except as provided in Section 8.02 of this Indenture.
The Issuer will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee (and if the Trustee acts as Paying Agent, it hereby so agrees),
subject to the provisions of this Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and pay such sums to such Persons as herein provided;
(ii) give the Trustee written notice of any default by the Issuer of
which it has actual knowledge (or any other obligor upon the Notes) in the
making of any payment required to be made with respect to the Notes;
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(iii) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to the
Trustee all sums held by it in trust for the payment of Notes if at any
time it ceases to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any applicable
withholding taxes imposed thereon and with respect to any applicable
reporting requirements in connection therewith.
The Issuer may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, by Issuer Order direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which the sums were held by such Paying Agent; and upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Subject to applicable laws with respect to escheat of funds, any money held
by the Trustee or any Paying Agent in trust for the payment of any amount due
with respect to any Note and remaining unclaimed for two years after such amount
has become due and payable shall be discharged from such trust, and the Trustee
or such Paying Agent, as the case may be, shall give prompt notice of such
occurrence to the Issuer and shall release such money to the Issuer on Issuer
Request; and the Holder of such Note shall thereafter, as an unsecured general
creditor, look only to the Issuer (and then only to the extent of the amounts so
paid to the Issuer) for payment thereof, and all liability of the Trustee or
such Paying Agent with respect to such trust money shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, shall at the expense and direction of the Issuer
cause to be published once, in a newspaper published in the English language,
customarily published on each Business Day and of general circulation in The
City of New York, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication, any unclaimed balance of such money then remaining will be
repaid to the Issuer. The Trustee shall also adopt and employ, at the expense of
the Issuer, any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment to Holders
whose Notes have been called but have not been surrendered for redemption or
whose right to or interest in moneys due and payable but not claimed is
determinable from the records of the Trustee or of any Paying Agent, at the last
address of record for each such Holder).
Section 3.04. Existence. The Issuer will keep in full effect its existence,
rights and franchises as a limited liability company under the laws of the State
of Nevada (unless it becomes, or any successor Issuer hereunder is or becomes,
organized under the laws of any other State or of the United States of America,
in which case the Issuer will keep in full effect its existence, rights and
franchises under the laws of such other jurisdiction) and will obtain and
preserve its qualification to do business in each jurisdiction in which such
qualification is or shall
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be necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
Section 3.05. Protection of Trust Estate. The Issuer will from time to time
take all actions necessary (other than taking possession of the original
Contracts and other than perfecting any security interest which it or the
Transferor may have in Financed Equipment with an original cost of $25,000 or
less), including without limitation preparing, executing, delivering and filing
all such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
if applicable, and will take such other action necessary or advisable to:
(i) maintain or preserve the lien and security interest (and the
priority thereof) of this Indenture or carry out more effectively the
purposes hereof;
(ii) perfect, publish notice of or protect the validity of any Grant
made or to be made by this Indenture:
(iii) enforce any of the Collateral; or
(iv) preserve and defend title to the Trust Estate and the rights of
the Trustee and the Noteholders in such Trust Estate against the claims of
all persons and parties.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
pursuant to this Section.
Section 3.06. Opinions as to Trust Estate. On the Closing Date, the Issuer
shall furnish to the Trustee an Opinion of Counsel either stating that, in the
opinion of such counsel, such action has been taken to perfect the lien and
security interest of this Indenture, including without limitation with respect
to the recording and filing of this Indenture, any indentures supplemental
hereto, and any other requisite documents, and with respect to the execution and
filing of any financing statements and continuation statements, as are so
necessary and reciting the details of such action, or stating that, in the
opinion of such counsel, no such action is necessary to maintain the perfection
of such lien and security interest.
Section 3.07. Performance of Obligations; Servicing of Contracts. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of, or impair the
validity or effectiveness of, any such instrument or agreement, except as
expressly provided in this Indenture, the Transfer and Servicing Agreement or
such other instrument or agreement.
(b) The Issuer may contract with other Persons to assist it in performing
its duties under this Indenture, and any performance of such duties by a Person
identified to the Trustee in an Officer's Certificate of the Issuer shall be
deemed to be action taken by the Issuer. Initially, the Issuer has contracted
with the Servicer to assist the Issuer in performing its duties under this
Indenture.
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(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to filing or causing to be filed all UCC financing statements and
continuation statements required to be filed by the terms of this Indenture and
the Transfer and Servicing Agreement in accordance with and within the time
periods provided for herein and therein; provided that no provision of this
Indenture or the Transfer and Servicing Agreement shall be deemed to require the
filing of any financing statement to perfect any security interest the Issuer or
the transfer may have in any Financed Equipment with an original cost of $25,000
or less. Except as otherwise expressly provided therein, the Issuer shall not
waive, amend, modify, supplement or terminate any Basic Document or any
provision thereof without the written consent of the Trustee or the Holders of a
majority of the Outstanding Amount of the Investor Notes; provided that the
written consent of the Trustee shall be required for any amendment which
increases the obligations of the Servicer.
(d) If the Issuer shall have knowledge of the occurrence of a Servicer
Default under the Transfer and Servicing Agreement, the Issuer shall promptly
notify the Trustee in writing and the Rating Agencies thereof, and shall specify
in such notice the action, if any, the Issuer is taking with respect to such
default. If a Servicer Default shall arise from the failure of the Servicer to
perform any of its duties or obligations under the Transfer and Servicing
Agreement with respect to the Contracts, the Issuer shall take all reasonable
steps available to it to remedy such failure.
(e) As promptly as possible after the giving of notice of termination to
the Servicer of the Servicer's rights and powers pursuant to [Section 8.01] of
the Transfer and Servicing Agreement, the Issuer shall appoint a successor
servicer (the "Successor Servicer"), and such Successor Servicer shall accept
its appointment by a written assumption in a form acceptable to the Trustee. In
the event that a Successor Servicer has not been appointed and accepted its
appointment at the time when the Servicer ceases to act as Servicer, the Trustee
without further action shall automatically be appointed the Successor Servicer.
The Trustee may resign as the Servicer by giving written notice of such
resignation to the Issuer and in such event will be released from such duties
and obligations, such release not to be effective until the date a new servicer
enters into a servicing agreement with the Issuer as provided below. Upon
delivery of any such notice to the Issuer, the Issuer shall obtain a new
servicer as the Successor Servicer under the Transfer and Servicing Agreement.
Any Successor Servicer other than the Trustee shall (i) be a corporation having
a net worth of not less than $20,000,000 and whose regular business includes the
servicing of equipment receivables and (ii) enter into a servicing agreement
with the Issuer having substantially the same provisions as the provisions of
the Transfer and Servicing Agreement applicable to the Servicer. If within 30
days after the delivery of the notice referred to above, the Issuer shall not
have obtained such a new servicer, the Trustee may appoint, or may petition a
court of competent jurisdiction to appoint, a Successor Servicer. In connection
with any such appointment, the Trustee may make such arrangements for the
compensation of such successor as it and such successor shall agree, subject to
the limitations set forth below and in the Transfer and Servicing Agreement, and
in accordance with Section [8.02] of the Transfer and Servicing Agreement, the
Issuer shall enter into an agreement with such successor for the servicing of
the Contracts (such agreement to be in form and substance reasonably
satisfactory to the Trustee). Notwithstanding anything else herein to the
contrary, in no event shall the Trustee be liable for any servicing fee or for
any differential in the amount of
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the servicer fee paid hereunder and the amount necessary to induce any successor
Servicer to act as Successor Servicer under this Agreement and the transactions
set forth or provided for herein. If the Trustee shall succeed to the Servicer's
duties as servicer of the Contracts as provided herein, it shall do so in its
individual capacity and not in its capacity as Trustee and, accordingly, the
provisions of Article VI hereof shall be inapplicable to the Trustee in its
duties as the successor to the Servicer and the servicing of the Contracts. In
case the Trustee shall become a successor to the Servicer under the Transfer and
Servicing Agreement, the Trustee shall be entitled to appoint any one of its
Affiliates to carry out its functions as Servicer (pending appointment of a
Successor Servicer), provided that it shall be fully liable for the actions and
omissions of such Affiliate in such capacity as Successor Servicer.
(f) Upon any termination of the Servicer's rights and powers pursuant to
the Transfer and Servicing Agreement, the Issuer shall promptly notify the
Trustee in writing. As soon as a Successor Servicer is appointed, the Issuer
shall notify the Trustee in writing of such appointment, specifying in such
notice the name and address of such Successor Servicer.
(g) Without derogating from the absolute nature of the assignment granted
to the Trustee under this Indenture or the rights of the Trustee hereunder, the
Issuer agrees that it will not, without the prior written consent of the Trustee
or the Holders of a majority in Outstanding Amount of the Investor Notes, amend,
modify, waive, supplement, terminate or surrender, or agree to any amendment,
modification, supplement, termination, waiver or surrender of, the terms of any
Collateral (except to the extent otherwise permitted pursuant to the terms of
the Transfer and Servicing Agreement) or the Basic Documents, or waive timely
performance or observance by the Servicer or the Transferor under the Transfer
and Servicing Agreement; provided, however, that no such amendment shall (i)
except to the extent otherwise provided in the Transfer and Servicing Agreement,
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on Contracts or distributions that are
required to be made for the benefit of the Noteholders or (ii) reduce the
aforesaid percentage of the Notes which are required to consent to any such
amendment, without the consent of the holders of all the Outstanding Notes. If
any such amendment, modification, supplement or waiver shall be so consented to
by the Trustee or such Holders, the Issuer agrees, promptly following a request
by the Trustee to do so, to execute and deliver, in its own name and at its own
expense, such agreements, instruments, consents and other documents as the
Trustee may reasonably deem necessary or appropriate under the circumstances.
Section 3.08. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Transfer
and Servicing Agreement, sell, transfer, exchange or otherwise dispose of
any of the properties or assets of the Issuer, including those included in
the Trust Estate, unless directed to do so by the Trustee;
(ii) claim any credit on, or make any deduction from the principal or
interest payable in respect of, the Notes (other than amounts properly
withheld from such payments under the Code or applicable state law) or
assert any claim against any present
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or former Noteholder by reason of the payment of the taxes levied or
assessed upon any part of the Trust Estate;
(iii) dissolve or liquidate in whole or in part; or
(iv) (A) permit the validity or effectiveness of this Indenture to be
impaired, or permit the lien of this Indenture to be amended, hypothecated,
subordinated, terminated or discharged, or permit any Person to be released
from any covenants or obligations with respect to the Notes under this
Indenture except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or any
interest therein or the proceeds thereof (other than tax liens, mechanics'
liens and other liens on a Financed Equipment arising solely as a result of
an action or omission of the related Obligor) or (C) permit the lien of
this Indenture not to constitute a valid first priority perfected security
interest in the Trust Estate (other than with respect to any such tax,
mechanics' or other lien).
Section 3.09. Statements as to Compliance. The Issuer will deliver to the
Trustee or cause the Servicer to deliver to the Trustee within 90 days after the
end of each fiscal year of the Issuer the Officer's Certificate described in
Section 4.10 of the Transfer and Servicing Agreement.
Section 3.10. Issuer May Consolidate, etc., Only on Certain Terms. The
Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or surviving such
consolidation or merger shall be a Person organized and existing under the
laws of the United States of America or any State and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to the
Trustee the payment of the principal of and interest on all Notes as
provided in this Indenture and in the Notes and the performance or
observance of every agreement and covenant of this Indenture on the part of
the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Trustee) to the effect that such
transaction will not have any material adverse tax consequence to any
Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
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(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such consolidation
or merger and such supplemental indenture comply with this Article III and
that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).
(b) The Issuer shall not convey all or substantially all of its properties
or assets to any Person, unless
(i) the Person that acquires by conveyance or transfer the properties
and assets of the Issuer shall be a United States citizen or a Person
organized and existing under the laws of the United States of America or
any State, expressly assumes, by an indenture supplemental hereto, executed
and delivered to the Trustee the due and punctual payment of the principal
of and interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture on the part of the Issuer to be
performed or observed, all as provided herein, expressly agrees by means of
such supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of Holders of
the Notes, unless otherwise provided in such supplemental indenture, unless
expressly agreed in such supplemental indenture, expressly agrees to
indemnify, defend and hold harmless the Issuer against and from any loss,
liability or expense arising under or related to this Indenture and the
Notes and expressly agrees by means of such supplemental indenture that
such Person (or if a group of Persons, then one specified Person) shall
make all filings with the Commission (and any other appropriate Person)
required by the Exchange Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no Default
or Event of Default shall have occurred and be continuing:
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and shall
have delivered copies thereof to the Trustee) to the effect that such
transaction will not have any material adverse tax consequence to any
Noteholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such conveyance or
transfer and such supplemental indenture comply with this Article III and
that all conditions precedent herein provided for relating to such
transaction have been complied with (including any filing required by the
Exchange Act).
Section 3.11. Successor or Transferee. Upon any consolidation or merger of
the Issuer in accordance with Section 3.10(a), the Person formed by or surviving
such consolidation or merger (if other than the Issuer) shall succeed to, and be
substituted for, and may exercise
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every right and power of, the Issuer under this Indenture with the same effect
as if such Person had been named as the Issuer herein.
Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), Advanta Equipment Receivables Series
2000-___ LLC will be released from every covenant and agreement of this
Indenture to be observed or performed on the part of the Issuer with respect to
the Notes immediately upon the delivery to the Trustee of the Officer's
Certificate and Opinion of Counsel specified in Section 3.10(b)(vi) stating that
Advanta Equipment Receivables Series 2000-___ LLC is to be so released.
Section 3.12. No Other Business. The Issuer shall not engage in any
business other than the purposes set forth in the Basic Documents including this
Indenture.
Section 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
indebtedness except as expressly provided for pursuant to the terms of the Basic
Documents and the Notes.
Section 3.14. Servicer's Obligations. The Issuer shall cause the Servicer
to comply with all of its obligations under the Basic Documents.
Section 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Transfer and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
Section 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
Section 3.17. Notice of Events of Default. The Issuer agrees to give the
Trustee and the Rating Agencies prompt written notice of each Event of Default
hereunder and written notice of each default on the part of the Servicer or the
Transferor of its obligations under the Transfer and Servicing Agreement
immediately after obtaining knowledge of any such default.
Section 3.18. Further Instruments and Acts. Upon request of the Trustee,
the Issuer will execute and deliver such further instruments and do such further
acts as may be reasonably necessary or proper to carry out more effectively the
purpose of this Indenture.
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ARTICLE IV
SATISFACTION AND DISCHARGE
Section 4.01. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes (except as to rights of
registration of transfer and exchange, substitution of mutilated, destroyed,
lost or stolen Notes, rights of Noteholders to receive payments of principal
thereof and interest thereon, Sections 3.03, 3.04, 3.05, 3.08, 3.10, 3.12 and
3.13, the rights, obligations and immunities of the Trustee hereunder (including
the rights of the Trustee under Section 6.07 and the obligations of the Trustee
under Section 4.02) and (vi) the rights of Noteholders as beneficiaries hereof
with respect to the property so deposited with the Trustee payable to all or any
of them for a period of one year after clauses (A), (B) and (C) below have
occurred), and the Trustee, on demand of and at the expense of the Issuer, shall
execute proper instruments acknowledging satisfaction and discharge of this
Indenture with respect to the Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered (other than (i)
Notes that have been destroyed, lost or stolen and that have been replaced or
paid as provided in Section 2.05 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.03) have been delivered to the Trustee for cancellation;
or
(2) all Notes not theretofore delivered to the Trustee for
cancellation:
(i) have become due and payable;
(ii) [will become due and payable at (A) the Maturity Date with
respect to the Class A-1 Notes, (B) the Maturity Date with respect to
the Class A-2 Notes, (C) the Maturity Date with respect to the Class
A-3 Notes, (D) the Maturity Date with respect to the Class A-4 Notes,
(E) the Maturity Date with respect to the Class B Notes, (F) the
Maturity Date with respect to the Class C Notes and (G) the Maturity
Date with respect to the Class D Notes]; or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Issuer;
and the Issuer, in the case of (i), (ii) or (iii) above, has irrevocably
deposited or caused to be irrevocably deposited with the Trustee cash or
direct obligations of or obligations guaranteed by the United States of
America (which will mature prior to the date such amounts are payable), in
trust for such purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to the Trustee
for cancellation when due to the Maturity Date for the Class A-1 Notes, the
Maturity Date for the Class A-2 Notes, the Maturity Date for the Class A-4
Notes, the Maturity Date for the Class B Notes, the Maturity Date for the
Class C Notes and the Maturity
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Date for the Class D Notes or the Redemption Date (if Notes shall have been
called for redemption pursuant to Section 10.01), as the case may be;
(B) the Issuer has paid or caused to be paid all other sums payable
hereunder by the Issuer; and
(C) the Issuer has delivered to the Trustee an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA or the Trustee) an Independent
Certificate from a firm of certified public accountants, each meeting the
applicable requirements of Section 11.01(a) and each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Section 4.02. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.01 hereof shall be held in trust and applied by
it, in accordance with the provisions of the Notes, the Transfer and Servicing
Agreement or this Indenture, to the payment, either directly or through any
Paying Agent, as the Trustee may determine, to the Holders of the particular
Notes for the payment or redemption of which such moneys have been deposited
with the Trustee, of all sums due and to become due thereon for principal and
interest; provided such moneys need not be segregated from other funds except to
the extent required herein or in the Transfer and Servicing Agreement or
required by law.
Section 4.03. Repayment of Moneys Held by Paying Agent. In connection with
the satisfaction and discharge of this Indenture with respect to the Notes, all
moneys then held by any Paying Agent other than the Trustee under the provisions
of this Indenture with respect to such Notes shall, upon demand of the Issuer,
be paid to the Trustee to be held and applied according to Section 3.03, and
thereupon such Paying Agent shall be released from all further liability with
respect to such moneys.
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ARTICLE V
REMEDIES
Section 5.01. Events of Default. "Event of Default", wherever used herein,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the same
becomes due and payable and such default shall continue for a period of
five days; or
(ii) default in the payment of the full amount of principal of any
Class on or before the Maturity Date for such Class; or
(iii) default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant or
agreement, a default in the observance or performance of which is elsewhere
in this Section specifically dealt with), or any representation or warranty
of the Issuer made in this Indenture proving to have been incorrect in any
material respect as of the time when the same shall have been made, and
such default shall continue or not be cured, or the circumstance or
condition in respect of which such representation or warranty was incorrect
shall not have been eliminated or otherwise cured, for a period of 30 days
after there shall have been given, by registered or certified mail, to the
Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at
least 25% of the Outstanding Amount of the Investor Notes, a written notice
specifying such default or incorrect representation or warranty and
requiring it to be remedied and stating that such notice is a "Notice of
Default" hereunder; or
(iv) the filing of a decree or order for relief by a court having
jurisdiction in the premises in respect of the Issuer or the Transferor or
any substantial part of the Trust Estate in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for the Issuer or for
any substantial part of the Trust Estate, or ordering the winding-up or
liquidation of the Issuer's affairs, and such decree or order shall remain
unstayed and in effect for a period of 90 consecutive days; or
(v) the commencement by the Issuer or the Transferor of a voluntary
case under any applicable federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer or the
Transferor to the entry of an order for relief in an involuntary case under
any such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator, conservator or similar official of the Issuer or for any
substantial part of the Trust Estate, or the making by the Issuer of any
general assignment for the benefit of creditors, or the failure by the
Issuer generally to pay, or admit in writing its inability to pay, its
debts as
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such debts become due, or the taking of action by the Issuer in furtherance
of any of the foregoing.
The Issuer shall deliver to the Trustee, within five days after the
occurrence thereof, written notice in the form of an Officer's Certificate of
any event which with the giving of notice and the lapse of time would become an
Event of Default under clause (iii) or clause (iv), its status and what action
the Issuer is taking or proposes to take with respect thereto.
Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an
Event of Default described in Section 5.01(iv) or Section 5.01(v) occurs, then
the Notes shall without any action on the part of the Trustee or any Noteholder
automatically become due and payable. If any other Event of Default should occur
and be continuing, then and in every such case the Trustee may, or if directed
by the Holders of Notes representing not less than a majority of the Outstanding
Amount of the Investor Notes, shall declare all the Notes to be immediately due
and payable, by a notice in writing to the Issuer (and to the Trustee if
declared by Noteholders), and upon any such declaration the unpaid principal
amount of the Notes, together with accrued and unpaid interest thereon through
the date of acceleration, shall become immediately due and payable.
At any time after the Notes have been accelerated, but before a judgment or
decree for payment of the money due has been obtained by the Trustee as
hereinafter in this Article V provided, the Holders of Notes representing not
less than a majority of the Outstanding Amount of the Investor Notes, by written
notice to the Issuer and the Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum sufficient
to pay
(A) all payments of principal of and interest on all Notes and all
other amounts that would then be due hereunder or upon such Notes if the
Event of Default giving rise to such acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the principal
of the Notes that has become due solely by such acceleration, have been
cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
Section 5.03. Collection of Indebtedness and Suits for Enforcement by
Trustee. The Issuer covenants that if (i) default is made in the payment of any
interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of any Class of Notes on the Maturity Date of such Class when the
same becomes due and payable, the Issuer will, upon demand of the Trustee, pay
to it, for the benefit of the Holders of the Notes, the whole amount then due
and payable on such Notes for principal and interest, with interest upon the
overdue principal, and, to
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the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the applicable Note Interest Rate borne by
the respective Classes of Notes, and in addition thereto will pay such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee and its agents and counsel.
(a) In case the Issuer shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a Proceeding for the collection of the sums so due and unpaid, and may
prosecute such Proceeding to judgment or final decree, and may enforce the same
against the Issuer or other obligor upon such Notes and collect in the manner
provided by law out of the property of the Issuer or other obligor upon such
Notes, wherever situated, the moneys adjudged or decreed to be payable.
(b) If an Event of Default occurs and is continuing, the Trustee may, as
more particularly provided in Section 5.04, in its discretion, proceed to
protect and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Trustee shall deem most effective to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy or legal or equitable right vested
in the Trustee by this Indenture or by law.
(c) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, Proceedings under Title 11 of the United States Code or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial Proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to file
such other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for reasonable
compensation to the Trustee and each predecessor Trustee, and their
respective agents, attorneys and counsel, and for reimbursement of all
expenses and liabilities incurred, and all advances made, by the Trustee
and each predecessor Trustee, except as a result of negligence or bad
faith) and of the Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and regulations, to vote on
behalf of the Holders of Notes in any election of a trustee, a standby
trustee or Person performing similar functions in any such Proceedings;
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(iii) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute all amounts received with
respect to the claims of the Noteholders and of the Trustee on their
behalf; and
(iv) file such proofs of claim and other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee or the
Holders of Notes allowed in any judicial proceedings relative to the
Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such Proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(d) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar Person.
(e) All rights of action and of asserting claims under this Indenture, or
under any of the Notes, may be enforced by the Trustee without the possession of
any of the Notes or the production thereof in any trial or other Proceedings
relative thereto, and any such action or Proceedings instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment, subject to the payment of the expenses, disbursements and
compensation of the Trustee, each predecessor Trustee and their respective
agents and attorneys, shall be for the benefit of the Holders of the Notes as
provided herein.
(f) In any Proceedings brought by the Trustee (and also any Proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such Proceedings.
Section 5.04. Remedies; Priorities. (a) If an Event of Default shall have
occurred and be continuing, the Trustee may do one or more of the following
(subject to Section 5.05):
(i) institute Proceedings in its own name and as trustee of an express
trust for the collection of all amounts then payable on the Notes or under
this Indenture with respect thereto, whether by declaration or otherwise,
enforce any judgment obtained, and collect from the Issuer and any other
obligor upon such Notes moneys adjudged due;
(ii) institute Proceedings from time to time for the complete or
partial foreclosure of this Indenture with respect to the Trust Estate;
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(iii) exercise any remedies of a secured party under the UCC and take
any other appropriate action to protect and enforce the rights and remedies
of the Trustee and the Holders of the Notes; and
(iv) in the event that all the Notes have been declared due and
payable pursuant to Section 5.02, sell the Trust Estate or any portion
thereof or rights or interest therein, at one or more public or private
sales called and conducted in any manner permitted by law;
provided, however, that the Trustee may not sell or otherwise liquidate the
Trust Estate following an Event of Default, other than an Event of Default
described in Section 5.01(i) or (ii) unless (A) the Holders of 100% of the
Outstanding Amount of the Notes consent thereto, (B) the Trustee determines that
the proceeds of such sale or liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due and unpaid upon such Notes
for principal and interest or (C) the Trustee determines that the Trust Estate
will not continue to provide sufficient funds for the payment of principal of
and interest on the Notes as they would have become due if the Notes had not
been declared due and payable, and the Trustee obtains the consent of Holders of
at least 66-2/3% of the Outstanding Amount of the Investor Notes. In determining
such sufficiency or insufficiency with respect to clause (B) and (C), the
Trustee may, but need not, obtain and rely upon an opinion of an Independent
investment banking or accounting firm of national reputation as to the
feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
(b) If the Trustee collects any money or property pursuant to this Article
V following the acceleration of the maturities of the Notes pursuant to Section
5.02 (so long as such declaration shall not have been rescinded or annulled), it
shall pay out the money or property (other than the Excluded Amounts, unpaid
Servicing Fees, which may be retained by the Servicer free and clear of the lien
of this Indenture) in the following order:
FIRST: to the Trustee for any and all amounts due and owing pursuant
to Section 6.07;
SECOND: to Holders of the Class A-1 Notes, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes for amounts due and unpaid on the for interest,
ratably among Class A Notes, without preference or priority of any kind,
according to the amounts due and payable on the Class A Notes for interest;
THIRD: to Holders of the Class A-1 Notes for amounts due and unpaid on
the Class A-1 Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class A-1
Notes for principal;
FOURTH: to Holders of the Class A-2 Notes for amounts due and unpaid
on the Class A-2 Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the Class
A-2 Notes for principal;
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FIFTH: to Holders of the Class A-3 Notes for amounts due and unpaid on
the Class A-3 Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class A-3
Notes for principal;
SIXTH: to Holders of the Class A-4 Notes for amounts due and unpaid on
the Class A-4 Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class A-4
Notes for principal;
SEVENTH: to Holders of the Class B Notes for amounts due and unpaid on
the Class B Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class B notes for
interest;
EIGHTH: to Holders of the Class B Notes for amounts due and unpaid on
the Class B Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class B Notes for
principal;
NINTH: to Holders of the Class C Notes for amounts due and unpaid on
the Class C Notes for interest, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class C notes for
interest;
TENTH: to Holders of the Class C Notes for amounts due and unpaid on
the Class C Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class C Notes for
principal;
ELEVENTH: to Holders of the Class D Notes for amounts due and unpaid
on the Class D Notes for principal, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Class D Notes
for principal; and
FINALLY: to the Issuer for distribution.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date,
the Issuer shall mail to each Noteholder and the Trustee a notice that states
the record date, the payment date and the amount to be paid.
Section 5.05. Optional Preservation of the Contracts. If the Notes have
been declared to be due and payable under Section 5.02 following an Event of
Default and such declaration and its consequences have not been rescinded and
annulled, the Trustee may, but need not, elect to maintain possession of the
Trust Estate. It is the desire of the parties hereto and the Noteholders that
there be at all times sufficient funds for the payment of principal of and
interest on the Notes, and the Trustee shall take such desire into account when
determining whether or not to maintain possession of the Trust Estate. In
determining whether to maintain possession of the Trust Estate, the Trustee may,
but need not, obtain and rely upon an opinion of an Independent investment
banking or accounting firm of national reputation as to the feasibility of such
proposed action and as to the sufficiency of the Trust Estate for such purpose.
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Section 5.06. Limitation of Suits. No Holder of any Note shall have any
right to institute any Proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the Trustee of
a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount of the
Investor Notes have made written request to the Trustee to institute such
Proceeding in respect of such Event of Default in its own name as Trustee
hereunder;
(iii) Holder or Holders have offered to the Trustee an indemnity
against the costs, expenses and liabilities to be incurred in complying
with such request in form and substance satisfactory to the Trustee;
(iv) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute such Proceedings; and
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority
of the Outstanding Amount of the Notes;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of Notes, each representing
less than a majority of the Outstanding Amount of the Investor Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
Section 5.07. Unconditional Rights of Noteholders to Receive Principal and
Interest. Notwithstanding any other provisions in this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
Section 5.08. Restoration of Rights and Remedies. If the Trustee or any
Noteholder has instituted any Proceeding to enforce any right or remedy under
this Indenture and such Proceeding has been discontinued or abandoned for any
reason or has been determined adversely to the Trustee or to such Noteholder,
then and in every such case the Issuer, the Trustee and the Noteholders shall,
subject to any determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter all rights and
remedies of the Trustee and the Noteholders shall continue as though no such
Proceeding had been instituted.
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Section 5.09. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Trustee or to the Noteholders is intended to
be exclusive of any other right or remedy, and every right and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right
and remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.10. Delay or Omission Not a Waiver. No delay or omission of the
Trustee or any Holder of any Note to exercise any right or remedy accruing upon
any Default or Event of Default shall impair any such right or remedy or
constitute a waiver of any such Default or Event of Default or an acquiescence
therein. Every right and remedy given by this Article V or by law to the Trustee
or to the Noteholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Noteholders, as the case may be.
Section 5.11. Control by Noteholders. The Holders of a majority of the
Outstanding Amount of the Investor Notes shall have the right to direct the
time, method and place of conducting any Proceeding for any remedy available to
the Trustee with respect to the Notes or exercising any trust or power conferred
on the Trustee; provided that
(i) such direction shall not be in conflict with any rule of law or
with this Indenture;
(ii) subject to the express terms of Section 5.04, any direction to
the Trustee to sell or liquidate the Trust Estate shall be by the Holders
of Notes representing not less than 75% of the Outstanding Amount of the
Notes;
(iii) if the conditions set forth in Section 5.05 have been satisfied
and the Trustee elects to retain the Trust Estate pursuant to such Section,
then any direction to the Trustee by Holders of Notes representing less
than 75% of the Outstanding Amount of the Notes to sell or liquidate the
Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
Section 5.12. Waiver of Past Default. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.02, the
Holders of Notes of not less than a majority of the Outstanding Amount of the
Investor Notes may waive any past Default or Event of Default and its
consequences except a Default (a) in payment of principal of or interest on any
of the Notes or (b) in respect of a covenant or provision hereof which cannot be
modified or amended without the consent of the Holder of each Note. In the case
of any such waiver, the Issuer, the Trustee and the Holders of the Notes shall
be restored to their former positions and rights hereunder, respectively;
provided that no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereto.
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Upon any such waiver, such Default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; provided that no such waiver shall extend to any
subsequent or other Default or Event of Default or impair any right consequent
thereto.
Section 5.13. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; provided that the provisions of this Section shall not
apply to (a) any suit instituted by the Trustee, (b) any suit instituted by any
Noteholder, or group of Noteholders, in each case holding in the aggregate more
than 10% of the Outstanding Amount of the Investor Notes or (c) any suit
instituted by any Noteholder for the enforcement of the payment of principal of
or interest on any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or after the
Redemption Date).
Section 5.14. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
Section 5.15. Action on Notes. The Trustee's right to seek and recover
judgment on the Notes or under this Indenture shall not be affected by the
seeking, obtaining or application of any other relief under or with respect to
this Indenture. Neither the lien of this Indenture nor any rights or remedies of
the Trustee or the Noteholders shall be impaired by the recovery of any judgment
by the Trustee against the Issuer or by the levy of any execution under such
judgment upon any portion of the Trust Estate or upon any of the assets of the
Issuer. Any money or property collected by the Trustee shall be applied in
accordance with Section 5.04(b).
Section 5.16. Performance and Enforcement of Certain Obligations. (a)
Promptly following a request from the Trustee to do so and at the Transferor's
expense, the Issuer agrees to take all such lawful action as the Trustee may
request to compel or secure the performance and observance by the Transferor, in
its capacity as Transferor and as Servicer of its obligations to the Issuer
under or in connection with the Transfer and Servicing Agreement in accordance
with the terms thereof, and to exercise any and all rights, remedies, powers and
privileges lawfully available to the Issuer under or in connection with the
Transfer and Servicing Agreement to the extent and in the manner directed by the
Trustee, including the transmission of notices of default on the part of the
Transferor or in its capacity as Servicer thereunder and the
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institution of legal or administrative actions or proceedings to compel or
secure performance by the Transferor of its obligations under the Transfer and
Servicing Agreement, both in its capacity as Transferor and as Servicer.
(b) If an Event of Default has occurred and is continuing, the Trustee may,
and, at the direction (which direction shall be in writing) of the Holders of at
least 66-2/3% of the Outstanding Amount of the Investor Notes shall, exercise
all rights, remedies, powers, privileges and claims of the Issuer against the
Transferor or under or in connection with the Transfer and Servicing Agreement,
including the right or power to take any action to compel or secure performance
or observance by the Transferor of its obligations to the Issuer thereunder and
to give any consent, request, notice, direction, approval, extension or waiver
under the Transfer and Servicing Agreement, and any right of the Issuer to take
such action shall be suspended.
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ARTICLE VI
THE TRUSTEE
Section 6.01. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and use the same degree of care and skill in their exercise as
a prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture and no implied covenants or
obligations (including, without limitation, to exercise any discretionary
powers granted by this Indenture) shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee pursuant to the requirements of this Indenture; provided,
however, the Trustee shall examine the certificates and opinions to
determine whether or not they conform on their face to the requirements of
this Indenture.
The Trustee shall not be required to determine, confirm or recalculate the
information contained in the Servicer's Certificate delivered to it pursuant to
the Transfer and Servicing Agreement.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:
(i) this paragraph does not limit the effect of subsection 6.01(b);
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with the direction of
any requisite majority of Noteholders authorized to give direction to the
Trustee pursuant to this Indenture.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to subsections 6.01(a), (b) and (c);
(e) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
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(f) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law or the terms of this Indenture or the
Transfer and Servicing Agreement.
(g) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayments of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(h) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
Section 6.02. Rights of Trustee. (a) The Trustee may conclusively rely on
any document believed by it to be genuine and to have been signed or presented
by the proper person. The Trustee need not investigate any fact or matter stated
in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of, any
such agent, attorney, custodian or nominee appointed with due care by it
hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute
willful misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent entitlement order, approval or other
paper or document.
(g) The Trustee shall not be charged with knowledge of any Event of
Default unless either (1) a Responsible Officer of the Trustee shall have
actual knowledge or (2) the Trustee shall have received notice thereof from the
Issuer or a Holder.
Section 6.03. Individual Rights of Trustee. The Trustee in its individual
or any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its affiliates with the same rights it would have if it
were not Trustee. Any Paying Agent, Note
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Registrar, co-registrar or co-paying agent may do the same with like rights.
However, the Trustee, in its capacity as Trustee, must comply with Sections
6.11 and 6.12.
Section 6.04. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of the Trust
Estate, this Indenture or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
Section 6.05. Notice of Defaults. If a Default occurs and is continuing and
if it is actually known to a Responsible Officer of the Trustee, the Trustee
shall mail to each Noteholder notice of the Default within 90 days after it
occurs. Except in the case of a Default in payment of principal of or interest
on any Note (including payments pursuant to the mandatory redemption provisions
of such Note), the Trustee may withhold the notice if and so long as a committee
of its Responsible Officers in good faith determines that withholding the notice
is in the interests of Noteholders.
Section 6.06. Reports by Trustee to Holders. The Trustee shall, to the
extent provided to it by the Servicer pursuant to Section 5.06 of the Transfer
and Servicing Agreement, deliver to each Noteholder upon written request and at
the expense of such Noteholder, such information as may be required to enable
such holder to prepare its federal and state income tax returns, which shall
include the information required to be distributed pursuant to the second to
last paragraph of Section 5.06 of the Transfer and Servicing Agreement. The
Trustee shall not be required to determine, confirm or recompute any such
information provided to it.
Section 6.07. Compensation and Indemnity. The Issuer shall pay to the
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall reimburse the Trustee for all
reasonable out-of-pocket expenses incurred or made by it, including costs of
collection, in addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses, disbursements and
advances of the Trustee's agents, counsel, accountants and experts. The Issuer
shall indemnify and hold harmless the Trustee and its officers, directors,
employees and agents (retained by the Trustee in order to perform its duties
pursuant to this Indenture) against any and all loss, liability or expense
(including the fees of either in-house counsel or outside counsel, but not both)
incurred by it in connection with the administration of the Trust Estate and the
performance of its duties hereunder. The Trustee shall notify the Issuer
promptly of any claim for which it may seek indemnity. Failure by the Trustee to
so notify the Issuer shall not relieve the Issuer of its obligations hereunder
unless such loss, liability or expense could have been avoided with such prompt
notification and then only to the extent of such loss, expense or liability
which could have been so avoided. The Issuer shall defend, any claim against the
Trustee, the Trustee may have separate counsel and if it does, the Issuer shall
pay the fees and expenses of such counsel. The Issuer need not reimburse any
expense or indemnify against any loss, liability or expense incurred by the
Trustee through the Trustee's own willful misconduct, negligence or bad faith.
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The Issuer's payment obligations to the Trustee pursuant to this Section
shall survive the discharge of this Indenture or the earlier resignation or
removal of the Trustee. When the Trustee incurs expenses after the occurrence of
a Default specified in Section 5.01(iv) or (v) with respect to the Issuer, the
expenses are intended to constitute expenses of administration under Title 11 of
the United States Code or any other applicable federal or state bankruptcy,
insolvency or similar law.
Notwithstanding anything herein to the contrary, the Trustee's right to
enforce any of the Issuer's payment obligations pursuant to this Section 6.07
shall be subject to the provisions of Section 11.17.
Section 6.08. Replacement of Trustee. No resignation or removal of the
Trustee and no appointment of a successor Trustee shall become effective until
the acceptance of appointment by the successor Trustee pursuant to this Section
6.08. The Trustee may resign at any time by so notifying the Issuer. The Holders
of a majority in Outstanding Amount of the Notes may remove the Trustee by so
notifying the Trustee in writing and may appoint a successor Trustee. The Issuer
shall remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) the Trustee shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings of or
relating to the Trustee or all or substantially all of its property, or a
decree or order of a court or agency or supervisory authority having
jurisdiction in the premises for the appointment of a conservator or
receiver or liquidator in any insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against
the Trustee; or the Trustee shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of any applicable insolvency or reorganization statute, make an assignment
for the benefit of its creditors or voluntarily suspend payment of its
obligations; or
(iii) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee,
which successor shall be reasonably acceptable to the Transferor.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. The
successor Trustee shall mail a notice of its succession to Noteholders. The
retiring Trustee shall promptly transfer all property held by it as Trustee to
the successor Trustee.
If a successor Trustee does not take office within 45 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of not less than a majority in
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Outstanding Amount of the Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.11, any Noteholder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuer's obligations under Section 6.07 shall continue for the benefit of
the retiring Trustee.
Section 6.09. Successor Trustee by Merger. If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation or banking
association without any further act shall be the successor Trustee provided that
such corporation or banking association shall be otherwise qualified and
eligible under Section 6.11.
In case at the time such successor or successors by merger, conversion or
consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
Section 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction, the Trustee shall
have the power and may execute and deliver all instruments to appoint one or
more Persons reasonably acceptable to the Issuer to act as a co-trustee or
co-trustees, or separate trustee or separate trustees, of all or any part of the
Trust Estate, and to vest in such Person or Persons, in such capacity and for
the benefit of the Noteholders, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Trustee may consider necessary or
desirable. No co-trustee or separate trustee hereunder shall be required to meet
the terms of eligibility as a successor trustee under Section 6.11 and no notice
to Noteholders of the appointment of any co-trustee or separate trustee shall be
required under Section 6.08 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations shall be
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exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Indenture on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
Section 6.11. Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA Section 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and have a long-term deposit rating
of at least A3 from Moody's or otherwise be acceptable to Moody's and a
long-term deposit rating of at least A- from S&P or otherwise be acceptable to
S&P. The Trustee shall comply with TIA Section 310(b), including the optional
provision permitted by the second sentence of TIA Section 310(b)(9); provided,
however, that there shall be excluded from the operation of TIA Section
310(b)(1) any indenture or indentures under which other securities of the issuer
are outstanding if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
Section 6.12. Preferential Collection of Claims Against. The Trustee shall
comply with TIA Section 311(a), excluding any creditor relationship listed in
TIA Section 311(b). A Trustee who has resigned or been removed shall be subject
to TIA Section 311(a) to the extent indicated.
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ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
Section 7.01. Issuer To Furnish Trustee Names and Addresses of Noteholders.
The Issuer will furnish or cause to be furnished to the Trustee (a) not more
than five days after the earlier of (i) each Record Date and (ii) three months
after the last Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders of Notes as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished.
Section 7.02. Preservation of Information; Communications to Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders of Notes contained in the
most recent list furnished to the Trustee as provided in Section 7.01 and the
names and addresses of Holders of Notes received by the Trustee in its capacity
as Note Registrar. The Trustee may destroy any list furnished to it as provided
in such Section 7.01 upon receipt of a new list so furnished.
(b) Noteholders may communicate, pursuant to TIA Section 312(b), with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA Section 312(c).
Section 7.03. Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is required
to file the same with the Commission, copies of the annual reports and of
the information, documents and other reports (or copies of such portions of
any of the foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with rules
and regulations prescribed from time to time by the Commission such
additional information, documents and reports with respect to compliance by
the Issuer with the conditions and covenants of this Indenture as may be
required from time to time by such rules and regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by mail to
all Noteholders described in TIA Section 313(c)) such summaries of any
information, documents and reports required to be filed by the Issuer
pursuant to clauses (i) and (ii) of this Section 7.03(a) as may be required
by rules and regulations prescribed from time to time by the Commission.
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(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
Section 7.04. Reports by Trustee. If required by TIA Section 313(a), within
60 days after each March 31 beginning with March 31, 2000, the Trustee shall
mail to each Noteholder as required by TIA Section 313(c) a brief report dated
as of such date that complies with TIA Section 313(a). The Trustee also shall
comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Noteholders shall be
filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee in writing if
and when the Notes are listed on any stock exchange.
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ARTICLE VIII
ACCOUNTS, DISBURSEMENTS AND RELEASES
Section 8.01. Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by
the Trustee pursuant to this Indenture. The Trustee shall apply all such money
received by it as provided in this Indenture. Except as otherwise expressly
provided in this Indenture, if any default occurs in the making of any payment
or performance under any agreement or instrument that is part of the Trust
Estate, the Trustee may take such action as may be appropriate to enforce such
payment or performance, including the institution and prosecution of
appropriate Proceedings. Any such action shall be without prejudice to any
right to claim a Default or Event of Default under this Indenture and any right
to proceed thereafter as provided in Article V.
Section 8.02. Collection and Reserve Accounts. On or prior to the Closing
Date, the Issuer shall cause the Servicer to establish and maintain, in the
name of the Trustee, for the benefit of the Noteholders the Collection Account
as provided in Section 5.01 of the Transfer and Servicing Agreement and for the
benefit of the Holders of the Investor Notes, the Reserve Account as provided
in Section 5.01 of the Transfer Servicing Agreement.
On each Payment Date and Redemption Date, the Trustee shall distribute
from the Collection Account funds in the amounts, for the purpose and in the
priority set forth in Section 5.04 of the Transfer and Servicing Agreement.
Section 8.03. General Provisions Regarding Accounts. (a) So long as no
Default or Event of Default shall have occurred and be continuing, all or a
portion of the funds in the Collection Account and Reserve Account shall be
invested in Eligible Investments and reinvested by the Trustee upon Issuer
Order, subject to the provisions of Section 5.01(b) of the Transfer and
Servicing Agreement (which Issuer Order may be upon direction of the Servicer).
All income or other gain from investments of moneys deposited in the Reserve
Account shall be deposited by the Trustee in the Collection Account, and any
loss resulting from such investments shall be charged to such account. The
Issuer will not direct the Trustee to make any investment of any funds or to
sell any investment held in any of the Reserve Account unless the security
interest granted and perfected in such account will continue to be perfected in
such investment or the proceeds of such sale.
(b) Subject to Section 6.01(c), the Trustee shall not in any way be held
liable by reason of any insufficiency in the Collection Account and Reserve
Account resulting from any loss on any Eligible Investment included therein
pursuant to the terms of the Basic Documents except for losses attributable to
the Trustee's failure to make payments on such Eligible Investments issued by
the Trustee, in its commercial capacity as principal obligor and not as
trustee, in accordance with their terms. In no event shall the Trustee be
liable for the selection of Eligible Investments or for investment losses
incurred thereon (except in the case of gross negligence of the Trustee). The
Trustee shall have no liability in respect of losses incurred as a result of
the liquidation of any Eligible Investment prior to its stated maturity or the
failure of the
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Issuer to provide timely written investment direction (except in the case of
gross negligence of the Trustee).
(c) If (i) the Issuer shall have failed to give investment directions for
any funds on deposit in the Collection Account and Reserve Account to the
Trustee by 12:00 noon New York Time (or such other time as may be agreed in
writing by the Issuer and Trustee) on any Business Day; or (ii) a Default or
Event of Default shall have occurred and be continuing with respect to the
Notes but the Notes shall not have been declared due and payable pursuant to
Section 5.02, or, if such Notes shall have been declared due and payable
following an Event of Default and amounts collected or receivable from the
Trust Estate are being applied in accordance with Section 5.05; then the
Trustee shall, to the fullest extent practicable, invest and reinvest funds in
the Collection Account and Reserve Account in Eligible Investments of the same
type as the Trustee was most recently directed to invest such funds and
maturing prior to the succeeding Payment Date in accordance with Section 5.01
of the Transfer and Servicing Agreement.
Section 8.04. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.07, the Trustee may, and when required
by the provisions of this Indenture shall, execute instruments to release
property from the lien of this Indenture, or convey the Trustee's interest in
the same, in a manner and under circumstances that are not inconsistent with
the provisions of this Indenture. No party relying upon an instrument executed
by the Trustee as provided in this Article VIII shall be bound to ascertain the
Trustee's authority, inquire into the satisfaction of any conditions precedent
or see to the application of any moneys.
(b) The Trustee shall, at such time as there are no Notes Outstanding and
all sums due the Trustee pursuant to Section 6.07 have been paid, release any
remaining portion of the Trust Estate that secured the Notes from the lien of
this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Collection Account and Reserve Account. The
Trustee shall release property from the lien of this Indenture pursuant to this
Section 8.04(b) only upon receipt of an Issuer Request accompanied by an
Officer's Certificate, an Opinion of Counsel and (if required by the TIA)
Independent Certificates in accordance with TIA Sections 314(c) and 314(d)(1)
meeting the applicable requirements of Section 11.01.
(c) Notwithstanding anything to the contrary in this Indenture or the
Transfer and Servicing Agreement, immediately prior to the release of any
portion of the Trust Estate or any funds on deposit in the Collection Account
and Reserve Account pursuant to this Indenture, the Trustee shall remit to the
Transferor for its own account any funds that, upon such release, would
otherwise be remitted to the Issuer.
Section 8.05. Opinion of Counsel. The Trustee shall receive at least
seven days' written notice when requested by the Issuer to take any action
pursuant to Section 8.04(a), accompanied by copies of any instruments involved,
and the Trustee shall also require, as a condition to such action, an Opinion
of Counsel, in form and substance reasonably satisfactory to the Trustee,
stating the legal effect of any such action, outlining the steps required to
complete the same, and concluding that all conditions precedent to the taking
of such action have been complied with and such action will not materially and
adversely impair the security for the Notes or the rights of the Noteholders in
contravention of the provisions of this Indenture; provided, however, that such
Opinion of Counsel shall not be required to express an opinion as to the fair
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value of the Trust Estate. The Trustee and counsel rendering any such opinion
may conclusively rely, without independent investigation, on the accuracy and
validity of any certificate or other instrument delivered to the Trustee in
connection with any such action.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
Section 9.01. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with prior notice to the
Rating Agencies, the Issuer and the Trustee, when authorized by an Issuer Order,
at any time and from time to time, may enter into one or more indentures
supplemental hereto (which shall conform to the provisions of the TIA as in
force at the date of the execution thereof), in form reasonably satisfactory to
the Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any time
subject to the lien of this Indenture, or better to assure, convey and
confirm unto the Trustee any property subject or required to be subjected
to the lien of this Indenture, or to subject to the lien of this Indenture
additional property;
(ii) to evidence the succession, in compliance with the applicable
provisions hereof, of another Person to the Issuer, and the assumption by
any such successor of the covenants of the Issuer herein and in the Notes
contained;
(iii) to add to the covenants of the Issuer, for the benefit of the
Holders of the Notes, or to surrender any right or power herein conferred
upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any property to
or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with any
other provision herein or in any supplemental indenture or to make any
other provisions with respect to matters or questions arising under this
Indenture or in any supplemental indenture; provided that such action shall
not, as evidenced by an Opinion of Counsel, adversely affect in any
material respect the interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the appointment
hereunder by a successor trustee with respect to the Notes and to add to or
change any of the provisions of this Indenture as shall be necessary to
facilitate the administration of the trusts hereunder by more than one
trustee, pursuant to the requirements of Article VI; or
(vii) to modify, eliminate or add to the provisions of this Indenture
to such extent as shall be necessary, as evidenced by an Opinion of
Counsel, to effect the qualification of this Indenture under the TIA or
under any similar federal statute hereafter enacted and to add to this
Indenture such other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
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(b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
Section 9.02. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies and with the consent of the Holders of not less
than a majority of the Outstanding Amount of the Notes, by Act of such Holders
delivered to the Issuer and the Trustee, enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or of
modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent of the Holder of each Outstanding Note affected thereby:
(i) change the date of payment of any installment of principal of or
interest on any Note, change the order of priority of payments to be made
on any Note or reduce the principal amount thereof, the interest rate
thereon or the Redemption Price with respect thereto, change the provisions
of this Indenture relating to the application of collections on, or the
proceeds of the sale of, the Trust Estate to payment of principal of or
interest on the Notes, or change any place of payment where, or the coin or
currency in which, any Note or the interest thereon is payable, or impair
the right to institute suit for the enforcement of the provisions of this
Indenture requiring the application of funds available therefor, as
provided in Article V, to the payment of any such amount due on the Notes
on or after the respective due dates thereof (or, in the case of
redemption, on or after the Redemption Date);
(ii) reduce the percentage of the Outstanding Amount of the Notes, the
consent of the Holders of which is required for any such supplemental
indenture, or the consent of the Holders of which is required for any
waiver of compliance with certain provisions of this Indenture or certain
defaults hereunder and their consequences provided for in this Indenture;
(iii) modify or alter the provisions of the proviso to the definition
of the term "Outstanding";
(iv) reduce the percentage of the Outstanding Amount of the Investor
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.04;
(v) modify any provision of this Section 9.02 except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified or
waived without the consent of the Holder of each Outstanding Note affected
thereby;
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(vi) modify any of the provisions of this Indenture in such manner as
to affect the calculation of the amount of any payment of interest due on
any Note on any Payment Date or the calculation of the amount of principal
to be paid on any Payment Date or the amount to be paid to any Class on any
Payment Date (including the calculation of any of the individual components
of such calculations); or
(vii) permit the creation of any lien ranking prior to or on a parity
with the lien of this Indenture with respect to any part of the Trust
Estate or, except as otherwise permitted or contemplated herein, terminate
the lien of this Indenture on any property at any time subject hereto or
deprive the Holder of any Note of the security provided by the lien of this
Indenture.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
Section 9.03. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.01 and 6.02, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
Section 9.04. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
Section 9.05. Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the TIA as then in effect so long as this
Indenture shall then be qualified under the TIA.
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Section 9.06. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental indenture. If the Issuer or the Trustee shall so determine, new
Notes so modified as to conform, in the opinion of the Trustee and the Issuer,
to any such supplemental indenture may be prepared and executed by the Issuer
and authenticated and delivered by the Trustee in exchange for Outstanding
Notes.
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ARTICLE X
REDEMPTION OF NOTES
Section 10.01. Redemption. (a) On any Payment Date following any
Calculation Date as of which the Aggregate Contract Principal Balance is less
than ten percent 10% of the Initial Aggregate Contract Principal Balance, the
Servicer shall have the option to cause the redemption of the Notes by
depositing with the Trustee the sum of (i) the Outstanding Amount (after giving
effect to the payment of any principal on such Payment Date) and (ii) the Class
A-1 Note Interest, Class A-2 Note Interest, Class A-3 Note Interest, Class A-4
Note Interest, Class B Note Interest and Class C Note Interest due on such
Payment Date. Upon receipt of such amounts and all amounts then owed to the
Trustee, the Trustee shall (x) make the final payment in full of the Outstanding
Amount and all accrued and unpaid interest to the Noteholders and (y) release
any remaining Trust Estate to the Issuer as determined by the Servicer and
delivered in writing to the Trustee 20 days prior to the Redemption Date.
(b) The Class A-4 Notes may be redeemed ("Class A-4 Special Redemption") on
any Payment Date at the option of the Issuer at a price equal to the sum of (i)
the then Class A-4 Principal Balance, accrued and unpaid interest thereon and
(ii) the Class A-4 Special Redemption Premium as determined by the Servicer and
delivered in writing to the Trustee 20 days prior to the Redemption Date.
The Class A-4 Special Redemption Premium will equal the excess, if any,
discounted as described below, of (i) the amount of interest that would accrue
on the aggregate outstanding principal balance of the Class A-4 Notes at the
Class A-4 Interest Rate during the period beginning on and including the Payment
Date on which such Class A-4 Special Redemption Premium is required to be paid
to the Class A-4 Noteholders to but excluding the Class A-4 Maturity Date, over
(ii) the amount of interest that would have accrued on the aggregate outstanding
Class A-4 Principal Balance over the same period at a per annum rate of interest
equal to the bond equivalent yield to maturity on the Determination Date
preceding such Payment Date of a United States Treasury security, which is
trading in the public securities market, maturing on a date closest to the date
equal to the remaining average life of the Class A-4 Notes minus 0.5%. Such
excess shall be discounted to the present value to such Payment Date at the
applicable yield described in clause (ii) above. For purposes of this paragraph
only, (i) the Class A-4 Principal Balance upon which interest will be deemed to
accrue, and (ii) the average weighted life of the Class A-4 Notes, shall be
determined based upon the amortization of the Aggregate Contract Principal
Balance remaining at such Payment Date at a rate of 6.0% conditional payment
rate and no losses.
If the Class A-4 Notes are redeemed pursuant to a Class A-4 Special
Redemption, the Class A-4 Notes will be deemed to have been repurchased by the
Obligors. In such an event, the Obligors will be entitled to receive payments of
principal and interest on the Class A-4 Notes, and the Class A-4 Principal
Balance will thereafter continue to amortize as provided in this Series 1999-1
Supplement.
Section 10.02. Form of Redemption Notice. Notice of redemption under
Section 10.01 shall be given by the Trustee by first-class mail, postage
prepaid, mailed not less than ten and not
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more than 30 days prior to the applicable Redemption Date to each Holder of
Notes to be redeemed as of the close of business on the Record Date preceding
the applicable Redemption Date, at such Holder's address appearing in the Note
Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price; and
(iii) the place where such Notes are to be surrendered for payment of
the Redemption Price (which shall be the office or agency of the Issuer to
be maintained as provided in Section 3.02).
Notice of redemption of the Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
Section 10.03. Notes Payable on Redemption Date. The Notes or portions
thereof to be redeemed shall, following notice of redemption as required by
Section 10.02 (in the case of redemption pursuant to Section 10.01), on the
Redemption Date become due and payable at the Redemption Price and (unless the
Issuer shall default in the payment of the Redemption Price) no interest shall
accrue on the Redemption Price for any period after the date to which accrued
interest is calculated for purposes of calculating the Redemption Price.
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ARTICLE XI
MISCELLANEOUS
Section 11.01. Compliance Certificates and Opinions etc. (a) Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee (i) an
Officer's Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with,
(ii) an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with and (iii) (if required by
the TIA) an Independent Certificate from a firm of certified public accountants
meeting the applicable requirements of this Section, except that, in the case of
any such application or request as to which the furnishing of such documents is
specifically required by any provision of this Indenture, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or opinion has
read or has caused to be read such covenant or condition and the
definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory, such
signatory has made such examination or investigation as is necessary to
enable such signatory to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such signatory,
such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.01(a) or elsewhere in this
Indenture, furnish to the Trustee an Officer's Certificate certifying or stating
the opinion of each person signing such certificate as to the fair value (within
90 days of such deposit) to the Issuer of the Collateral or other property or
securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee an
Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (i) above, the Issuer shall
also deliver to the Trustee an Independent Certificate as to the same
matters, if the fair value to the Issuer of the securities to be so
deposited and of all other such securities made the basis of any such
withdrawal or release since the commencement of the then-current fiscal
year of the Issuer, as set forth in the certificates delivered pursuant to
clause (i) above and this clause (ii), is 10% or
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more of the Outstanding Amount of the Notes, but such a certificate need
not be furnished with respect to any securities so deposited if the fair
value thereof to the Issuer as set forth in the related Officer's
Certificate is less than $25,000 or less than one percent of the
Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any [Acquired
Contracts] or [Liquidated Contracts] whenever any property or securities
are to be released from the lien of this Indenture, the Issuer shall also
furnish to the Trustee an Officer's Certificate certifying or stating the
opinion of each person signing such certificate as to the fair value
(within 90 days of such release) of the property or securities proposed to
be released and stating that in the opinion of such person the proposed
release will not impair the security under this Indenture in contravention
of the provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee an
Officer's Certificate certifying or stating the opinion of any signer
thereof as to the matters described in clause (iii) above, the Issuer shall
also furnish to the Trustee an Independent Certificate as to the same
matters if the fair value of the property or securities and of all other
property, other than [Acquired Contracts] and [Liquidated Contracts], or
securities released from the lien of this Indenture since the commencement
of the then current calendar year, as set forth in the certificates
required by clause (iii) above and this clause (iv), equals 10% or more of
the Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the fair
value thereof as set forth in the related Officer's Certificate is less
than $25,000 or less than one percent of the then Outstanding Amount of the
Notes.
(v) Notwithstanding Section 2.09 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise dispose
of Contracts and Financed Equipment as and to the extent permitted or
required by the Basic Documents and (B) make cash payments out of the
Collection Account and Reserve Account as and to the extent permitted or
required by the Basic Documents.
Section 11.02. Form of Documents Delivered to Trustee. In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
Any certificate or opinion of an Authorized Officer of the Issuer may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel
may be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Servicer, the
Transferor or the Issuer, stating that the information with respect to such
factual matters is in the possession of the Servicer, the
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<PAGE> 66
Transferor, the Issuer, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
Section 11.03. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.01) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any manner that the Trustee deems sufficient.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Trustee or
the Issuer in reliance thereon, whether or not notation of such action is made
upon such Note.
Section 11.04. Notices, etc. to Trustee, Issuer and Rating Agencies. Any
request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
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(a) the Trustee by any Noteholder or by the Issuer shall be sufficient for
every purpose hereunder if made, given, furnished or filed in writing to or with
the Trustee and received at its Corporate Trust Office, or
(b) the Issuer by the Trustee or by any Noteholder shall be sufficient for
every purpose hereunder if in writing and mailed, first-class, postage prepaid,
to the Issuer addressed to: Advanta Equipment Receivables Series 2000-___ LLC,
as Issuer _________________________________, Attention: _______________________.
The Issuer shall promptly transmit any notice received by it from the
Noteholders to the Trustee.
(c) the Rating Agencies by the Issuer or the Trustee shall be sufficient
for every purpose hereunder if in writing, personally delivered or mailed by
certified mail, return receipt requested to (i) in the case of
_________________, at the following address: _______________________ and (ii) in
the case of _____________________, at the following address:
_______________________, Attention of _____________________; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
Section 11.05. Notices to Noteholders; Waiver. Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at such Noteholder's address as it appears on the Note Register, not
later than the latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to Noteholders is given
by mail, neither the failure to mail such notice nor any defect in any notice so
mailed to any particular Noteholder shall affect the sufficiency of such notice
with respect to other Noteholders, and any notice that is mailed in the manner
herein provided shall conclusively be presumed to have been duly given.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Noteholders shall be filed with the Trustee but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such a waiver.
In case, by reason of the suspension of regular mail service as a result of
a strike, work stoppage or similar activity, it shall be impractical to mail
notice of any event to Noteholders when such notice is required to be given
pursuant to any provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
Where this Indenture provides for notice to the Rating Agencies, failure to
give such notice shall not affect any other rights or obligations created
hereunder and shall not under any circumstance constitute a Default or Event of
Default.
Section 11.06. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, to the extent
reasonably satisfactory to the Trustee, the Issuer may enter into any agreement
with any Holder of a Note providing for a method of payment, or notice by the
Trustee or any Paying Agent to such Holder,
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that is different from the methods provided for in this Indenture for such
payments or notices. The Issuer will furnish to the Trustee a copy of each such
agreement and the Trustee will cause payments to be made and notices to be given
in accordance with such agreements.
Section 11.07. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof that is required to
be included in this indenture by any of the provisions of the TIA, such required
provision shall control.
The provisions of TIA Sections 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
Section 11.08. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 11.09. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not.
All covenants and agreements of the Trustee in this Indenture shall bind
its successors, co-trustees and agents of the Trustee.
Section 11.10. Separability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 11.11. Benefits of Indenture. Nothing in this Indenture or in the
Notes, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the Noteholders, and any other party
secured hereunder, and any other Person with an ownership interest in any part
of the Trust Estate, any benefit or any legal or equitable right, remedy or
claim under this Indenture.
Section 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
Section 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 11.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
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Section 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any other counsel reasonably acceptable
to the Trustee) to the effect that such recording is necessary either for the
protection of the Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee under this Indenture.
Section 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer or the Trustee on the
Notes or under this Indenture or any certificate or other writing delivered in
connection herewith or therewith, against (i) the Trustee in its individual
capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Trustee or of any successor or assign of the Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee has no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Section 11.17. No Petition. The Trustee (in its capacity as Trustee), by
entering into this Indenture, and each Noteholder, by accepting a Note, hereby
covenant and agree that they will not at any time institute against the
Transferor, or voluntarily join in any institution against the Transferor of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any United States federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, this Indenture or any of the Basic Documents.
Section 11.18. Inspection. The Issuer agrees that, on 5 days prior notice,
it will permit any representative of the Trustee, during the Issuer's normal
business hours, to examine all the books of account, records, reports, and other
papers of the Issuer, to make copies and extracts therefrom, to cause such books
to be audited by Independent certified public accountants, and to discuss the
Issuer's affairs, finances and accounts with the Issuer's officers, employees,
and Independent certified public accountants, all at such reasonable times and
as often as may be reasonably requested. The Trustee shall, and shall cause its
representatives, to hold in confidence all such information except to the extent
disclosure may be required by law (and all reasonable applications for
confidential treatment are unavailing) and except to the extent that the Trustee
may reasonably determine that such disclosure is consistent with its obligations
hereunder.
Section 11.19. Restrictions on Transfer of Class D Notes. To the fullest
extent permitted by applicable law, the Class D Notes (or any interest therein)
may not be transferred by the initial Holder of the Class D Notes to any Person.
Section 11.20. Tax Treatment. Each Class A-1 Noteholder, Class A-2
Noteholder, Class A-3 Noteholder, Class A-4 Noteholder, Class B Noteholder and
Class C Noteholder, by acceptance of their Note, and each holder of a beneficial
interest in a Class A-1 Note, Class A-2 Note, Class A-3 Note, Class A-4 Note,
Class B Note and Class C Note, by the acquisition of a
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beneficial interest therein, agree to treat the Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes as
indebtedness of the Transferor for applicable federal, state, and local income
and franchise tax law and for purposes of any other tax imposed on or measured
by income.
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<PAGE> 71
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture
to be duly executed by their respective officers, thereunto duly authorized, all
as of the day and year first above written.
ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-___ LLC
By:
Name:
Title:
------------------------------------
not in its individual capacity
but solely as Trustee,
By:
Name:
Title:
65
<PAGE> 72
- ----------------- )
) ss.:
)
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared _________________ known to me
to be the person and officer whose name is subscribed to the foregoing
instrument and acknowledged to me that the same was the act of the said
_________________ banking corporation and that he executed the same as the
corporation for the purpose and consideration therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this ____ day of _______________,
2000.
---------------------------------
Notary Public
[Seal]
My commission expires:
- -------------------------
66
<PAGE> 73
EXHIBIT A
LIST OF CONTRACTS
A-1
<PAGE> 74
EXHIBIT B
FORM OF TRANSFER AND SERVICING AGREEMENT
B-1
<PAGE> 75
EXHIBIT C
FORM OF DEPOSITORY AGREEMENT
C-1
<PAGE> 76
EXHIBIT D
FORM OF CLASS [A-1] [A-2] [A-3] [A-4] [B] [C] [D] NOTE
REGISTERED $_________________ *
No. ______
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.___________
[UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) - ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.]**
[TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE CLASS D NOTES (OR
ANY INTEREST THEREIN) MAY NOT BE TRANSFERRED BY THE INITIAL HOLDER OF THE CLASS
D NOTES TO ANY PERSON.]***
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF COVENANTS AND AGREES THAT
IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE TRANSFEROR, OR JOIN IN ANY
INSTITUTION AGAINST THE TRANSFEROR, OF, ANY BANKRUPTCY PROCEEDINGS UNDER ANY
UNITED STATES FEDERAL OR STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY
OBLIGATIONS RELATING TO THE NOTES OR THE INDENTURE.
- --------
* Denominations of $1,000 and integral multiples thereof; provided, however,
that a single Note of any Class may be issued in a denomination of other
than $1,000.
* For Class A-1, Class A-2, Class A-3, Class A-4, Class B, Class C and Class
D Notes only.
** For Class D Note only.
D-1
<PAGE> 77
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
[THE HOLDER OF THIS CLASS [A-1, A-2, A-3, A-4, B or C] NOTE, BY ACCEPTANCE
OF THIS NOTE, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE
ACQUISITION OF A BENEFICIAL INTEREST THEREIN, AGREE TO TREAT THE CLASS [A-1,
A-2, A-3, A-4, B or C] NOTES AS INDEBTEDNESS OF ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-___ LLC FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND
FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY
INCOME.]
D-2
<PAGE> 78
[ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-___ LLC]
[rate%] [rate%]
[CLASS A-1] [CLASS A-2] [CLASS A-3] [CLASS A-4]
[CLASS B] [CLASS C] [CLASS D]
ASSET BACKED NOTES
[Advanta Equipment Receivables Series 2000-___ LLC], a limited liability
company organized and existing under the laws of the State of Nevada (herein
referred to as the "Issuer"), for value received, hereby promises to pay to
[__________], or registered assigns, the principal sum of [_________] DOLLARS
payable on each Payment Date in an amount equal to the result obtained by
multiplying (i) a fraction the numerator of which is $[INSERT INITIAL PRINCIPAL
AMOUNT OF NOTE] and the denominator of which is [$________ [for Class A-1
Notes]] [$__________ [for Class A-2 Notes]] [$__________ [for Class A-3 Notes]
[$__________ [for Class A-4 Notes] [$__________ [for Class B Notes] [$__________
[for Class C Notes] [$__________ [for Class D Notes] by (ii) the aggregate
amount, if any, payable from the Note Distribution Account in respect of
principal on the [Class A-1] [Class A-2] [Class A-3] [Class A-4] [Class B]
[Class C] [Class D] Notes pursuant to Section 8.02(c) of the Indenture;
provided, however, the entire unpaid principal amount of this Note shall be due
and payable on the earlier of the [[month] [2000] Payment Date for the Class
A-1] [[month] [2000] Payment Date for the Class A-2] [[month] [2000] Payment
Date for the Class A-3] [[month] [2000] Payment Date for the Class A-4] [[month]
[2000] Payment Date for the Class B] [[month] [2000] Payment Date for the Class
C] [[month] [2000] Payment Date for the Class D] Notes and the Redemption Date,
if any, pursuant to Section 10.01 of the Indenture. The Issuer will pay interest
on this Note at the [Class A-1] [Class A-2] [Class A-3] [Class A-4] [Class B]
[Class C] [Class D] Note Interest Rate on each Payment Date until the principal
of this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date after giving effect to all
payments of principal made on such preceding Payment Date (or in the case of the
first Payment Date, on the initial principal amount of this Note). Interest on
this Note will accrue for each Payment Date from and including the most recent
Payment Date on which interest has been paid to but excluding such Payment Date
or, for the initial Payment Date from ______ __, 2000 to but excluding such
Payment Date. [Interest will be computed on the basis of a 360-day year of
twelve 30-day months.] Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
D-3
<PAGE> 79
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer.
ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-___ LLC,
By:
--------------------------------
Name:
Title:
D-4
<PAGE> 80
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
---------------------------------
[TRUSTEE]
not in its individual capacity but
solely as Trustee,
By:
-----------------------------
Name:
Title:
D-5
<PAGE> 81
[REVERSE OF NOTE]
This Note is one of the [Class A-1] [Class A-2] [Class A-3] [Class A-4]
[Class B] [Class C] [Class D] Notes of a duly authorized issue of Notes of the
Issuer, designated as its [rate] [rate%] [Class A-1] [Class A-2] [Class A-3]
[Class A-4] [Class B] [Class C] [Class D] Asset Backed Notes (herein called the
"Notes"), all issued under an Indenture dated as of __________ __, 2000 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and [Trustee], as trustee (the "Trustee", which term includes
any successor Trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights and obligations thereunder of the Issuer, the Trustee and the
Holders of the Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as supplemented or
amended, shall have the meanings assigned to them in or pursuant to the
Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the collateral
pledged as security therefor as provided in the Indenture.
Principal of the Notes will be payable on each Payment Date in an amount
described on the face hereof. "Payment Date" means the ____ day of each calendar
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing __________ __, 2000.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the [[________ ____] Payment Date [for
Class A-1] [________ ____] Payment Date [for Class A-2] [________ ____] Payment
Date [for Class A-3] [________ ____] Payment Date [for Class A-4] [________
____] Payment Date [for Class B] [________ ____] Payment Date [for Class C]
[________ ____] Payment Date [for Class D] [________ ____]] and the Redemption
Date, if any, pursuant to Section 10.01 of the Indenture. Notwithstanding the
foregoing, the entire unpaid principal amount of the Notes shall be due and
payable on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Notes representing a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.02 of the Indenture. All
principal payments on the Notes of a Class shall be made pro rata to the
Noteholders of such Class entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Registered Holder of this Note (or one or more Predecessor Notes)
on the Note Register as of the close of business on each Record Date, except
that with respect to Notes registered on the Record Date in the name of the
nominee of the Clearing Agency (initially, such nominee to be Cede & Co.),
payments will be made by wire transfer in immediately available funds to the
account designated by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on the Note
Register as of the applicable Record Date without requiring that this Note be
submitted for notation of payment. Any reduction in the principal amount of this
Note (or any one or more Predecessor Notes) effected by any payments made on any
Payment Date shall be
1
<PAGE> 82
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Registered Holder hereof as of
the Record Date preceding such Payment Date by notice mailed within five days of
such Payment Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Trustee's principal Corporate
Trust Office or at the office of the Trustee's agent appointed for such purposes
located in The City of New York.
As provided in the Indenture, the Notes may be redeemed in whole, but not
in part, at the option of the Servicer, on any Payment Date on or after the date
on which the Pool Balance is less than or equal to ten percent of the Initial
Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the issuer pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by a commercial bank or trust company
located, or having a correspondent located, in The City of New York or the city
in which the Corporate Trust Office is located, or a member firm of a national
securities exchange, and such other documents as the Trustee may require, and
thereupon one or more new Notes of authorized denominations and in the same
aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any registration of transfer
or exchange of this Note, but the transferor may be required to pay a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer or the Trustee on the Notes or under the Indenture or any
certificate or other writing delivered in connection therewith, against (i) the
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Trustee or of any successor or assign of the Trustee
in its individual capacity, except as any such Person may have expressly agreed
and except that any such partner, owner or beneficiary shall be fully liable, to
the extent provided by applicable law, for any unpaid consideration for stock,
unpaid capital contribution or failure to pay any installment or call owing to
such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note, covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Transferor, or join in any institution against the
Transferor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings under any United States federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, the
Indenture or the Basic Documents.
2
<PAGE> 83
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
Person in whose name this Note (as of the day of determination or as of such
other date as may be specified in the Indenture) is registered as the owner
hereof for all purposes, whether or not this Note be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Holders of Notes representing a
majority of the Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Holders of Notes representing
specified percentages of the Outstanding Amount of the Notes, on behalf of the
Holders of all the Notes, to waive compliance by the Issuer with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note (or
any one of more Predecessor Notes) shall be conclusive and binding upon such
Holder and upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent or waiver is made upon this Note. The Indenture
also permits the Trustee to amend or waive certain terms and conditions set
forth in the Indenture without the consent of Holders of the Notes issued
thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Basic Documents, neither the Trustee in its individual capacity,
any owner of a beneficial interest in the Issuer, nor any of their respective
partners, beneficiaries, agents, officers, directors, employees or successors or
assigns shall be personally liable for, nor shall recourse be had to any of them
for, the payment of principal of or interest on, or performance of, or omission
to perform, any of the covenants, obligations or indemnifications contained in
this Note or the Indenture. The Holder of this Note by the acceptance hereof
agrees that, except as expressly
3
<PAGE> 84
provided in the Basic Documents in the case of an Event of Default under the
Indenture, the Holder shall have no claim against any of the foregoing for any
deficiency, loss or claim therefrom; provided, however, that nothing contained
herein shall be taken to prevent recourse to, and enforcement against, the
assets of the Issuer for any and all liabilities, obligations and undertakings
contained in the Indenture or in this Note.
4
<PAGE> 85
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
- ------------------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- ----------------------------------------
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: *
------------------------ ---------------------------
Signature Guaranteed:
- ----------------
* NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
1
<PAGE> 86
EXHIBIT E
[FORM OF CLASS D TRANSFEREE CERTIFICATE]
E-1
<PAGE> 1
EXHIBIT 4.2
OH&S DRAFT
02/16/00
TRANSFER AND SERVICING AGREEMENT
between
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC
Issuer
ADVANTA BANK CORP.
Transferor and Servicer
Dated as of __________ __, 2000
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitions.....................................................1
Section 1.02. Other Definitional Provisions..................................20
Section 1.03. Calculations...................................................21
ARTICLE II
CONVEYANCE OF CONTRACTS
Section 2.01. Transfer of Conveyed Assets....................................21
Section 2.02. Closing........................................................22
Section 2.03. Books and Records..............................................22
Section 2.04. Grant of Security Interest.....................................22
ARTICLE III
THE CONTRACTS
Section 3.01. Representations and Warranties of Transferor...................23
Section 3.02. Reacquisition by the Transferor Upon Breach....................24
Section 3.03. Duties of Servicer.............................................24
ARTICLE IV
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Servicer.............................................25
Section 4.02. Collection of Contract Payments................................26
Section 4.03. Realization upon Contracts.....................................26
Section 4.04. Servicer Advances..............................................26
Section 4.05. Maintenance of Security Interests in Financed Equipment........26
Section 4.06. Covenants of Servicer..........................................27
Section 4.07. Acquisition by Servicer of Contracts upon Breach...............27
Section 4.08. Servicing Fee..................................................27
Section 4.09. Servicer's Certificate.........................................27
Section 4.10. Annual Statement as to Compliance..............................28
Section 4.11. Security Deposits..............................................28
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
ARTICLE V
DISTRIBUTIONS; ACCOUNTS;
STATEMENTS TO NOTEHOLDERS
<S> <C> <C>
Section 5.01. Establishment of Trust Accounts................................28
Section 5.02. Collections....................................................29
Section 5.03. Additional Deposits............................................30
Section 5.04. Distributions..................................................31
Section 5.05. Reserve Account................................................32
Section 5.06. Statement to Noteholders.......................................33
ARTICLE VI
THE TRANSFEROR
Section 6.01. Representations of Transferor..................................34
Section 6.02. Liability of Transferor; Indemnities...........................35
Section 6.03. Merger or Consolidation of, or Assumption of the
Obligations of, Transferor.....................................36
Section 6.04. Limitation on Liability of Transferor and Others...............36
Section 6.05. Transferor May Own Notes.......................................36
Section 6.06. Tax Treatment..................................................37
ARTICLE VII
THE SERVICER
Section 7.01. Representations of Servicer.....................................37
Section 7.02. Indemnities of Servicer.........................................38
Section 7.03. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer........................................39
Section 7.04. Limitation on Liability of Servicer and Others..................40
Section 7.05. Advanta Bank Corp. Not To Resign as Servicer....................40
ARTICLE VIII
DEFAULT
Section 8.01. Servicer Default................................................41
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 8.02. Appointment of Successor.......................................42
Section 8.03. Notification to Noteholders....................................43
Section 8.04. Waiver of Past Defaults........................................43
ARTICLE IX
OPTIONAL ACQUISITION
Section 9.01. Optional Acquisition of All Contracts..........................44
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01. Amendment......................................................44
Section 10.02. Protection of Title to Trust Estate............................45
Section 10.03. Notices........................................................46
Section 10.04. Assignment.....................................................47
Section 10.05. Limitations on Rights of Others................................47
Section 10.06. Severability...................................................47
Section 10.07. Separate Counterparts..........................................47
Section 10.08. Headings.......................................................47
Section 10.09. Governing Law..................................................47
Section 10.10. Assignment to Trustee..........................................47
Section 10.11. Nonpetition Covenants..........................................47
Section 10.12. Limitation of Liability of Trustee.............................48
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SCHEDULE A - List of Contracts [Deemed Incorporated]........................A-1
SCHEDULE B - Location of Contract Files.....................................B-1
SCHEDULE C - Servicer's Certificate.........................................C-1
SCHEDULE D - Officers' Certificate..........................................D-1
</TABLE>
-iv-
<PAGE> 6
TRANSFER AND SERVICING AGREEMENT dated as of __________ __, 2000, between
ADVANTA EQUIPMENT RECEIVABLES SERIES 2000-__ LLC, a Nevada limited liability
company (the "Issuer") and ADVANTA BANK CORP., a Utah corporation (the
"Transferor" or the "Servicer").
WHEREAS Advanta Bank Corp. in the ordinary course of its business
originates and acquires equipment leases, loans and other financing
arrangements;
WHEREAS, the Issuer desires to acquire from Advanta Bank Corp. a portfolio
of such leases, loans and other equipment financing arrangements as specified in
the List of Contracts delivered to the Issuer in connection with this Agreement
and to acquire all of the Transferor's right, title and interest in, to and
under the Contracts except for the Residual Interest in the equipment related to
such Contracts which Residual Interest will be retained by the Transferor;
WHEREAS, the Transferor has agreed to transfer the contracts, but not any
Residual Interest related to such Contracts, to the Issuer on the term as set
forth in this Agreement; and
WHEREAS, the Issuer has requested that Advanta Bank Corp. service the
Contracts and Advanta Bank Corp. has agreed to service the Contracts on the
terms set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Whenever used in this Agreement, the following
words and phrases, unless the context otherwise requires, shall have the
following meanings:
"Acquired Contract" means a Contract acquired as of the close of business
on the last day of a Collection Period by the Servicer pursuant to Section 4.07
or reacquired as of such time by the Transferor pursuant to Section 3.02.
"Advance Payment" means, with respect to any Contract, any Scheduled
Payment or a portion thereof made by or on behalf of an Obligor which does not
become due until a subsequent Collection Period. Advance Payments shall be
"Collections" with respect to the Collection Period to which such Advance
Payment relates. Advance Payments do not include Prepayment Amounts.
"Additional Principal" means, with respect to each Payment Date, an amount
equal to the Monthly Principal Amount less the Class A Monthly Principal Payment
Amount, the Class B Monthly Principal Payment Amount and the Class C Monthly
Principal Payment Amount for such date.
"Affiliate" has the meaning assigned thereto in Section 1.01 of the
Indenture.
<PAGE> 7
"Agreement" means this Transfer and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Aggregate Contract Principal Balance" means, as of any Calculation Date,
the sum of the Contract Principal Balances of all Contracts as of such
Calculation Date.
"Applicable Discount Rate" means ____%.
"Available Funds" means, for any Payment Date, (i) all Collections for the
immediately preceding Collection Period, (ii) Servicer Advances made to cover
payments due in the immediately preceding Collection Period, (iii) all
Prepayment Proceeds received by the Servicer for the immediately preceding
Collection Period, (iv) available earnings on the Collection Account and Reserve
Account and (v) all amounts transferred from the Reserve Account and deposited
into the Collection Account for such Payment Date but not including Excluded
Amounts and not including any Residual Receipts.
"Basic Documents" has the meaning assigned to such term in the Indenture.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions or trust companies in New York, New York or Salt Lake
City, Utah, are authorized or obligated by law, regulation or executive order to
remain closed.
"Calculation Date" means for any Payment Date, the last day of the
immediately preceding Collection Period. Amounts calculated from Calculation
Date balances shall be calculated from such balances as of the close of business
on the Calculation Date.
"Class" means of the following classes of Notes: Class A-1, Class A-2,
Class A-3, Class A-4, Class B, Class C or Class D, as applicable.
"Class A Monthly Principal Payment Amount" means, with respect to any
Payment Date on which all or a portion of the Class A-1 Notes remain outstanding
after giving effect to payments on such day, the Monthly Principal Amount, (b)
with respect to the Payment Date on which the outstanding principal of the Class
A-1 Notes is reduced to $0, the sum of (i) the amount necessary to reduce the
outstanding principal of the Class A-1 Notes to $0 and (ii) the amount necessary
to reduce the sum of the outstanding principal amount of the Class A-2 Notes,
the Class A-3 Notes and the Class A-4 Notes to the Class A Target Investor
Principal Amount or (c) on any subsequent Payment Date, the amount necessary to
reduce the sum of the outstanding principal amount of the Class A-2 Notes, the
Class A-3 and the Class A-4 Notes to the Class A Target Investor Principal
Amount.
"Class A Percentage" means a fraction, expressed as a percentage, equal to
(i) the sum of the Class A-2 initial principal balance, the Class A-3 initial
principal balance and the Class A-4 initial principal balance by (ii) the
Initial Aggregate Contract Principal Balance minus the Class A-1 initial
principal balance and being approximately _______%.
"Class A Target Principal Amount" means with respect to each Payment Date,
an amount equal to the product of (i) the Class A Percentage and (ii) the
Aggregate Contract Principal Balance as of the related Calculation Date.
2
<PAGE> 8
"Class A-1 Note" means a Class A-1 Note issued pursuant to the Indenture.
"Class A-1 Note Interest" means with respect to any Payment Date, the sum
of (i) the product of (A) the Class A-1 Principal Balance immediately prior to
such Payment Date, (B) the actual number of days in the related Interest Period
divided by 360 and (C) the Class A-1 Interest Rate and (ii) the Class A-1
Overdue Interest from the preceding Payment Date; provided that on the first
Payment Date, the Class A-1 Interest shall be $___________.
"Class A-1 Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class A-1 Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class A-1 Notes as of such date (after giving effect to payments in reduction of
the principal amount of the Class A-1 Notes on the immediately following Payment
Date) divided by the original outstanding principal amount of the Class A-1
Notes.
"Class A-1 Noteholder" means a holder of a Class A-1 Note.
"Class A-1 Overdue Interest" means, with respect to any Payment Date, the
sum of:
(i) the excess, if any, of any Class A-1 Note Interest due on such
Payment Date over the Class A-1 Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class A-1 Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date, (b) the actual number of days
in the related Interest Period divided by 360 and (c) the Class A-1
Interest Rate.
"Class A-1 Principal Balance" means, as of any date of determination, an
amount equal to the initial Class A-1 principal balance of $ ______________ less
any principal payments previously made on the Class A-1 Notes.
"Class A-2 Note" means a Class A-2 Note issued pursuant to the Indenture.
"Class A-2 Note Interest" means, with respect to any Payment Date, the sum
of (i) the product of [ (A) the Class A-2 Principal Balance immediately prior to
such Payment Date and (B) one-twelfth of the Class A-2 Interest Rate] and (ii)
the Class A-2 Overdue Interest from the preceding Payment Date; provided that on
the first Payment Date, the Class A-2 Note Interest shall be $ ______________.
"Class A-2 Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class A-2 Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class A-2 Notes as of such date (after
3
<PAGE> 9
giving effect to payments in reduction of the principal amount of the Class A-2
Notes on the immediately following Payment Date) divided by the original
outstanding principal amount of the Class A-2 Notes.
"Class A-2 Noteholder" means a holder of a Class A-2 Note.
"Class A-2 Overdue Interest" means, with respect to any Payment Date, the
sum of:
(i) the excess, if any, of any Class A-2 Note Interest due on such
Payment Date over the Class A-2 Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class A-2 Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date and (b) one-twelfth of the Class
A-2 Interest Rate.
"Class A-2 Principal Balance" means, as of any date of determination, an
amount equal to the initial Class A-2 principal balance of $ __________ less any
principal payments previously made on the Class A-2 Notes.
"Class A-3 Note" means a Class A-3 Note issued pursuant to the Indenture.
"Class A-3 Note Interest" means, with respect to any Payment Date, the sum
of (i) the product of (A) the Class A-3 Principal Balance immediately prior to
such Payment Date and [(B) one-twelfth of the Class A-3 Interest Rate] and (ii)
the Class A-3 Overdue Interest from the Preceding Payment Date; provided that on
the first Payment Date, the Class A-3 Note Interest shall be $___________.
"Class A-3 Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class A-3 Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class A-3 Notes as of such date (after giving effect to payments in reduction of
the principal amount of the Class A-3 Notes on the immediately following Payment
Date) divided by the original outstanding principal amount of the Class A-3
Notes.
"Class A-3 Noteholder" means a holder of a Class A-3 Note.
"Class A-3 Overdue Interest" means, with respect to any Payment Date, the
sum of:
(i) the excess, if any, of any Class A-3 Note Interest due on such
Payment Date over the Class A-3 Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class A-3 Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date and (b) one-twelfth of the Class
A-3 Interest Rate.
4
<PAGE> 10
"Class A-3 Principal Balance" means, as of any date of determination, an
amount equal to the initial Class A-3 Principal Balance of $ _________ less any
principal payments previously made on the Class A-3 Notes.
"Class A-4 Note" means a Class A-4 Note issued pursuant to the Indenture.
"Class A-4 Note Interest" means, with respect to any Payment Date, the sum
of (i) the product of [ (A) the Class A-4 Principal Balance immediately prior to
such Payment Date and (B) one-twelfth of the Class A-4 Interest Rate] and (ii)
the Class A-4 Overdue Interest from the preceding Payment Date; provided that on
the first Payment Date, the Class A-4 Note Interest shall be $
______________.
"Class A-4 Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class A-4 Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class A-4 Notes as of such date (after giving effect to payments in reduction of
the principal amount of the Class A-4 Notes on the immediately following Payment
Date) divided by the original outstanding principal amount of the Class A-4
Notes.
"Class A-4 Noteholder" means a holder of a Class A-4 Note.
"Class A-4 Overdue Interest" means, with respect to any Payment Date, the
sum of:
(i) the excess, if any, of any Class A-4 Note Interest due on such
Payment Date over the Class A-4 Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class A-4 Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date and (b) one-twelfth of the Class
A-4 Interest Rate.
"Class A-4 Principal Balance" means, as of any date of determination, an
amount equal to the initial Class A-4 Principal Balance of $ __________ less any
principal payments previously made on the Class A-4 Notes.
"Class B Monthly Principal Payment Amount" means, an amount equal to (a)
for any Payment Date on which all or a portion of the Class A-1 Notes remain
outstanding after giving effect to payments on such day, $0, and (b) for any
subsequent Payment Date, the amount necessary to reduce the outstanding
principal amount of the Class B Notes to the Class B Target Principal Amount.
"Class B Note" means a Class B Note issued pursuant to the Indenture.
"Class B Note Interest" means, with respect to any Payment Date, the sum of
(i) the product of (A) the Class B Principal Balance immediately prior to such
Payment Date and (B) [one-twelfth of the Class B Interest Rate] and (ii) the
Class B Overdue Interest from the
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preceding Payment Date; provided that on the first Payment Date, the Class B
Note Interest shall be $________________.
"Class B Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class B Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class B Notes as of such date (after giving effect to payments in reduction of
the principal amount of the Class B Notes on the immediately following Payment
Date) divided by the original outstanding principal amount of the Class B Notes.
"Class B Noteholder" means a holder of a Class B Note.
"Class B Overdue Interest" means, with respect to any Payment Date, the sum
of:
(i) the excess, if any, of any Class B Note Interest due on such
Payment Date over the Class B Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class B Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date and (b) one-twelfth of the Class
B Interest Rate.
"Class B Percentage" means a fraction, expressed as a percentage, equal to
(i) the initial Class B Principal Balance or $_________ divided by (ii) the
Initial Aggregate Contact Principal Balance minus the Class A-1 Initial
Principal Balance, and being approximately _______%.
"Class B Principal Balance" means as of any date, an amount equal to the
initial Class B principal balance less any principal payments previously made on
the Class B Notes.
"Class B Target Principal Amount" means, with respect to each Payment Date,
an amount equal to the product of (i) the Class B Percentage and (ii) the
Aggregate Contract Principal Balance as of the related Calculation Date.
"Class C Monthly Principal Payment Amount" means an amount equal to (a) for
any Payment Date on which all or a portion of the Class A-1 Notes remain
outstanding after giving effect to payments on such day, $0, and (b) for any
subsequent Payment Date, the amount necessary to reduce the outstanding
principal amount of the Class C Notes to the Class C Target Principal Amount.
"Class C Note" means a Class C Note issued pursuant to the Indenture.
"Class C Note Interest" means, with respect to any Payment Date, the sum of
(i) the product of (A) the Class C Principal Balance immediately prior to such
Payment Date and (B) [one-twelfth of the Class C Interest Rate] and (ii) the
Class C Overdue Interest from the preceding Payment Date; provided that on the
first Payment Date, the Class C Note Interest shall be $___________.
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"Class C Note Interest Rate" has the meaning assigned to such term in the
Indenture.
"Class C Note Pool Factor" means 1.0000000 as of the Closing Date, and as
of the close of business on the last day of a Collection Period thereafter means
a seven-digit decimal figure equal to the outstanding principal amount of the
Class C Notes as of such date (after giving effect to payments in reduction of
the principal amount of the Class C Notes on the immediately following Payment
Date) divided by the original outstanding principal amount of the Class C Notes.
"Class C Noteholder" means a holder of a Class C Note.
"Class C Noteholders' Monthly Principal Payment Amount" means, an amount
equal to (a) for any Payment Date on which all or a portion of the Class A-1
Notes remain outstanding after giving effect to payments on such day, $0, and
(b) for any subsequent Payment Date, the amount necessary to reduce the
outstanding principal amount of the Class C Notes to the Class C Target
Principal Amount.
"Class C Overdue Interest" means, with respect to any Payment Date, the sum
of:
(i) the excess, if any, of any Class C Note Interest due on such
Payment Date over the Class C Note Interest paid on such Payment
Date; and
(ii) the product of (a) the amount of Class C Overdue Interest due on
the immediately preceding Payment Date and not paid on such
immediately preceding Payment Date and (b) one-twelfth of the Class
C Interest Rate.
"Class C Percentage" means a fraction, expressed as a percentage, equal to
(i) the initial Class C principal balance or $_________ divided by (ii) the
Initial Aggregate Contact Principal Balance minus the Class A-1 initial
principal balance, and being approximately _______%.
"Class C Principal Balance" means as of any date, an amount equal to the
initial Class C principal balance less any principal payments previously made on
the Class C Notes.
"Class C Target Principal Amount" means, with respect to each Payment Date,
an amount equal to the product of (i) the Class C Percentage and (b) the
Aggregate Contract Principal Balance as of the related Calculation Date.
"Class D Floor" means, with respect to each Payment Date, (i) ___% of the
Initial Aggregate Contract Principal Balance, plus (ii) the Cumulative Loss
Amount as of such Payment Date, minus (iii) the amount on deposit in the Reserve
Account after giving effect to payments and withdrawals on such Payment Date.
"Class D Monthly Principal Payment Amount" means, an amount equal to (a)
for any Payment Date on which all or a portion of the Class A-1 Notes remain
outstanding after giving effect to payments on such day, $0, and (b) for any
subsequent Payment Date, the amount necessary to reduce the outstanding
principal amount of the Class D Notes to the greater of the Class D Target
Principal Amount and the Class D Floor.
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"Class D Note" means a Class D Note issued pursuant to the
Indenture.
"Class D Noteholder" means a holder of a Class D Note.
"Class D Percentage" means a fraction, expressed as a percentage,
equal of (i) the initial Class D Principal Balance divided by (ii) the Initial
Aggregate Contract Principal Balance minus the initial Class A-1 Principal
Balance and being approximately ____%.
"Class D Principal Balance" means, as of any date, an amount equal
to the initial Class D principal balance less any principal payments previously
made on the Class D Notes.
"Class D Target Principal Amount" means, with respect to each
Payment Date, an amount equal to the product of (i) the Class D Percentage and
(ii) the Aggregate Contract Principal Balance as of the related Calculation
Date.
"Closing Date" means __________ __, 2000.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.01.
"Collection Period" means, with respect to the first Payment Date, the
calendar month ending on and including __________ __, 2000 and, with respect to
each subsequent Payment Date, the immediately preceding calendar month. Any
amount stated "as of the close of business on the last day of a Collection
Period" shall give effect to the following calculations as determined as of the
end of the day on such last day: (1) all applications of collections and (2) all
distributions to be made on the following Payment Date.
"Collections" means all payments and other amounts received by the Servicer
in respect of a Contract and the Related Security other than Residual Receipts
and other than Excluded Amounts. Collections include, but are not limited to,
Scheduled Payments, Prepayment Proceeds, Offset Amounts, Recoveries and
Insurance Proceeds. Collections do not include Excluded Amounts and do not
include Residual Receipts.
"Commission" means the Securities and Exchange Commission.
"Contract" means the leases and other contracts and agreements contained on
the List of Contracts.
"Contract Principal Balance" means as of any date of calculation with
respect to a Contract, the present value of the Scheduled Payments to become due
with respect to such Contract on or after the date of calculation (but in any
event on or prior to _______, 200_) (excluding Scheduled Payments previously due
and unpaid), discounted monthly at one-twelfth of the Applicable Discount Rate,
except that a Defaulted Contract has a Contract Principal Balance of $0.
Contracts which have been prepaid or otherwise terminated or released from the
Trust Estate shall also have a Contract Principal Balance of $0.
"Contract Files" means with respect to each Contract, the following
documents:
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(i) The executed original counterparts of the Contract;
(ii) A copy of any related broker agreement;
(iii) Copies of all documents (which may be in microfiche form or on the
Servicer's computerized information system), if any, that the
Transferor or the Servicer keeps on file for the benefit of the
Transferor in accordance with the Transferor's or Servicer's
customary procedures; and
(iv) Copies (together with all amendments, assignments, and
continuations thereof and including evidence of filings with the
appropriate office) of all UCC financing statements filed with
respect to the Contracts, identifying the Obligor as debtor and the
Transferor as secured party, if applicable.
"Corporate Trust Office" has the meaning assigned to such term in Section
1.01 of the Indenture.
"Credit and Collection Policy" means the credit and collection policies and
practices of the Servicer as the same may be modified from time to time in
accordance with the terms of this Agreement.
"Cumulative Loss Amount" means the excess, if any, of (a) the remainder of
(i) the Outstanding Amount of the Notes minus (ii) the lesser of (A) the Monthly
Principal Amount and (B) Available Funds (after the payment of amounts described
in subsection _____ through ______ hereof) over (b) the Aggregate Contract
Principal Balance as of the related Calculation Date.
"Cumulative Net Loss Ratio" 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 Balances (calculated as of
the date immediately before such Contract become a Defaulted Contract) of all
Contracts which become Defaulted Contracts during all prior Collection Periods
over (y) the aggregate amount of all Recoveries collected by the Servicer with
respect to such Collection Periods and the denominator of which is the Initial
Aggregate Contract Principal Balance.
"Cut-Off Date" means, with respect to the Contracts _________, 2000.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, suspension
of payments, readjustment of debt, marshalling of assets or similar debtor
relief laws of the United States or any state from time to time in effect,
affecting the rights of creditors generally.
"Defaulted Contract" means any Contract (i) that is a Delinquent Contract
with respect to which an Obligor is contractually delinquent for 121 days or
more (without regard to any Servicer Advances or the application of any Security
Deposit) or (ii) as to which the Servicer has determined in accordance with its
customary servicing practices that eventual payment of the
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remaining Scheduled Payments thereunder is unlikely or (iii) that has been
rejected by or on behalf of the Obligor in a bankruptcy proceeding.
"Delinquent Contract" means, as of any date, a Contract as to which a
Scheduled Payment, or part thereof, remains unpaid for more than 60 days from
the original due date for such Scheduled Payment.
"Determination Date" means, with respect to any Payment Date, the third
Business Day prior to such Payment Date.
"Eligible Deposit Account" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America 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 such account, so long as any of the
securities of such depository institution shall have a credit rating from each
Rating Agency in one of its generic rating categories which signifies investment
grade.
"Eligible Institution" means (a) the corporate trust department of the
Trustee, so long as it is a paying agent under the Indenture, or such other
institution acceptable to the Rating Agencies, or (b) a depository institution
(excluding the Servicer or any of its Affiliates) organized under the laws of
the United States of America 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 (1)
a long-term unsecured debt rating of __________ or better by __________ and
__________ or better by __________ or (2) a short-term unsecured debt rating or
a certificate of deposit rating of __________ by __________ and __________or
better by __________, or any other long-term, short-term or certificate of
deposit rating acceptable to the Rating Agencies 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 and (B) whose deposits
are insured by the FDIC. If so qualified, the Trustee may be considered an
Eligible Institution for the purposes of clause (b) of this definition.
"Eligible Investments" mean any instrument, security or security
entitlement evidencing any of the following:
(a) marketable obligations of the United States of America which are
backed by the full faith and credit of the United States of America;
(b) marketable obligations directly and fully guaranteed by the full faith
and credit of the United States of America;
(c) bankers' acceptances and certificates of deposit and other
interest-bearing obligations denominated in United States Dollars and issued by
any bank with capital, surplus and undivided profits aggregating at least
$100,000,000, the short-term securities of which are rated "A-1" by S&P, "P-1"
by Moody's and "F1" by Fitch (if rated by Fitch);
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(d) repurchase obligations for underlying securities of the types
described in clauses (a), (b) and (c) above entered into with any bank of the
type described in clause (c) above;
(e) commercial paper rated at least "A-1+" by S&P, "P-1" by Moody's and
"F1" by Fitch (if rated by Fitch);
(f) freely redeemable shares in money market funds (including funds for
which the Trustee, any Noteholder or any affiliates of either of the foregoing
may act as sponsor or advisor or for which any of the foregoing Persons may
receive fee income) which money market funds are rated at least "AAm" or "AAm-g"
by S&P, "Aa1" by Moody's and "AA" by Fitch (if rated by Fitch); and
(g) demand deposits, time deposits or certificates of deposit (having
original maturities of no more than 365 days) of depository institutions or
trust companies incorporated under the laws of the United States of America or
any state thereof (or domestic branches of any foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities; provided that at the time such investment, or the
commitment to make such investment, is entered into, the short-term debt rating
of such depository institution or trust company shall be at least "A-1" by S&P,
"P-1" by Moody's and "F1" by Fitch (if rated by Fitch).
Notwithstanding anything set forth in clauses (a) through (g) above, any
Eligible Investment must mature no later than the Business Day prior to the next
Payment Date.
"Excluded Amounts" means (i) any payments received from an Obligor in
connection with any insurance premiums or fees, or Taxes or other charges
imposed by any Governmental Authority, (ii) any indemnity payments made by an
Obligor pursuant to any Contract and (iii) all Late Fees, extension fees, and
other incidental charges (from whatever source) collected with respect to any
Contract.
"Eligible Contract" means a Contract which, as of the Closing Date or,
where indicated, the Cut-Off Date:
(i) (a) is with a Obligor whose billing address is in the United States or
its territories and possessions and requires all payments under such Contract to
be made in United States dollars and (b) is with a Obligor who, if a natural
person, is a resident of the United States or its territories and possessions
with legal capacity to contract or, if a corporation or other business
organization, is organized under the laws of the United States, its territories
or any political subdivision thereof and has its chief executive office in the
United States or its territories or possessions;
(ii) has not had any of its terms, conditions or provisions modified or
waived other than in compliance with the Credit and Collection Policy;
(iii) the payments arising under the Contract constitute an account or
general intangible which is evidenced by a Contract that constitutes "chattel
paper" within the meaning of Section 9-105(b) of the UCC of all applicable
jurisdictions and for which there is only one
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original of such Contract that constitutes "chattel paper" for purposes of the
UCC (other than those which are in the form of a loan which may be evidence by a
promissory note);
(iv) does not contravene any applicable federal, state and local laws and
regulations thereunder (including, without limitation, any law, rule and
regulation relating to truth in lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices and privacy)
and, with respect to which no part of such Contract thereto is in violation of
any applicable law, rule or regulation;
(v) satisfies in all material respects all applicable requirements of the
Credit and Collection Policy;
(vi) as of the Cut-Off Date, the Contract is not a Defaulted Contract;
(vii) (other than a Contract which is a loan in form), (a) contains "hell
or high water" provisions requiring the related Obligor to assume all risk of
loss or malfunction of the related Equipment, (b) makes the related Obligor
absolutely and unconditionally liable for all payments required to be made
thereunder, (c) is a triple-net lease and (d) is not cancelable at the option of
the Obligor;
(viii) creates a valid and enforceable security or ownership interest in
favor of the Transferor in the related Equipment, if any;
(ix) has only one set of original documentation;
(x) is free and clear of any Adverse Claims, other than the claims
arising pursuant to the Indenture; provided, however, that nothing in this
clause (x) shall prevent or be deemed to prohibit Permitted Liens;
(xi) 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 Financed Equipment, if
any, thereunder and of the benefits of any security granted thereunder;
(xii) does not provide for the substitution, exchange, or addition of any
other items of Financed Equipment pursuant to such Contract which would result
in any reduction or extension of payments due thereunder;
(xiii) by its terms is due and payable on or within 84 months of the
Closing Date and, in either event, has not had its payment terms extended other
than in compliance with the Credit and Collection Policy;
(xiv) is in substantially the form of one of the standard form contracts
that the Transferor uses or a form reviewed and accepted by the Transferor;
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(xv) (a) does not preclude the pledge, transfer or assignment thereof, (b)
does not require the consent of the Obligor to the pledge, assignment or
transfer thereof, and (c) does not contain a confidentiality provision that
purports to restrict the ability of the Trustee to exercise its rights under the
Basic Documents with respect thereto, including, without limitation, its right
to review the Contract;
(xvi) was originated or purchased by the Originator in the ordinary course
of its business, (b) approved and purchased or funded in the ordinary course of
the Originator's business and (c) if purchased from a broker or vendor, has been
re-underwritten by the Originator in the ordinary course of the Originator's
business and in compliance with its underwriting policies;
(xvii) either (a) is an account receivable representing all or part of the
sales price of merchandise, insurance and/or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended, or (b)
represents a financial asset that converts to cash within a finite period of
time within the meaning of Rule 3a-7 promulgated under the Investment Company
Act of 1940, as amended;
(xviii) relates to Financed Equipment which is located in the United States
of America, its territories or possessions;
(xix) it is not a consumer lease;
(xx) no adverse selection was used in selecting the Contract for transfer
to the Issuer;
(xxi) the information with respect to the Contract contained on the List
of Contracts delivered to the Trustee is true and correct in all material
respects; and
(xxii) all filings necessary to evidence the conveyance or transfer of the
Contract to the Issuer have been made in all appropriate jurisdictions.
"Final Scheduled Payment Date" means the __________ ____ Payment Date.
"Fitch" means Fitch IBCA, Inc.
"Financed Equipment" means all goods, equipment or other property which
secure the payment or performance of a Contract which were directly or
indirectly acquired with the proceeds of such Contract, or in the case of a
lease transaction, are leased by the Obligor in connection with such Contract.
"Governmental Authority" means the United States of America, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holder" or "Noteholder" has the meaning assigned to such term in Section
1.01 of the Indenture.
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"Indenture" means the Indenture dated as of ________ __, 2000 between the
Issuer and the Trustee, as the same may be amended and supplemented from time to
time.
"Initial Aggregate Contract Principal Balance" means the Aggregate Contract
Principal Balance as of the Cut-Off Date, which is $__________.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a decree or order for relief by a court having jurisdiction in the
premises in respect of such Person or any substantial part of its property in an
involuntary case under any applicable Federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official for
such Person or for any substantial part of its property, or ordering the
winding-up or liquidation of such Person's affairs, and such decree or order
shall remain unstayed and in effect for a period of 90 consecutive days; or (b)
the commencement by such Person of a voluntary case under any applicable Federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect,
or the consent by such Person to the entry of an order for relief in an
involuntary case under any such law, or the consent by such Person to the
appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official for such Person or for any
substantial part of its property, or the making by such Person of any general
assignment for the benefit of creditors, or the failure by such Person generally
to pay its debts as such debts become due, or the taking of action by such
Person in furtherance of any of the foregoing.
"Insurance Policy" means any insurance policy maintained by an Obligor (or
on an Obligor's behalf by the Servicer) covering physical damage to any financed
equipment relating to any Contract or the related Obligor's ability to make
Scheduled Payments pursuant to such Contract.
"Insurance Proceeds" means all payments made to the Servicer under an
Insurance Policy in respect of or in lieu of any amount that has or may become
due pursuant to any Contract, including any such amount received in respect of
any Scheduled Payment.
"Interest Period," with respect to any interest which is calculated on the
basis of actual days elapsed means the period from and including one Payment
Date to but excluding the next following Payment Date, provided that the first
Interest Period will be the period from and including the Closing Date to but
excluding the first Payment Date.
"Investment Earnings" means, with respect to any Payment Date, the
investment earnings (net of losses and investment expenses) on amounts on
deposit in the Trust Accounts to be deposited into the Collection Account on
such Payment Date pursuant to Section 5.01(b).
"Issuer" means Advanta Equipment Receivables Series 2000-__ LLC and any
successors thereto.
"Late Fees" means any interest or other amounts assessed by Advanta Bank
Corp. and paid by an Obligor in excess of the Scheduled Payment due to the
delinquency of such Scheduled Payment.
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"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind with respect to any Contract other than mechanics' liens
and any liens which attach to such Contract by operation of law as a result of
any act or omission by the related Obligor.
"Liquidation Proceeds" means, with respect to any Defaulted Contract, the
moneys collected in respect thereof, from whatever source (including any
Insurance Proceeds) during the Collection Period in which such Contract became a
Defaulted Contract, net of the sum of any amounts expended by the Servicer in
connection with such liquidation and any amounts required by law to be remitted
to the Obligor on such Defaulted Contract.
"List of Contracts" as defined in the Indenture.
"Monthly Class A-1 Note Interest" means, with respect to any Payment Date,
an amount equal to one-twelfth of the product of (a) the Class A-1 Note Interest
Rate and (b) the outstanding principal balance of the Class A-1 Notes as of the
close of business on the preceding Payment Date after giving effect to all
payments of principal made to the Class A-1 Noteholders on such preceding
Payment Date; provided, however, that with respect to the first Payment Date,
interest on the outstanding principal balance of the Class A-1 Notes will accrue
from and including the Closing Date to but excluding the _____ 2000 Payment Date
[and will be calculated on the basis of a 360-day year of twelve 30-day months.]
"Monthly Class A-2 Note Interest" means, with respect to any Payment Date,
an amount equal to one-twelfth of the product of (a) the Class A-2 Note Interest
Rate and (b) the outstanding principal balance of the Class A-2 Notes as of the
close of business on the preceding Payment Date after giving effect to all
payments of principal made to the Class A-2 Noteholder on such preceding Payment
Date; provided, however, that with respect to the first Payment Date, interest
on the outstanding principal balance of the Class A-2 Notes will accrue from and
including the Closing Date to but excluding the __________ 2000 Payment Date
[and will be calculated on the basis of a 360-day year of twelve 30-day months.]
"Monthly Class A-3 Note Interest" means, with respect to any Payment Date,
an amount equal to one-twelfth of the product of (a) the Class A-3 Note Interest
Rate and (b) the outstanding principal balance of the Class A-3 Notes as of the
close of business on the preceding Payment Date after giving effect to all
payments of principal made to the Class A-3 Noteholders on such preceding
Payment Date; provided, however, that with respect to the first Payment Date,
interest on the outstanding principal balance of the Class A-3 Notes will accrue
from and including the Closing Date to but excluding the _____ 2000 Payment Date
[and will be calculated on the basis of a 360-day year of twelve 30-day months.]
"Monthly Class A-4 Note Interest" means, with respect to any Payment Date,
an amount equal to one-twelfth of the product of (a) the Class A-4 Note Interest
Rate and (b) the outstanding principal balance of the Class A-4 Notes as of the
close of business on the preceding Payment Date after giving effect to all
payments of principal made to the Class A-4 Noteholders on such preceding
Payment Date; provided, however, that with respect to the first Payment Date,
interest on the outstanding principal balance of the Class A-4 Notes will accrue
from and including the Closing Date to but excluding the _____ 2000 Payment Date
[and will be calculated on the basis of a 360-day year of twelve 30-day months.]
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"Monthly Class B Note Interest" means, with respect to any Payment Date, an
amount equal to one-twelfth of the product of (a) the Class B Note Interest Rate
and (b) the outstanding principal balance of the Class B Notes as of the close
of business on the preceding Payment Date after giving effect to all payments of
principal made to the Class B Noteholders on such preceding Payment Date;
provided, however, that with respect to the first Payment Date, interest on the
outstanding principal balance of the Class B Notes will accrue from and
including the Closing Date to but excluding the _____ 2000 Payment Date [and
will be calculated on the basis of a 360-day year of twelve 30-day months.]
"Monthly Class C Note Interest" means, with respect to any Payment Date, an
amount equal to one-twelfth of the product of (a) the Class C Note Interest Rate
and (b) the outstanding principal balance of the Class C Notes as of the close
of business on the preceding Payment Date after giving effect to all payments of
principal made to the Class C Noteholders on such preceding Payment Date;
provided, however, that with respect to the first Payment Date, interest on the
outstanding principal balance of the Class C Notes will accrue from and
including the Closing Date to but excluding the _____ 2000 Payment Date [and
will be calculated on the basis of a 360-day year of twelve 30-day months.]
"Monthly Principal Amount" means, with respect to any Payment Date, the
excess of (a) the aggregate outstanding principal amount of all Classes of Notes
as of the immediately preceding Payment Date after giving effect to all
principal payments on that day, over (b) the Aggregate Contract Principal
Balance as of the related Calculation Date.
"Moody's" means Moody's Investors Service Inc.
"Nonrecoverable Advances" means, with respect to any Contract, a Servicer
Advance which the Servicer has determined it will be unable to recover, in whole
or in part, with respect to such Contract.
"Note Register" and "Note Registrar" have the meanings specified in Section
2.04 of the Indenture.
"Noteholders' Class A-1 Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class A-1 Note Interest for such
Payment Date and (b) the Class A-1 Overdue Interest for such Payment Date.
"Noteholders' Class A-2 Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class A-2 Note Interest for such
Payment Date and (b) the Class A-2 Overdue Interest for such Payment Date.
"Noteholders' Class A-3 Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class A-3 Note Interest for such
Payment Date and (b) the Class A-3 Overdue Interest for such Payment Date.
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"Noteholders' Class A-4 Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class A-4 Note Interest for such
Payment Date and (b) the Class A-4 Overdue Interest for such Payment Date.
"Noteholders' Class B Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class B Note Interest for such Payment
Date and (b) the Noteholders' Class B Interest Carryover Shortfall for such
Payment Date.
"Noteholders' Class C Interest Payment Amount" means, with respect to any
Payment Date, the sum of (a) the Monthly Class C Note Interest for such Payment
Date and (b) the Noteholders' Class C Interest Carryover Shortfall for such
Payment Date.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes, the Class A-4 Notes, the Class B Notes, the Class C Notes and the Class D
Notes collectively.
"Notes of a Class" or "Class of Notes" means all Notes included in Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes,
Class C Notes or Class D Notes, whichever is appropriate.
"Obligor" with respect to any Contract means any Person which is an
obligor, lessee or guarantor thereof; provided, that in no event shall Advanta
Bank Corp. or the Transferor be construed to be the Obligor with respect to any
Contract due to the application of Section 3.02 or Section 4.07, as applicable.
"Officers' Certificate" of any Person means a certificate on behalf of such
Person that is signed by any Vice President or more senior officer of such
Person and states that the certifications set forth in such certificate are
based upon the results of a due inquiry into the matters in question conducted
by or under the supervision of the signing officer and that the facts stated in
such certifications are true and correct to the best of the signing officer's
knowledge.
"Offset Amount" means, in the event that (i) any Obligor requests that a
Security Deposit be applied as an offset against such Obligor's payment
obligations under a Contract or (ii) any Contract becomes a Defaulted Contract
and the Servicer demands that such Obligor remit to the Servicer an amount out
of the applicable Obligor's Security Deposit, an amount equal to the lesser of
(a) the amount of such Security Deposit and (b) the amount of all unpaid and
remaining Scheduled Payments as payment in respect of any unpaid Scheduled
Payments under the related Contract.
"Opinion of Counsel" means one or more written opinions of counsel who may
be an employee of or counsel to the Transferor or the Servicer, which counsel
shall be acceptable to the Trustee and/or the Rating Agencies, as applicable.
"Outstanding" has the meaning assigned to such term in Section 1.01 of the
Indenture.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
a Class of Notes, as applicable, Outstanding at the date of determination.
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"Payment Date" means _______, 2000 and the 15th day of each month
thereafter, or, if such day is not a Business Day, the next succeeding Business
Day.
"Permitted Lien" means any Lien for federal, state, municipal or other
local Taxes and other governmental charges, so long as either (x) such Taxes or
governmental charges are not at the time due and payable or (y) the Transferor
is then contesting the validity of any such Taxes or charges in good faith by
appropriate proceedings that have staged the enforcement thereof and there has
been set aside on the appropriate entity's books any reserve that is required
under generally accepted accounting principles with respect to such Taxes or
charges.
"Prepayment Amount" means with respect to any Contract: (a) the Contract
Principal Balance of such Contract (without any deduction for any security
deposit paid by the related Obligor, unless such security deposit has been
applied to the Contract Principal Balance pursuant to the Credit and Collection
Policy and deposited into the Collection Account) as of the date of reconveyance
of such Contract to the Issuer by the Trustee, plus (b) the product of (i) the
Contract Principal Balance as of the date of reconveyance and (ii) one-twelfth
of the Applicable Discount Rate.
"Prepayment Proceeds" means all payments received in prepayment of a
Contract.
"Principal Distribution Amount" means, with respect to any Payment Date,
the excess of (a) the aggregate outstanding principal amount of all Classes of
Notes as of the immediately preceding Payment Date after giving effect to all
principal payments on that preceding Payment Date, over (b) the Aggregate
Contract Principal Balance as of the related Calculation Date.
"Rating Agencies" means _______________ and _______________. If no such
organization or successor is in existence, "Rating Agency" shall be a nationally
recognized statistical rating organization or other comparable Person designated
by the Transferor, notice of which designation shall be given to the Trustee and
the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have notified the Transferor, the Servicer, and the Trustee
in writing that such action will not result in a reduction or withdrawal of the
then current rating on any Class of Notes.
"Recoveries" means all amounts received or recovered by the Servicer to be
applied against amount due on a Defaulted Contract; such amounts include, but
are not limited to (i) amounts received from the sale or other disposition of
the Financed Equipment or the sale of the Defaulted Contract, (ii) Insurance
Proceeds received as a result of the damage or destruction of the Financed
Equipment, or (iii) any other payments made by or on behalf of the defaulting
Obligor, including any amounts paid from a Security Deposit applied by the
Servicer as a Recovery.
"Required Reserve Amount" means ___________________________.
"Related Property" means all right, title and interest of the Transferor
in, to and under (a) the security interest in the Financed Equipment granted to
the Transferor, (b) any proceeds with respect to the Contracts from claims on
any physical damage, credit life or disability insurance
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policies covering financed equipment or Obligors with respect to Financed
Equipment, as the case may be, and (c) the proceeds of any of the foregoing.
"Reserve Account" means the account designated as such, established and
maintained pursuant to Section 5.01(a).
"Reserve Account Initial Deposit" means the initial deposit by the
Transferor on the Closing Date of $__________.
"Residual Interest" means the ownership interest, if any, in the Financial
Equipment and the Residual Receipts including, without limitation, the right to
receive and retain Residual Receipts as owner thereof.
"Residual Receipts" means, with respect to any Collection Period, all
residual proceeds received by the Servicer, including, without limitation,
proceeds of the sale or re-lease of the Financed Equipment received by the
Servicer in the event the related Obligor does not purchase the Financed
Equipment at the end of the related Contract, any amounts collected by the
Servicer as judgments against a Obligor or others related to the failure of such
Obligor to pay any required amounts under the related Contract or to return the
Financed Equipment, including any amounts relating to a Security Deposit applied
by the Servicer as Residual Receipts, plus any other amounts which are received
by the Servicer and applied against the booked residual value of such Contract
in accordance with the Servicer's servicing standards during such Collection
Period, in each case as reduced by any reasonably incurred out-of-pocket
expenses incurred by the Servicer in enforcing such Contract or in liquidating
such Financed Equipment.
"S&P" means Standard & Poor's Ratings Services.
"Scheduled Payment" on a Contract means for any Contract, the stated
periodic payments (exclusive of any Excluded Amounts) set forth in the Contract
and due from the Obligor in the related Collection Period.
"Servicer" means Advanta Bank Corp., as the servicer of the Contracts, and
each successor to Advanta Bank Corp. (in the same capacity) pursuant to Section
7.03 or 8.02.
"Servicer Advance" means the amount, if any, which the Servicer at its
option advances with respect to Overdue Payments, in accordance with Section __
of this Agreement.
"Servicer Default" means an event specified as such in Section 8.01.
"Servicer's Certificate" means an Officers' Certificate of the Servicer
delivered pursuant to Section 4.09, substantially in the form of Schedule C or
in such other form that is acceptable to the Trustee and the Servicer.
"Servicing Fee" means the fee payable to the Servicer for services rendered
during the respective Collection Period, determined pursuant to Section 4.08.
"Servicing Fee Rate" means ___% per annum.
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"Tax" with respect to any Person means each tax, assessment or other
governmental charge or levy imposed upon such Person, its income, any
transaction in which it engages, or any of its properties, franchises or assets.
"Transferor" means Advanta Bank Corp., a Utah corporation, and its
successors in interest to the extent permitted hereunder.
"Trust Accounts" has the meaning assigned thereto in Section 5.01(b).
"Trust Account Property" means the Trust Accounts, all monies, instruments,
securities, documents and other property held in or credited to any Trust
Account from time to time (whether in the form of deposit accounts, physical
property, book-entry securities, uncertificated securities, securities
entitlements or otherwise), including the Reserve Account Initial Deposit, and
all proceeds of the foregoing.
"Trust Estate" means all money, instruments, documents, securities, general
intangibles and other property that are subject or intended to be subject to the
lien and security interest of the Indenture for the benefit of the Noteholders
(including, without limitation, all property and interests Granted (as defined
in the Indenture) to the Trustee), including all proceeds thereof.
"Trust Officer" means, in the case of the Trustee, any Officer within the
Corporate Trust Office of the Trustee assigned to administer the Trustee's
duties under the Basic Documents.
"Trustee" means ____________________, in its capacity as trustee under the
Indenture, its successors in interest and any successor trustee under the
Indenture.
"UCC" has the meaning assigned thereto in Section 1.01 of the Indenture.
Section 1.02. Other Definitional Provisions. (a) Capitalized terms used
herein and not otherwise defined herein have the meanings assigned to them in
the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not
defined in this Agreement or in any such certificate or other
document, and accounting terms partly defined in this Agreement or
in any such certificate or other document to the extent not
defined, shall have the respective meanings given to them under
generally accepted accounting principles. To the extent that the
definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of
such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate
or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as
a whole and not to any
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particular provision of this Agreement; Section, Schedule and
Exhibit references contained in this Agreement are references to
Sections, Schedules and Exhibits in or to this Agreement unless
otherwise specified; and the term "including" shall mean "including
without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such
terms.
Section 1.03. Calculations. [For all purposes of this Agreement, interest
on the Class A-1 Notes will be calculated on the basis of actual days and a
360-day year. Interest on the Class A-2 Notes, Class A-3 Notes, Class A-4 Notes,
Class B Notes and Class C Notes will be calculated on the basis of a year of 360
days and twelve 30-day months.]
ARTICLE II
CONVEYANCE OF CONTRACTS
Section 2.01. Transfer of Conveyed Assets. In consideration of the Issuer's
delivery to or upon the order of the Transferor of $__________ and the increase
in the value of the Transferor's membership interest in the Issuer, the
Transferor does hereby sell, transfer, assign, set over, contribute, quitclaim,
and otherwise convey to the Issuer, without recourse (subject to the obligations
of the Transferor herein) all right, title and interest of the Transferor in and
to all accounts, general intangibles, instruments, chattel paper, documents,
money, letters of credit, advices of credit, deposit accounts, certificates of
deposit, investment property, goods and other property consisting of, arising
from or related to any of the following, whether now owned or hereafter
acquired:
(a) all right, title and interest of the Transferor, in and to the
Contracts except the right to the Residual Interest and all moneys
(including accrued interest) due or to become due, or received
under the Contracts on or after the Cut-Off Date except Excluded
Amounts and except any amounts received as Residual Receipts;
(b) the interest of the Transferor in the Trust Accounts and all
monies, instruments, documents, securities and other property held
in or credited thereto;
(c) the security interest, if any, of the Transferor in the Financed
Equipment granted by Obligors pursuant to the Contracts;
(d) the interest of the Transferor in any proceeds with respect to the
Contracts from claims on any physical damage, credit life or
disability insurance policies covering financed equipment or
Obligors with respect to financed equipment;
(e) the proceeds of any and all of the foregoing.
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Section 2.02. Closing. The conveyance of the Contracts shall take place at
the offices of Orrick, Herrington & Sutcliffe LLP, 3050 K Street, N.W.,
Washington, D.C. 20007, on the Closing Date, simultaneously with the issuance of
the Notes. Upon the acceptance by the Transferor of the Class D Note and the
proceeds of the sale of other Notes and upon the payment to the Transferor of
the net proceeds of the Notes, the ownership of each Contract transferred on
such date and the contents of the related Contract File is vested in the Issuer,
subject only to the lien of the Indenture. Notwithstanding the foregoing, the
assignment, transfer and conveyance set forth in Section 2.01 shall not
constitute and is not intended to result in the creation, or an assumption by
the Issuer of any obligation of the Transferor or any other Person in connection
with the Contracts or under any agreement or instrument relating thereto,
including any obligation to any Obligors or any Affiliate of or other Person to
whom the Transferor may delegate servicing duties or to insurers.
Section 2.03. Books and Records.
(a) In connection with the transfer, assignment, set-over and conveyance
set forth in Section 2.01, the Transferor agrees to record and file, at its
own expense, any financing statements (and continuation statements with
respect to such financing statements when applicable) required to be filed
with respect to the Contracts sold or to be sold by the Transferor
hereunder, meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary under the applicable UCC to
perfect the transfer and assignment of the Contracts to the Issuer, and to
deliver a file-stamped copy of such financing statements or other evidence
of such filings to the Issuer on or prior to the Closing Date (excluding
such continuation and similar statements, which shall be delivered promptly
after filing).
(b) In connection with the sales and conveyances hereunder, the Transferor
further agrees, at its own expense, on or prior to the Closing Date with
respect to the Contracts to indicate on its books and records (including
any computer files) that all of the Contracts have been sold to the Issuer
pursuant to this Agreement. The Transferor further agrees not to alter the
computer file designation referenced in this paragraph with respect to any
Contract during the term of this Agreement unless and until such Contract
becomes an Acquired Contract. The transfer of each Contract shall be
reflected on the Transferor's balance sheets and other financial statements
prepared in accordance with generally accepted accounting principles as a
transfer of assets by the Transferor to the Issuer. The Transferor shall be
responsible for maintaining, and shall maintain, a complete and accurate
set of books and records and computer files for each Contract which shall
be clearly marked to reflect the ownership of each Contract by the Issuer.
Section 2.04. Grant of Security Interest. In the event that the Contracts
are held to continue to be property of the Transferor, then (i) this Agreement
also shall be deemed to be and hereby is a security agreement within the meaning
of the UCC, and (ii) the conveyance by the Transferor provided for in the
Agreement shall be deemed to be and hereby is a grant by the Transferor to the
Issuer of a security interest in and to all of the Transferor's right, title and
interest in, to and under all accounts, contract rights, general intangibles,
chattel paper, instruments, documents, money, deposit accounts, certificates of
deposit, goods, letters of credit, advices of credit, certificated securities
and uncertificated securities consisting of, arising from,
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or relating to the Contracts and the Related Property, to secure the rights of
the Issuer under this Agreement and the obligations of the Transferor hereunder.
The Transferor and the Issuer shall, to the extent consistent with this
Agreement, take such actions (other than delivery of the original contracts) as
may be necessary to ensure that, if the conveyance of the Contracts and the
Related Property by the Transferor to the Issuer pursuant to this Agreement is
not deemed to be a sale, the security interest in the Contracts and the Related
Property created hereunder will be a perfected security interest of first
priority under applicable law and will be maintained as such throughout the term
of this Agreement.
ARTICLE III
THE CONTRACTS
Section 3.01. Representations and Warranties of Transferor. The Transferor
makes the following representations and warranties as to the Contracts on which
the Issuer is deemed to have relied in acquiring the Contracts. Such
representations and warranties speak as of the execution and delivery of this
agreement, but shall survive the transfer and assignment of the Contracts to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Title. It is the intention of the Transferor that the transfer and
assignment herein contemplated constitute either (i) a sale of the
Contracts or (ii) a grant of a perfected security interest therein from the
Transferor to the Issuer and that the beneficial interest in and title to
such Contracts not be part of the debtor's estate in the event of the
filing of a bankruptcy petition by or against the Transferor under any
bankruptcy law. No Contract has been sold, transferred, assigned or pledged
by the Transferor to any Person other than the Issuer. Immediately prior to
the transfer and assignment herein contemplated, the Transferor had good
and marketable title to each Contract, free and clear of all Liens and
rights of others and, immediately upon the transfer thereof, the Issuer
shall have good and marketable title to each such Contract, free and clear
of all Liens and rights of others or a first priority perfected security
interest therein; and the transfer has been perfected, by the filing of
appropriate financing statements pursuant to the UCC, under the UCC.
(b) All Actions Taken. All actions (other than delivering the original
Contract) necessary under the applicable UCC in any jurisdiction to be
taken (i) to give the Issuer a first priority perfected security interest
or ownership interest in the Contracts, and (ii) to give the Trustee a
first priority perfected security interest therein (including, without
limitation, UCC filings with the Nevada and Utah Secretaries of State) have
been taken.
(c) Location of Contract Files. The Contract Files are kept at the location
specified in Schedule B hereto.
(d) Eligible Contracts. Each of the Contracts is an Eligible Contract.
(e) No Consents Required. All approvals, authorizations, consents, orders
or other actions of any Person or of any Governmental Authority required in
connection with the execution and delivery by the Transferor of this
Agreement or any other Basic Document,
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the performance by the Transferor of the transactions contemplated by this
Agreement or any other Basic Document and the fulfillment by the Transferor
of the terms hereof or thereof, have been obtained or have been completed
and are in full force and effect (other than approvals, authorizations,
consents, orders or other actions which if not obtained or completed or in
full force and effect would not have a material adverse effect on the
Transferor or the Issuer or upon the collectibility of any Contract or upon
the ability of the Transferor to perform its obligations under this
Agreement).
Section 3.02. Reacquisition by the Transferor Upon Breach.
(a) The Transferor, the Servicer, or the Trustee, as the case may be, shall
inform the other parties to this Agreement, promptly, in writing, upon the
discovery of any breach of the Transferor's representations and warranties made
pursuant to Section 3.01. Unless any such breach shall have been cured by the
last day of the second month following the month of the discovery thereof by the
Transferor or receipt by the Transferor of written notice from the Trustee or
the Servicer of such breach, the Transferor shall be obligated to reacquire any
Receivable materially and adversely affected by any such breach as of such last
day (or, at the Transferor's option, as of the last day of the first month
following the month of the discovery).
In consideration of the reacquisition of the Receivable, the Transferor
shall remit the Prepayment Amount in the manner specified in Section 5.03. The
sole remedy of each of the Issuer, the Trustee and the Noteholders with respect
to a breach of representations and warranties pursuant to Section 3.01 and the
agreement contained in this Section shall be to require the Transferor to
reacquire Receivables pursuant to this Section, subject to the conditions
contained herein. The Trustee shall have no duty to conduct any affirmative
investigation as to the occurrence of any condition requiring the reacquisition
of any Contract pursuant to this Section.
(b) The Issuer shall execute such documents and instruments of transfer or
assignment and take other actions as shall reasonably be requested by the
Servicer to evidence the conveyance of such Receivable pursuant to this Section
3.02.
Section 3.03. Duties of Servicer.
(a) Contract Files. The Servicer shall maintain such accurate and complete
accounts, records and computer systems pertaining to each Contract
File as shall enable itself and the Issuer to comply with this
Agreement. In performing its duties, the Servicer shall act with
reasonable care, using that degree of skill and attention that the
Servicer exercises with respect to the contract files relating to all
comparable contracts that the Servicer services for itself or others.
The Servicer shall promptly report to the Issuer and the Trustee any
failure on its part to maintain its accounts, records and computer
systems as herein provided and promptly take appropriate action to
remedy any such failure. Nothing herein shall be deemed to require an
initial review or any periodic review by the Issuer or the Trustee.
(b) Access to Records. The Servicer shall notify the Trustee of any change
in the location of its principal place of business in writing not
later than 90 days after any such change. The Servicer shall make
available to the Trustee, or duly
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authorized representatives, attorneys or auditors, a list of locations
of the related accounts, records and computer systems maintained by
the Servicer at such times as the Trustee shall instruct. The Trustee
shall have access to such accounts, records and computer systems,
after reasonable notice and during normal business hours.
(c) Safekeeping. The Servicer shall hold on behalf of the Issuer (i) all
file stamped copies of UCC financing statements evidencing the
security interest of Advanta Bank Corp. in Financed Equipment, and
(ii) any and all documents, that Advanta Bank Corp. or the Transferor
shall keep on file, in accordance with its customary procedures,
relating to a Contract, an Obligor or Financed Equipment, and shall
maintain such accurate and complete records pertaining to each
Contract as shall enable the Issuer to comply with this Agreement.
Upon instruction from the Trustee, the Servicer shall release any such
UCC filing or other document to the Trustee, the Trustee's agent, or
the Trustee's designee, as the case may be, at such place or places as
the Trustee may designate, as soon as practicable.
ARTICLE IV
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 4.01. Duties of Servicer. The Servicer, as agent for the Issuer (to
the extent provided herein), shall manage, service, administer and make
collections on the Contracts (other than Acquired 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 shall include calculating, billing, collection and posting of
all payments, responding to inquiries of Obligors on such Contracts,
investigating delinquencies, reporting tax information to Obligors (to the
extent required under the related Contracts), accounting for collections, and
furnishing monthly and annual statements to the Trustee with respect to
distributions. Subject to the provisions of Section 4.02, 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 is
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 such Contracts or to the
Financed Equipment securing such Contracts. If the Servicer shall commence a
legal proceeding to enforce a Contract, the Issuer (in the case of a Contract
other than an Acquired Contract) shall thereupon 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 such Contract, the Issuer
shall, at the Servicer's expense and direction, take steps to enforce such
Contract, including bringing suit in its name or the name of the Trustee or the
Noteholders. The Issuer shall upon the written request of the Servicer furnish
the Servicer with any powers of attorney and other documents reasonably
necessary or appropriate to enable the Servicer to carry out its servicing and
administrative duties hereunder.
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Section 4.02. Collection of Contract Payments. The Servicer shall make
reasonable efforts to collect all payments called for under the terms and
provisions of the Contracts as and when the same shall become due and shall
follow such collection procedures as it follows with respect to all comparable
Contracts that it services for itself or others. In connection therewith, 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 Obligor
of any Contract beyond the date one month prior to the Final Scheduled Payment
Date, it shall promptly acquire the Contract from the Issuer in accordance with
the terms of Section 4.07. The Servicer shall not agree to any reduction of the
underlying interest rate on any Contract or, subject to the foregoing, of the
amount of any Scheduled Payment on a Contract. Notwithstanding anything in this
Agreement to the contrary, any Recoveries with respect to a Contract shall be
paid to the Transferor, and any Defaulted Contracts shall be assigned by the
Trust to the Transferor, to the extent, in either case, that the Contract
Principal Balance of the Contract has been distributed as part of the Principal
Distribution Amount.
Section 4.03. Realization upon Contracts. On behalf of the Issuer, the
Servicer shall use its customary servicing procedures, to repossess or otherwise
realize upon the Financed Equipment securing any Contract as to which the
Servicer shall have determined eventual payment in full is unlikely. The
Servicer shall follow such customary and usual practices and procedures as it
shall deem necessary or advisable in its servicing of comparable Contracts,
which may include selling the Financed Equipment at public or private sale. The
foregoing shall be subject to the provision that, in any case in which any item
of Financed Equipment shall have suffered damage, the Servicer shall not expend
funds in connection with the repair or the repossession of such Financed
Equipment unless it shall determine in its discretion that such repair and/or
repossession will increase the Liquidation Proceeds by an amount greater than
the amount of such expenses.
Section 4.04. Servicer Advances. If an Obligor fails to remit its full
schedule payment on any Contract by the Calculation Date in the month in which
the payment is due, then no later than one Business Day preceding the following
Payment Date, the Servicer may, but is not required, to make a Servicer Advance
for such overdue Scheduled Payment in an amount equal to the Scheduled Payments,
or portion thereof, which were due but not received during the related
Collection Period (and not previously covered by an unreimbursed Servicer
Advance). On each Determination Date, the Servicer shall deliver to the Trustee
the Servicer's Certificate listing the aggregate amount of Scheduled Payments
not received for the immediately prior Collection Period as of the related
Calculation Date, together with a listing of which such unpaid Scheduled
Payments will not be the subject of a corresponding Servicer Advance. The
Servicer shall remit any Servicer Advances to the Collection Account.
Section 4.05. Maintenance of Security Interests in Financed Equipment. The
Servicer shall, in accordance with its customary servicing procedures, take such
steps as are necessary to maintain perfection of the security interest created
by each Contract in the related Financed Equipment if the original Financed
Equipment had a cost greater than $25,000. The Servicer is hereby authorized to
take such steps as are necessary to re-perfect such security interest or to
maintain such perfected security interest on behalf of the Issuer and the
Trustee in the event of the relocation of Financed Equipment, or for any other
reason.
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Section 4.06. Covenants of Servicer. The Servicer shall not: (i) release
the financed equipment securing any Contract from the security interest granted
by such Contract in whole or in part except (A) in accordance with Section 4.03
above or (B) in the event of payment in full (including a prepayment) by the
Obligor thereunder; (ii) impair the rights of the Issuer, the Trustee or the
Noteholders in any Contract; or (iii) increase the number of Scheduled Payments
due under a Contract except in accordance with the terms thereof or the terms of
Section 4.02.
Section 4.07. Acquisition by Servicer of Contracts upon Breach.
(a) The Servicer shall inform the Trustee and the Transferor promptly, in
writing, upon the discovery of any breach pursuant to Section 4.02, 4.05 or
4.06. Unless the breach shall have been cured by the last day of the second
month following such discovery (or, at the Transferor's election, the last
day of the first following month), the Servicer shall acquire any Contract
materially and adversely affected by such breach. If the Servicer takes any
action pursuant to Section 4.02 that impairs the rights of the Issuer, the
Trustee or the Noteholders in any Contract or as otherwise provided in
Section 4.02, the Servicer shall acquire such Contract. In consideration of
the acquisition of any such Contract pursuant to either of the two
preceding sentences, the Servicer shall remit the Prepayment Amount in the
manner specified in Section 5.03. Subject to Section 7.02, the sole remedy
of any of the Issuer, Trustee and the Noteholders with respect to a breach
pursuant to Section 4.02, 4.05 or 4.06 shall be to require the Servicer to
acquire Contracts pursuant to this Section. The parties hereto intend that
the Servicer will not intentionally breach or cause a breach pursuant to
Section 4.02, 4.05 or 4.06 in order to provide direct or indirect assurance
to the Transferor, the Trustee or the Noteholders, as applicable, against
loss by reason of the bankruptcy or insolvency (or other credit condition)
of, or default by, the Obligor on, or the uncollectibility of, any
Contract.
(b) The Issuer shall execute such documents and instruments of transfer or
assignment and take other actions as shall reasonably be requested by the
Servicer to evidence the conveyance of such Contract pursuant to this
Section 4.07.
Section 4.08. 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 (a) one-twelfth of the Servicing Fee
Rate and (b) the Aggregate Contract Principal Balance as of the first day of
such preceding Collection Period. The Servicer shall also be entitled to any
Excluded Amounts with respect to Contracts, collected (from whatever source) on
the Contracts, which Excluded Amounts shall be paid to the Servicer pursuant to
Section 5.07.
Section 4.09. Servicer's Certificate. On each Determination Date, the
Servicer shall deliver to the Trustee and the Issuer, a Servicer's Certificate
containing all information necessary to make the distributions pursuant to
Sections 5.04 and 5.05 for the Collection Period immediately preceding the date
of such Servicer's Certificate. The Trustee shall not be required to determine,
confirm or recalculate the information contained in the Servicer's Certificate.
Contracts to be acquired by the Servicer or to be reacquired by the Transferor
shall be identified by the Servicer by account number with respect to such
Contract as specified in Schedule A.
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Section 4.10. Annual Statement as to Compliance. The Servicer will deliver
to the Issuer and the Trustee, not later than 90 days after the end of each
fiscal year, an Officer's Certificate, dated as of the last day of such fiscal
year, stating that (a) a review of the activities of the Servicer during the
preceding 12-month period and of the Servicer's performance under this Agreement
has been made under such officer's supervision and (b) nothing has come to such
officer's attention to indicate that a Servicer Default (or an event which with
the giving of notice or passage of time, or both, would constitute a Servicer
Default) hereunder has occurred and is continuing on such last day of such
fiscal year or, if a Servicer Default or such other event has so occurred and is
continuing, specifying each such Servicer Default or such other event known to
such officer and the nature and status thereof, and the steps, if any, necessary
to remedy such Servicer Default or such other event.
Section 4.11. Security Deposits. The Issuer acknowledges that the Security
Deposits are held by the Issuer on behalf of the Obligors and the Trustee. In
the event that (i) any Obligor requests that a Security Deposit be applied as an
offset against such Obligor's payment obligations under a Contract or (ii) any
Contract becomes a Defaulted Contract, the Servicer shall deliver to the Issuer
written demand that the Issuer remit to the Servicer, on the next Business Day,
out of the applicable Obligors's Security Deposit an amount equal to the Offset
Amount as payment in respect of any unpaid Scheduled Payments under the related
Contract. The Servicer shall deposit any Offset Amount so delivered to it into
the Collection Account no later than the end of the Collection Period in which
the Offset Amount is applied. The Servicer shall not be required to remit from
its own funds any Offset Amounts not received from the Issuer. The Servicer
shall notify the Issuer in writing of any demand it receives from an Obligor for
refund of such Obligor's Security Deposit at the end of the term of the related
Contract.
In no event shall the Trustee or any Noteholder be liable to any Obligor
with respect to the Security Deposits. The Issuer shall indemnify and hold
harmless the Trustee and its officers, directors, agents and employees and the
Noteholders for any loss, cost and expense (including legal fees and expenses
incurred by such parties in connection with the prosecution of claims made in
connection therewith) suffered as a result of the Issuer's misappropriation or
misapplication of any Security Deposit received from an Obligor. This right of
indemnification shall survive the termination of this Agreement and any earlier
removal or resignation of the Trustee.
ARTICLE V
DISTRIBUTIONS; ACCOUNTS;
STATEMENTS TO NOTEHOLDERS
Section 5.01. Establishment of Trust Accounts
(a) (i) The Servicer, for the benefit of the Noteholders, shall
establish and maintain in the name of the Trustee an Eligible Deposit
Account (the "Collection Account"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Noteholders.
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(ii) The Servicer, for the benefit of the Class A-1 Noteholders
the Class A-2 Noteholders, the Class A-3 Noteholders, the Class A-4
Noteholders, the Class B Noteholders and the Class C Noteholders, shall
establish and maintain in the name of the Trustee an Eligible Deposit
Account (the "Reserve Account"), bearing a designation clearly indicating
that the funds deposited therein are held for the benefit of the Class A-1
Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders, the
Class A-4 Noteholders, the Class B Noteholders and the Class C Noteholders.
(iii) Funds on deposit in the Collection Account and the Reserve
Account (collectively the "Trust Accounts") shall be invested by the
Trustee in Eligible Investments selected by the Servicer; provided,
however, it is understood and agreed that the Trustee shall not be liable
for any loss arising from such investment in Eligible Investments. All such
Eligible Investments shall be held by the Trustee for the benefit of the
Noteholders; provided, however, that on each Payment Date all investment
earnings (net of losses and investment expenses) on funds on deposit
therein shall be deposited into the Collection Account and shall be deemed
to constitute a portion of the Available Funds as directed in the Monthly
Servicer Report. Other than as permitted by the Rating Agencies, funds on
deposit in the Trust Accounts shall be invested in Eligible Investments
that will mature so that such funds will be available at the close of
business on the Business Day preceding the immediately following Payment
Date; provided, however, that funds on deposit in Trust Accounts may be
invested in Eligible Investments of the Trustee which may mature so that
such funds will be available on the Payment Date. Notwithstanding the other
provisions of this Agreement, the funds in the Collection Account or the
Reserve Account may be invested in Eligible Investments that will not
mature prior to the next Payment Date and are not to be sold to meet any
shortfalls if the Rating Agency Condition is satisfied with respect to such
investments. Funds deposited in a Trust Account on a Business Day which
immediately precedes a Payment Date upon the maturity of any Eligible
Investments are not required to be invested overnight, but if so invested,
such investments must meet the conditions of the immediately preceding
sentence.
(b) (i) The Trustee shall possess all right, title and interest
in all monies, securities, instruments and other property on deposit from
time to time in or credited to the Trust Accounts and in all proceeds
thereof (including all income thereon) and all such monies, securities,
instruments and other property (together with all earnings, dividends,
distributions, income, issues, and profits relating thereto) shall be part
of the Trust Estate. The Trust Accounts shall be under the sole dominion
and control of the Trustee for the benefit of the Noteholders. If, at any
time, any of the Trust Accounts ceases to be an Eligible Deposit Account,
the Trustee (or the Servicer on its behalf) shall within 10 Business Days
(or such longer period, not to exceed 30 calendar days, as to which each
Rating Agency may consent) establish a new Trust Account as an Eligible
Deposit Account and shall transfer any cash and/or any investments to such
new Trust Account. So long as the Trustee is an Eligible Institution, any
Trust Account may be maintained with it in an Eligible Deposit Account.
Section 5.02. Collections. (a) Except as otherwise provided in this
Agreement, the Servicer and the Issuer shall deposit to the Collection Account
any Collections received by any
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of them as soon as practicable (and, in any event, within two Business Days of
receipt and identification thereof) after their respective receipt thereof.
Notwithstanding anything else in this Agreement to the contrary, for so long as
Advanta Bank Corp. or an Affiliate thereof remains the Servicer and (x)
maintains a short-term debt rating of A-1 by S&P, P-1 by Moody's and F1 by Fitch
(if rated by Fitch) (or such other rating above A-1, P-1 or F1 (if rated by
Fitch), as the case may be), or (y) the Servicer has provided to the Trustee a
letter of credit covering collection risk of the Servicer, the Servicer and the
Issuer need not make the daily deposits of Collections into the Collection
Account as provided in the preceding sentence, but the Servicer may make a
single deposit in the Collection Account in immediately available funds not
later than 12:00 noon, New York City time, on the date which is the Business Day
immediately preceding each Payment Date following the Collection Period in which
the deposits were to have been made into the Collection Account.
(b) Furthermore, the Servicer is not required to deposit Advance
Payments into the Collection Account as received, but shall be required to
deposit Advance Payments or the appropriate portions thereof into the Collection
Account on the Business Day preceding the Payment Date following the Collection
Period in which such payment is due and owing.
(c) Notwithstanding the foregoing, the Trustee at the written direction
of the Servicer and/or the Servicer may deduct from amounts otherwise specified
for deposit to the Collection Account any amounts previously deposited by the
Trustee or the Servicer into the Collection but which are (i) subsequently
uncollectible as a result of dishonor of the instrument of payment for or on
behalf of the Obligor or (ii) later determined to have resulted from mistaken
deposits or which amounts were rebated to the Obligor.
(d) The Collection Account shall be under the sole dominion and control
of the Trustee for the benefit of the Noteholders; provided, however, that the
Trustee may conclusively rely on the information and instructions provided by
the Servicer in determining the amount of any withdrawals or payments to be made
from either such account for the purposes of carrying out the Trustee's duties
under this Agreement and the Indenture. Neither the Trustee nor the Servicer
shall have any right of setoff or banker's lien against, and no right to
otherwise deduct from, any funds held in the Collection Account for any amount
owed to it by the Servicer, the Obligors, the Trustee, or any Noteholder.
(e) The Trustee shall credit all net investment earnings on the
Collection Account, as collected, on a monthly basis to the Collection Account.
Section 5.03. Additional Deposits. The Servicer and the Transferor shall
deposit or cause to be deposited in the Collection Account the Prepayment
Amounts with respect to Acquired Contracts and Prepayment Proceeds received from
Obligors as set forth in the immediately following sentence, and the Servicer
shall deposit in the Collection Account all amounts to be paid under Section
9.02 as set forth therein. The Servicer and the Transferor will deposit the
Prepayment Proceeds to the Collection Account as received, unless the Servicer
shall be permitted to make deposits monthly prior to each Payment Date pursuant
to Section 5.02, in which case such deposits shall be made in accordance with
such Section. The Servicer shall account for Prepayment Amounts paid by itself
and the Transferor separately.
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Section 5.04. Distributions.
(a) On or prior to each Determination Date, the Servicer shall
calculate all amounts required to determine the amounts to be paid as interest
and as principal on the notes and the amount, if any, to be deposited into the
Reserve Account.
(b) On the Payment Date, the Trustee (based solely on information
contained in the Servicer's Certificate) will be required to make the following
payments from the Available Funds (including amounts transferred from the
Reserve Account on such Payment Date) then on deposit in the Collection Account,
in the following order of priority:
(i) from the Available Funds, the fees and expenses of the Trustee then
due and payable (including legal fees and expenses);
(ii) from the Available Funds, to the Servicer, any Nonrecoverable
Advances;
(iii) from the Available Funds then remaining in the Collection Account
to the Servicer, the Servicing Fee then due;
(iv) from the Available Funds then remaining in the Collection Account,
to the Class A Noteholders, the Class A Note Interest for the related Interest
Accrual Period, pro rata based on interest due with respect to the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes;
(v) from the Available Funds then remaining in the Collection Account,
to the Class B Noteholders, the Class B Note Interest for the related Interest
Accrual Period;
(vi) from the Available Funds then remaining in the Collection Account,
to the Class C Noteholders, the Class C Note Interest for the related Interest
Accrual Period;
(vii) from Available Funds then remaining in the Collection Account,
until the Class A-1 Principal Balance has been reduced to zero, to the Class A-1
Noteholders, the Class A Principal Payment Amount; when the Class A-1 Principal
Balance has been reduced to zero, then until the Class A-2 Principal Balance has
been reduced to zero, to the Class A-2 Noteholders, the Class A Principal
Payment Amount; after the Class A-1 Principal Balance and the Class A-2
Principal Balance have been reduced to zero, then until the Class A-3 Principal
Balance has been reduced to zero, the Class A-3 Noteholders, the Class A
Principal Payment Amount; after the Class A-1 Principal Balance, the Class A-2
Principal Balance and the Class A-3 Principal Balance have been reduced to zero,
then until the Class A-4 Principal Balance has been reduced to zero, the Class
A-4 Noteholders, the Class A Principal Payment Amount;
(viii) until the Class B Principal Balance has been reduced to zero, to
the Class B Noteholders, from the Available Funds then remaining in the
Collection Account, the Class B Principal Payment Amount;
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(ix) until the Class C Principal Balance has been reduced to zero, to the
Class C Noteholders, from the Available Funds then remaining in the Collection
Account, the Class C Principal Payment Amount;
(x) from the Available Funds then remaining in the Collection Account,
to the Reserve Account, the amount needed to increase the amount on deposit in
the Reserve Account to the Required Reserve Amount for such Payment Date;
(xi) then until the Class D Principal Balance has been reduced to zero,
to the Class D Noteholders, from the Available Fund then remaining in the
Collection Account, the Class D Monthly Principal Payment Amount;
(xii) if on such date the Class D Floor is greater than the Class D
Target Principal Amount, an amount equal to the Additional Principal for such
date shall be to the extent thereof, shall be paid sequentially to the Class A-2
Noteholders, Class A-3 Noteholders, Class B Noteholders, Class C Noteholders and
Class D Noteholders, in that order, until the principal amount of such Class has
been reduced to zero; and
(xiii) then to the Issuer any remaining Available Funds for the preceding
Collection Period on deposit in the Collection Account.
(c) All payments to Noteholders shall be made on each Payment Date to
each Noteholder of record on the related Record Date by check, or, if requested
in writing by such Noteholder, by wire transfer to the account designated in
writing delivered to the Trustee on or prior to the related Determination Date,
in immediately available funds, in amounts equal to such Noteholder's pro rata
share of such payment.
Section 5.05. Reserve Account.
(a) On the Closing Date, the Transferor shall deposit the Reserve
Account Initial Deposit into the Reserve Account. The Servicer shall determine
the Specified Reserve Account Balance for each Payment Date.
(b) If the amount on deposit in the Reserve Account on any Payment Date
(after giving effect to all deposits or withdrawals therefrom on such Payment
Date) is greater than the Specified Reserve Account Balance for such Payment
Date, the Servicer shall instruct the Trustee to distribute the amount of such
excess to the Transferor; provided, however, that if, after giving effect to all
payments made on the Notes on such Payment Date, the Aggregate Contract
Principal Balance as of the end of the preceding Collection Period is less than
the sum of the outstanding principal balance the Notes, such excess amount shall
not be distributed to the Transferor and shall be retained in the Reserve
Account available for application in accordance with Sections 5.05(c) and (d).
Amounts properly distributed to the Transferor pursuant to this Section 5.05(b)
shall be deemed released from the Trust and the security interest therein
granted to the Trustee, and the Transferor shall in no event thereafter be
required to refund any such distributed amounts.
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(c) In the event that the sum of the distributions to be made pursuant
to subsections 5.04(a)(i) through (ix) with respect to any Payment Date exceeds
the Available Funds otherwise available to be distributed in respect thereof on
such Payment Date, the Trustee shall withdraw from the Reserve Account on such
Payment Date, upon receipt of the instruction from the Servicer pursuant to
Section 5.04(b), to the extent of funds available therein, an amount equal to
such excess, and the Trustee shall use such amounts as Available Funds.
(d) Notwithstanding anything in this Section 5.05 to the contrary, if
an Event of Default under the Indenture occurs and the maturities of the Notes
are accelerated pursuant to Section 5.02 of the Indenture, amounts on deposit in
the Reserve Account shall be applied by the Trustee in accordance with Section
5.04(a) of the Indenture.
Section 5.06. Statement to Noteholders. Provided that the Servicer shall
have delivered to the Trustee the Servicer's Certificate on the preceding
Determination Date containing all information necessary to enable the Trustee to
make all distributions pursuant to Section 5.04 (b) hereof, then on each Payment
Date, the Trustee will forward to each Rating Agency, and mail to each
Noteholder, a statement based solely on such Servicer's Certificate, not later
than such Payment Date, setting forth the following information (per $1,000 of
Class A-1 Initial Principal Balance, Class A-2 Initial Principal Balance, Class
A-3 Initial Principal Balance, Class A-4 Initial Principal Balance, Class B
Initial Principal Balance, Class C Initial Principal Balance (as the case may
be) as to (i) and (ii) below):
(i) The amount of such payment allocable to the Class A-1
Principal Payment Amount, Class A-2 Principal Payment Amount, Class A-3
Principal Payment Amount, Class B Principal Payment Amount, or the Class
A-4 Principal Payment Amount, as applicable;
(ii) The amount of such payment allocable to such Class A-1 Note
Interest, Class A-2 Note Interest, Class A-3 Note Interest, Class A-4 Note
Interest, Class B Note Interest or Class C Note Interest, as applicable;
(iii) The aggregate amount of fees and compensation received by
the Servicer for the related Collection Period;
(iv) The aggregate Class A-1 Principal Balance, Class A-2
Principal Balance, Class A-3 Principal Balance, Class A-4 Principal
Balance, Class B Principal Balance and Class C Principal Balance, as
applicable, and the Class A-1 Note Factor, Class A-2 Note Factor, Class A-3
Note Factor, Class A-4 Note Factor, Class B Note Factor or Class C Note
Factor, as applicable, after taking into account all distributions made on
such Payment Date, the Aggregate Contract Principal Balance and the
Collateral Factor;
(v) The total unreimbursed Servicer Advances with respect to the
related Collection Period;
(vi) The aggregate Contract Principal Balance for all Contracts
that became Defaulted Contracts during the related Collection Period,
calculated immediately prior to the time such Contracts became Defaulted
Contracts;
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(vii) The amount on deposit in the Reserve Account;
(viii) 31-60, 61-90 and greater than 90 days delinquencies as of
the end of the related Collections Period; and
(ix) Prepayment Amounts received during the related Collection
Period;
provided, however, the Trustee may deliver a copy of the Servicer's
Certificate to each Noteholder and Rating Agency in satisfaction of the
requirement set forth in this Section.
The Servicer and the Trustee shall furnish to each Noteholder, on written
request, such periodic, special or other reports or information not specifically
provided for herein, as shall be necessary, reasonable or appropriate with
respect to such Noteholder and at the expense of such requesting party all such
reports or information to be provided by and in accordance with such written
applicable instructions and directions as the Noteholder may reasonably require
and as the Servicer and the Trustee may reasonably be able to produce. A
Noteholder may, by written notice to the Trustee, waive receipt of any reports.
The Trustee's obligation under this provision shall only pertain to information
provided by the Servicer to the Trustee or otherwise in the Trustee's
possession.
ARTICLE VI
THE TRANSFEROR
Section 6.01. Representations of Transferor. The Transferor makes the
following representations on which the Issuer is deemed to have relied in
acquiring the Contracts. The representations speak as of the execution and
delivery of this Agreement and shall survive the transfer of the Contracts to
the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Transferor is duly organized
and validly existing as a corporation in good standing under the laws of
the State of Utah with the power and authority to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and has,
the power, authority and legal right to acquire and own the Contracts.
(b) Due Qualification. The Transferor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the failure to so
qualify or to obtain any such license or approval would render any Contract
unenforceable that would otherwise be enforceable by the Transferor.
(c) Power and Authority. The Transferor has the power and authority to
execute and deliver this Agreement and to carry out its terms; the
Transferor has full power and
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authority to transfer and assign the Contracts and other property to be
transferred and assigned to and deposited with the Issuer and the
Transferor has duly authorized such transfer and assignment to the Issuer
by all necessary corporate action; and each of the execution, delivery and
performance of this Agreement has been duly authorized by the Transferor by
all necessary corporate action.
(d) FDIC Insurance. The deposits of the Transferor are insured by the
Federal Deposit Insurance Corporation.
(e) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Transferor enforceable in accordance with its
terms, except to the extent that such enforcement may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally, and the
remedy of specific performance and injunctive relief may be subject to
certain equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
(f) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not (i) conflict
with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time) a default under, the
certificate of incorporation or by-laws of the Transferor, or any
indenture, agreement or other instrument to which the Transferor is a party
or by which it is bound; (ii) result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the Basic
Documents); or (iii) violate any law or, to the best of the Transferor's
knowledge, any order, rule or regulation applicable to the Transferor of
any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the
Transferor or its properties.
(g) No Proceedings. There are no proceedings or investigations pending,
or to the Transferor's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Transferor or its properties:
(i) asserting the invalidity of this Agreement, the Indenture, the Notes or
any of the other Basic Documents, (ii) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated by
this Agreement, the Indenture or any of the other Basic Documents; (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Transferor of its obligations under, or the
validity or enforceability of, this Agreement, the Indenture, the Notes or
any other of the Basic Documents or (iv) which might adversely affect the
Federal or state income tax attributes of the Notes.
Section 6.02. Liability of Transferor; Indemnities. The Transferor shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Transferor under this Agreement.
(a) The Transferor shall indemnify, defend and hold harmless the
Issuer, the Trustee and their officers, directors and agents from and
against any taxes that may at any time be
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asserted against the Issuer or the Trustee or their respective officers,
directors, and agents with respect to the transfer of the Contracts to the
Issuer or the issuance and original sale of the Notes, including any sales,
gross receipts, general corporation, tangible personal property, privilege
or license taxes and costs and expenses in defending against the same.
(b) The Transferor shall indemnify, defend and hold harmless the Issuer
and the Trustee and their officers, directors, and agents from and against
any loss, liability or expense incurred by reason of (i) the Transferor's
willful misfeasance, bad faith or negligence in the performance of its
duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement and (ii) the Transferor's or
the Issuer's violation or alleged violation of Federal or state securities
laws in connection with the offering and sale of the Notes.
Indemnification under this Section shall survive the resignation or
removal of the Trustee and the termination of this Agreement and shall include
reasonable fees and expenses of counsel and expenses of litigation. If the
Transferor shall have made any indemnity payments pursuant to this Section 6.02
and the Person to or on behalf of whom such payments are made thereafter shall
collect any of such amounts from others, such Person shall promptly repay such
amounts collected from others to the Transferor, without interest.
Section 6.03. Merger or Consolidation of, or Assumption of the Obligations
of, Transferor. Any corporation (i) into which the Transferor may be merged or
consolidated, (ii) resulting from any merger, conversion, or consolidation to
which the Transferor shall be party, or (iii) succeeding to the business of the
Transferor substantially as a whole, which corporation in any of the foregoing
cases executes an agreement of assumption to perform every obligation of the
Transferor under this Agreement and all other Basic Documents, will be the
successor to the Transferor without the execution or filing of any document or
the taking of any further act on the part of any of the parties to this
Agreement, anything in this Agreement notwithstanding; provided, however, that
immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 6.01 shall have been breached.
Section 6.04. Limitation on Liability of Transferor and Others. The
Transferor and any director or officer or employee or agent of the Transferor
may rely in good faith on the advice of counsel or on any document of any kind,
prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Transferor shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
Section 6.05. Transferor May Own Notes. The Transferor and any Affiliate
thereof may in its individual or any other capacity become the owner or pledgee
of Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4
Notes, the Class B Notes or the Class C Notes with the same rights as it would
have if it were not the Transferor or an Affiliate thereof, except as expressly
provided herein (including, without limitation, the definition of "Outstanding"
contained in the Indenture) or in any Basic Document. The Transferor agrees that
it shall not transfer any interest in Notes (including the Class D Notes) or any
rights hereunder without
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delivering an Opinion of Counsel that such transfer will not [cause the Issuer
to be taxable as a corporation for federal income tax purposes.]
Section 6.06. Tax Treatment. The Transferor has structured this Agreement,
the Indenture and any related agreement with the intention that the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
B Notes [and the Class C Notes] qualify under applicable federal, state, and
local income and franchise tax law as indebtedness of the Transferor secured by
the Contracts and the Issuer shall be disregarded as a separate entity for such
purposes. The Transferor, the Servicer, and the Issuer agree to treat and to
take no action inconsistent with the treatment of the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes [and the
Class C Notes] (or any beneficial interest therein) as such indebtedness for
purposes of federal, state, and local income and franchise tax law and for
purposes of any other tax imposed on or measured by income.
ARTICLE VII
THE SERVICER
Section 7.01. Representations of Servicer. The Servicer makes the following
representations on which the Issuer is deemed to have relied in acquiring the
Contracts. The representations speak as of the execution and delivery of the
Agreement (or as of the date a Person (other than the Trustee) becomes Servicer
pursuant to Sections 7.03 and 8.02, in the case of a successor to the Servicer)
and shall survive the transfer of the Contracts to the Issuer and the pledge
thereof to the Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer is a corporation duly
organized, validly existing and in good standing under the laws of the
state if Utah and has the corporate power and authority to own its
properties and to conduct the business in which it is currently engaged,
and had at all relevant times, and has, the power, authority and legal
right to acquire, own, transfer and service the Contracts.
(b) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and to carry out its terms; and the
execution, delivery and performance of this Agreement have been duly
authorized by the Servicer by all necessary corporate action.
(c) Binding Obligation. This Agreement constitutes a legal, valid and
binding obligation of the Servicer enforceable in accordance with its
terms, except that such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and the remedy
of specific performance and injunctive relief may be subject to certain
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
(d) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof shall not conflict
with, result in any
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breach of any of the terms and provisions of, nor constitute (with or
without notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Servicer, or any material indenture,
agreement or other instrument to which the Servicer is a party or by which
it is bound; nor result in the creation or imposition of any material Lien
upon any of its properties pursuant to the terms of any such indenture,
agreement or other instrument (other than this Agreement); nor violate any
material law or, to the best of the Servicer's knowledge, any material
order, rule or regulation applicable to the Servicer of any court or of any
Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or its
properties.
(e) No Proceedings. To the Servicer's best knowledge, there are no
proceedings or investigations pending, or threatened, before any court,
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(i) asserting the invalidity of this Agreement, the Indenture, the Notes or
any of the other Basic Documents; (ii) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated by
this Agreement, the Indenture or any of the other Basic Documents; (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Servicer of its obligations under, or the
validity or enforceability of, this Agreement, the Indenture, the Notes or
any of the other Basic Documents ; or (iv) relating to the Servicer and
which might adversely affect the Federal or state income tax attributes of
the Notes.
(f) No Consents Required. All approvals, authorizations, consents,
orders or other actions of any Person or of any Governmental Authority
required in connection with the execution and delivery by the Servicer of
this Agreement or any other Basic Document, the performance by the Servicer
of the transactions contemplated by this Agreement or any other Basic
Document and the fulfillment by the Servicer of the terms hereof or
thereof, have been obtained or have been completed and are in full force
and effect (other than approvals, authorizations, consents, orders or other
actions which if not obtained or completed or in full force and effect
would not have a material adverse effect on the Servicer or the Issuer or
upon the collectibility of any Contract or upon the ability of the Servicer
to perform its obligations under this Agreement).
Section 7.02. Indemnities of Servicer. The Servicer shall be liable in
accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement.
(a) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Trustee, the Transferor and the Noteholders and any of the officers,
directors and agents of the Issuer, the Trustee and the Transferor from and
against any and all costs, expenses, losses, damages, claims and
liabilities, arising out of or resulting from the use, ownership or
operation by the Servicer or any Affiliate (other than the Transferor)
thereof of any Financed Equipment.
(b) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Trustee and the Transferor and their respective officers, directors and
agents from and against (i) any taxes that may at any time be asserted
against any such Person with respect to the
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transactions contemplated herein, including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but, in the case of the Issuer or the Transferor, not including any taxes
asserted with respect to, and as of the date of, the transfer of the
Contracts to the Issuer or the issuance and original sale of the Notes, or
Federal or other income taxes arising out of distributions on the Notes)
and (ii) costs and expenses in defending against the same.
(c) The Servicer shall indemnify, defend and hold harmless the Issuer,
the Trustee, the Transferor and the Noteholders and any of the officers,
directors and agents of the Issuer, the Trustee and the Transferor from and
against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that any such cost, expense, loss, claim, damage
or liability arose out of, or was imposed upon any such Person through, the
negligence, willful misfeasance or bad faith of the Servicer in the
performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement or on account
of the failure of the Servicer to be qualified to do business as a foreign
corporation or to have obtained a license or approval in any jurisdiction.
(d) The Servicer shall indemnify, defend and hold harmless the Trustee
and their respective officers, directors, employees and agents (which are
retained pursuant to the Indenture or this Agreement) from and against all
costs, expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein, in the case of the Trustee, the Indenture, except to the
extent that any such cost, expense, loss, claim, damage or liability is
otherwise reimbursed.
(e) The Servicer shall pay any and all taxes levied or assessed upon
all or any part of the Trust Estate, other than any taxes asserted with
respect to, and as of the date of, the transfer of the Contracts to the
Issuer or the Transferor or the issuance and original sale of the Notes, or
Federal or other income taxes arising out of distributions on the Notes.
For purposes of this Section, in the event of the termination of the rights
and obligations of Advanta Bank Corp. (or any successor thereto pursuant to
Section 7.03) as Servicer pursuant to Section 8.01, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer (other than the Trustee)
pursuant to Section 8.02.
Indemnification under this Section shall survive the resignation or removal
of the Trustee or the termination of this Agreement. Indemnification under this
Section shall include reasonable fees and expenses of counsel and expenses of
litigation if the indemnitee prevails in any action for which indemnification is
sought. If the Servicer shall have made any indemnity payments pursuant to this
Section and the Person to or on behalf of whom such payments are made thereafter
collects any of such amounts from others, such Person shall promptly repay such
amounts to the Servicer, without interest.
Section 7.03. Merger or Consolidation of, or Assumption of the Obligations
of, Servicer. Any corporation (i) into which the Servicer may be merged or
consolidated, (ii)
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resulting from any merger or consolidation to which the Servicer shall be a
party or (iii) succeeding to the business of the Servicer, shall be the
successor to the Servicer hereunder without the execution or filing of any paper
or any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding, and such corporation in any of the foregoing cases
shall execute an agreement of assumption, in a form reasonably satisfactory to
the Trustee, agreeing to perform every obligation of the Servicer hereunder. Any
corporation succeeding to the business of the Servicer by merger, consolidation
or otherwise shall be a corporation organized and existing under the laws of the
United States or any State and have a tangible net worth of at least
$20,000,000. The Servicer shall provide prompt written notice of the
effectiveness of any such event to the Issuer and the Trustee.
In addition to the provisions set forth in the preceding paragraph, if the
Servicer is Advanta Bank Corp. or an Affiliate thereof, the Servicer may
transfer all of its duties, obligations, rights and privileges as Servicer under
this Agreement to an Affiliate of Advanta Bank Corp. provided that (i) the then
Servicer shall give 30 days prior written notice of such change to the Trustee,
the Issuer and the entity assuming the servicer position shall execute an
agreement of assumption, in a form reasonably satisfactory to the Trustee
agreeing to perform every obligation of the Servicer hereunder and (ii) the
entity assuming the servicer position shall deliver to the Trustee written
evidence that the Rating Agency Condition has been satisfied. Upon the execution
and delivery to the Trustee of such written assumption and delivery of evidence
of the satisfaction of the Rating Agency Condition and delivery to the Trustee
of an Opinion of Counsel to the effect that all conditions precedent to such
assumption have been complied with and that such assumption is authorized and
permitted by this Agreement, the Affiliate of Advanta Bank Corp. shall become
the Servicer hereunder without any further act on the part of any of the parties
hereto and the entity serving as Servicer prior to such assumption shall be
relieved of all duties hereunder and shall cease to be the Servicer. Any
affiliate of Advanta Bank Corp. which becomes a Servicer under this paragraph
shall be required to have a tangible net worth of at least $20,000,000.
Section 7.04. Limitation on Liability of Servicer and Others. No directors,
officers, employees or agents of the Servicer shall be under any liability to
the Trustee, the Issuer or any of the Noteholders, except as provided in this
Agreement, for any action taken or for refraining from the taking of any action
pursuant to this Agreement or for errors in judgment. The Servicer and any
director or officer or employee or agent of the Servicer may rely in good faith
on any document of any kind prima facie properly executed and submitted by any
Person respecting any matters arising hereunder. Except as provided herein, the
Servicer shall not be under any obligation to appear in, prosecute or defend any
legal action that is not incidental to its duties to service the Trust Estate in
accordance with this Agreement and that in its opinion may involve it in any
expense or liability; provided, however, that the Servicer may take any such
action that is reasonable and that may be necessary or desirable in respect of
this Agreement and the rights and duties of the parties hereto and the interests
of the Trustee hereunder. In the event the Servicer takes such action, the
reasonably incurred legal expenses and costs of such action and any liabilities
resulting therefrom shall be expenses, costs and liabilities of the Trust
Estate, and the Servicer shall be entitled to be reimbursed therefor in
accordance with the terms hereof.
Section 7.05. Advanta Bank Corp. Not To Resign as Servicer. Except as
provided in Section 7.03, Advanta Bank Corp. shall not resign from the
obligations and duties hereby
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imposed on it as Servicer under this Agreement except upon determination that
the performance of its duties under this Agreement shall no longer be
permissible under applicable law (if it is also determined that such
determination may not be reversed). Notice of any such determination permitting
the resignation of Advanta Bank Corp. shall be communicated to the Trustee at
the earliest practicable time (and, if such communication is not in writing,
shall be confirmed in writing at the earliest practicable time) and any such
determination shall be evidenced by an Opinion of Counsel to such effect
delivered to the Trustee concurrently with or promptly after such notice. No
such resignation shall become effective until the Trustee or a successor
Servicer shall have assumed the responsibilities and obligations of Advanta Bank
Corp. in accordance with Section 8.02.
ARTICLE VIII
DEFAULT
Section 8.01. Servicer Default. If any one of the following events (a
"Servicer Default") shall occur and be continuing:
(a) any failure by the Servicer (i) to deliver to the Trustee for
deposit in any of the Trust Accounts any required payment or (ii) to direct
the Trustee to make any required distribution therefrom in either case that
shall continue unremedied for a period of five Business Days after written
notice of such failure is received by the Servicer from the Trustee or
after discovery of such failure by an officer of the Servicer; or
(b) failure on the part of the Servicer duly to observe or to perform
in any material respect any other covenants or agreements of the Servicer
set forth in this Agreement or any other Basic Document, which failure
shall (i) materially and adversely affect the rights of holders of the
investor notes and (ii) continues unremedied for a period of 60 days after
the date on which written notice of such failure, requiring the same to be
remedied, shall have been given (A) to the Servicer by the Trustee or (B)
to the Servicer, and to the Trustee by the Holders of Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class
C Notes evidencing not less than 25% of the Outstanding Amount of the Class
A-1 Notes, Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes
and Class C Notes; or
(c) an Insolvency Event occurs with respect to the Servicer;
then, and in each and every case, so long as the Servicer Default shall not have
been remedied, either the Trustee, or the Holders of Class A-1 Notes, Class A-2
Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C Notes
evidencing not less than 50% of the Outstanding Amount of the Class A-1 Notes,
Class A-2 Notes, Class A-3 Notes, Class A-4 Notes, Class B Notes and Class C
Notes, by notice then given in writing to the Servicer (and to the Trustee if
given by the Class A-1 Noteholders, Class A-2 Noteholders, Class A-3
Noteholders, Class A-4 Noteholders, Class B Noteholders or Class C Noteholders)
may terminate all the rights and obligations (other than the obligations set
forth in Section 7.02 hereof) of the Servicer under this Agreement (a "Servicer
Termination Event"). On or after the receipt by the Servicer of such
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written notice, all authority and power of the Servicer under this Agreement,
whether with respect to the Notes or the Contracts or otherwise, shall, without
further action, pass to and be vested in the Trustee or such successor Servicer
as may be appointed under Section 8.02; and, without limitation, the Trustee is
hereby authorized and empowered to execute and deliver, on behalf of the
predecessor Servicer, as attorney-in-fact or otherwise, any and all documents
and other instruments, and to do or accomplish all other acts or things
necessary or appropriate to effect the purposes of such notice of termination,
whether to complete the transfer and endorsement of the Contracts and related
documents, or otherwise. The predecessor Servicer shall cooperate with the
successor Servicer and the Trustee in effecting the termination of the
responsibilities and rights of the predecessor Servicer under this Agreement,
including the transfer to the successor Servicer for administration by it of all
cash amounts that shall at the time be held by the predecessor Servicer for
deposit, or shall thereafter be received by it with respect to a Contract. All
reasonable costs and expenses (including reasonable attorneys' fees) incurred in
connection (x) with transferring the computer or other records to the successor
Servicer in the form requested and (y) amending this Agreement to reflect such
succession as Servicer pursuant to this Section shall be paid by the predecessor
Servicer upon presentation of reasonable documentation of such costs and
expenses. Upon receipt of notice in writing from the majority Noteholders or the
Servicer of the occurrence of a Servicer Default, the Trustee shall give notice
thereof to the Rating Agencies.
Section 8.02. Appointment of Successor.
(a) Upon the Servicer's receipt of notice of termination, pursuant to
Section 8.01 or the Servicer's resignation in accordance with the terms of
this Agreement, the predecessor Servicer shall continue to perform its
functions as Servicer under this Agreement, in the case of termination,
only until the date specified in such termination notice or, if no such
date is specified in a notice of termination, until receipt of such notice
and, in the case of resignation, until the earlier of (x) the date 45 days
from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of the Servicer's termination
hereunder, the Trustee shall appoint a successor Servicer, and the
successor Servicer shall accept its appointment by a written assumption in
form acceptable to the Trustee (such acceptance not to be unreasonably
withheld). In the event that a successor Servicer has not been appointed at
the time when the predecessor Servicer has ceased to act as Servicer in
accordance with this Section, pending the appointment of and acceptance by
a successor Servicer, the Trustee without further action shall
automatically be appointed and serve as the successor Servicer and the
Trustee shall be entitled to the Servicing Fee and the Servicer's Yield.
Notwithstanding the above, the Trustee shall, if it shall be legally unable
so to act, appoint or petition a court of competent jurisdiction to
appoint, any established institution who has demonstrated its capability to
service the Contracts to the satisfaction of the Trustee, as the successor
to the Servicer under this Agreement, having a net worth of not less than
$20,000,000 and whose regular business shall include the servicing of
Contracts comparable with the Contracts, as the successor to the Servicer
under this Agreement.
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The Trustee, acting in its capacity as successor Servicer, and any
successor Servicer appointed by it, shall have no responsibility or obligation
(i) for any breach by any predecessor Servicer of any of its representations and
warranties, or (ii) any acts or omissions of Advanta Bank Corp. or any other
Servicer prior to its termination or resignation.
(b) Upon appointment, the successor Servicer (including the Trustee
acting as successor servicer) shall be the successor in all respects to the
predecessor Servicer and shall be subject to all the responsibilities,
duties and liabilities arising thereafter relating thereto placed on the
predecessor Servicer and shall be entitled to the Servicing Fee and the
servicer's yield accruing or collected, as the case may be, after the
successor Servicer becomes the Servicer, as set forth above, and all the
rights granted to the predecessor Servicer by the terms and provisions of
this Agreement.
(c) Subject to the Trustee's right to appoint a successor Servicer
pursuant to Section 8.02(a) after the Trustee has become the Servicer
pending the appointment of and acceptance by a successor Servicer, the
Servicer may not resign unless it is prohibited from serving as such by
law.
(d) Notwithstanding any other provision of this Agreement, neither the
Trustee nor any successor Servicer shall be deemed in default, breach or
violation of this Agreement as a result of the failure of Advanta Bank
Corp. or any Servicer (i) to cooperate with the Trustee or any successor
Servicer pursuant to Section 8.01, (ii) to deliver funds required to be
deposited to any Trust Account, or (iii) to deliver files or records
relative to the Contracts as may be requested by the Trustee or successor
Servicer.
Section 8.03. Notification to Noteholders. Upon any termination of, or
appointment of a successor to, the Servicer pursuant to this Article VIII, the
Trustee shall give prompt written notice thereof to the Noteholders and to the
Rating Agencies in the manner provided for in the Indenture.
Section 8.04. Waiver of Past Defaults. The Holders of the Class A-1 Notes,
the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes
and the Class C Notes, evidencing not less than a majority of the Outstanding
Amount of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
Class A-4 Notes, the Class B Notes and the Class C Notes may, on behalf of all
Noteholders, waive in writing any default by the Servicer in the performance of
its obligations hereunder and its consequences, except a default in making any
required deposits to or payments from any of the Trust Accounts in accordance
with this Agreement. Upon any such waiver of a past default, such default shall
cease to exist, and any Servicer Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
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ARTICLE IX
OPTIONAL ACQUISITION
Section 9.01. Optional Acquisition of All Contracts. On any Payment Date
following any Calculation Date as of which the Aggregate Contract Principal
Balance is less than 10% of the Initial Aggregate Contract Principal Balance,
the Servicer shall have the option to require the Transferor to reacquire all of
the Contracts and the Transferor agrees, that if the Servicer elects to cause
the redemption of the remaining Notes, that the Transferor will reacquire all of
the remaining Contracts at a price sufficient to provide to the Issuer funds
sufficient to pay the redemption price and accrued interest to the redemption
date. Any such redemption of the Notes shall be as provided in Section 10.01 of
the Indenture.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.01 Amendment. The Agreement may be amended by the Transferor,
the Servicer and the Issuer, with the consent of the Trustee, but without the
consent of any of the Noteholders, to cure any ambiguity, to correct or
supplement any provisions in this Agreement or for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions in
this Agreement or of modifying in any manner the rights of the Noteholders;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Trustee, adversely affect in any material respect the
interests of any Noteholder.
This Agreement may also be amended from time to time by the Transferor, the
Servicer and the Issuer, with the consent of the Trustee, the consent of the
Holders of Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the Class
A-4 Notes, the Class B Notes and the Class C Notes evidencing not less than a
majority of the Outstanding Amount of the Class A-1 Notes, the Class A-2 Notes,
the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the Class C
Notes for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any
manner the rights of the Noteholders; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Contracts or distributions that shall
be required to be made for the benefit of the Noteholders or (b) reduce the
aforesaid portion of the Outstanding Amount of the Class A-1 Notes, the Class
A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class B Notes and the
Class C Notes, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes, the Class
B Notes and the Class C Notes.
Prior to the execution of any such amendment or consent, the Servicer shall
furnish written notification of the substance of such amendment or consent to
each of the Rating Agencies. Promptly after the execution of any such amendment
or consent, the Servicer shall furnish written notification of the substance of
such amendment or consent to the Trustee.
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It shall not be necessary for the consent of Noteholders pursuant to this
Section to approve the particular form of any proposed amendment or consent, but
it shall be sufficient if such consent shall approve the substance thereof.
Prior to the execution of any amendment to this Agreement the Trustee shall
be entitled to receive and rely upon an Opinion of Counsel stating that the
execution of such amendment is authorized or permitted by this Agreement. The
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Trustee's, as applicable, own rights, duties or immunities under
this Agreement or otherwise.
Section 10.02 Protection of Title to Trust Estate.
(a) The Transferor shall take all actions necessary (other than
delivery of the original Contracts), and the Issuer shall cooperate with
the Transferor, if applicable, to perfect, and maintain perfection of, the
interests of the Issuer and the Trustee in the Contracts. In addition,
without limiting the rights of the Trustee or the Issuer specified in the
immediately preceding sentence, the Transferor shall execute and file and
cause to be executed and filed such financing statements and continuation
statements, all in such manner and in such places as may be required by law
fully to perfect, maintain, and protect the interest of the Issuer and the
interest of the Trustee in the Contracts and in the proceeds thereof. The
Transferor shall deliver (or cause to be delivered) to the Trustee
file-stamped copies of, or filing receipts for, any document filed as
provided above, as soon as available following such filing.
(b) The Transferor shall not change its name, identity or corporate
structure in any manner that would make any financing statement or
continuation statement filed in accordance with paragraph (a) above or
otherwise seriously misleading within the meaning of Section 9-402(7) of
the UCC, unless it shall have given the Trustee at least five days' prior
written notice thereof and, if applicable, shall have timely filed
appropriate amendments to any and all previously filed financing statements
or continuation statements (so that the interest of the Issuer or the
Trustee is not adversely affected).
(c) Each of the Transferor and the Servicer shall have an obligation to
give the Trustee at least 60 days' prior written notice of any relocation
of its principal executive office if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement and shall promptly, if applicable, file any such
amendment. The Servicer shall at all times maintain each office from which
it shall service Contracts, and its principal executive office, within the
United States of America.
(d) The Servicer shall maintain accounts and records as to each
Contract accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Contract, including payments
and Recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or Recoveries on (or with respect to) each
Contract and the amounts from time to time deposited in the Collection
Account in respect of such Contract.
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(e) The Servicer shall maintain its contract management system so that,
from and after the time of transfer under this Agreement of the Contracts,
the Servicer's contract management system (including any backup archives)
that refer to a Contract shall indicate clearly the interest of the Issuer
(which interest has been acquired from the Transferor) and the Trustee in
such Contract and that such Contract is owned by or has been pledged to the
Issuer and has been pledged to the Trustee. Indication of the Issuer's
interest (which interest has been acquired from the Transferor) and the
Trustee's interest in a Contract shall be deleted from or modified on the
Servicer's contract management system when, and only when, the related
Contract shall have been paid in full or reacquired.
(f) If at any time the Transferor or the Servicer shall propose to
sell, grant a security interest in, or otherwise transfer any interest in
Contracts comparable with the Contracts, to any prospective purchaser,
lender or other transferee, the Servicer shall give to such prospective
purchaser, lender or other transferee computer tapes, records or printouts
(including any restored from backup archives) that, if they shall refer in
any manner whatsoever to any Contract, shall indicate clearly that such
Contract has been transferred and is owned by or has been pledged to the
Issuer and has been pledged to the Trustee.
(g) The Servicer shall permit the Trustee and its agents at any time
following reasonable notice and during normal business hours to inspect,
audit and make copies of and abstracts from the Servicer's records
regarding any Contract.
(h) Upon reasonable request, the Servicer shall furnish to the Trustee,
within five Business Days, a list of all Contracts (by contract number and
name of Obligor) then held by the Trustee, together with a reconciliation
of such list to the List of Contracts and to each of the Servicer's
Certificates furnished before such request indicating Contracts removed
from the lien of the Indenture.
(i) The Servicer shall deliver to the Trustee promptly after the
execution and delivery of this Agreement and of each amendment thereto, an
Opinion of Counsel either (A) stating that, in the opinion of such counsel,
all actions (other than delivering the original Contracts) have been taken
that are necessary fully to perfect the interests of the Trustee in the
Contracts, and reciting the details of such action or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that,
in the opinion of such counsel, no such action shall be necessary to
perfect such interest.
Section 10.03. Notices. All demands, notices and communications upon or to the
Transferor, the Servicer, the Issuer, the Trustee or the Rating Agencies under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt (a) in the case of the Transferor, to Advanta Bank Corp.,
__________________________________, (b) in the case of the Servicer, to Advanta
Bank Corp., ______________________________, (c) the case of the Issuer, to
Advanta Equipment Receivables Series 2000-__ LLC; (d) in the case of the
Trustee, Corporate Trust Office, (e) in the case of ________, to
________________________ and (f) in the case of ______________________, to
____________________________or, as
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to each of the foregoing, at such other address as shall be designated by
written notice to the other parties.
Section 10.04. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 6.04 and 7.03 and as provided
in the provisions of this Agreement concerning the resignation of the Servicer,
this Agreement may not be assigned by the Transferor or the Servicer.
Section 10.05. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the Transferor, the Servicer, the
Issuer, the Trustee and the Noteholders, and nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Trust Estate or under or in respect of
this Agreement or any covenants, conditions or provisions contained herein.
Section 10.06. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 10.07. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
Section 10.08. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
Section 10.09. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS, REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.01. Assignment to Trustee. The Transferor hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Trustee pursuant to the Indenture for the benefit
of the Noteholders of all right, title and interest of the Issuer in, to and
under the Contracts and the other property constituting the Trust Estate and/or
the assignment of any or all of the Issuer's rights and obligations hereunder to
the Trustee.
Section 10.11. Nonpetition Covenants
(a) Notwithstanding any prior termination of this Agreement, the
Servicer (in its capacity as Transferor or Servicer) and the Trustee shall
not at any time with respect to the Issuer, acquiesce, petition or
otherwise invoke or cause the Issuer to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case
against the Issuer under any Federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator
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or other similar official of the Issuer or any substantial part of its
property, or ordering the winding up or liquidation of the affairs of the
Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer, the Issuer and the Trustee shall not at any time with respect to
the Transferor, acquiesce, petition or otherwise invoke or cause the
Transferor to invoke the process of any court or government authority for
the purpose of commencing or sustaining a case against the Transferor under
any Federal or state bankruptcy, insolvency or similar law or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Transferor or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Transferor.
Section 10.12. Limitation of Liability of Trustee
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been acknowledged and accepted by ____________________ not in its
individual capacity but solely as Trustee, and in no event shall
____________________ have any liability for the representations, warranties,
covenants, agreements or other obligations of the Issuer hereunder or in any of
the certificates, notices or agreements delivered pursuant hereto, as to all of
which recourse shall be had solely to the assets of the Issuer.
[Signature page to follow]
48
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Transfer and
Servicing Agreement to be duly executed by their respective officers as of the
day and year first above written.
ADVANTA EQUIPMENT RECEIVABLES
SERIES 2000-__ LLC
By:
----------------------------
Name:
Title:
ADVANTA BANK CORP.,
Transferor and Servicer,
By:
----------------------------
Name:
Title:
Acknowledged and Accepted:
- -------------------------------,
not in its individual capacity
but solely as Trustee
By:
---------------------------
Name:
Title:
[Signature Page to Transfer and Servicing Agreement]
<PAGE> 55
SCHEDULE A
List of Contracts
(Deemed Incorporated)
A-1
<PAGE> 56
SCHEDULE B
Location of Contract Files
B-1
<PAGE> 57
SCHEDULE C
Servicer's Certificate
(to be provided)
C-1
<PAGE> 58
SCHEDULE D
Officer's Certificate
(to be provided)
D-1
<PAGE> 1
Exhibit 4.3
[FORM OF LIMITED LIABILITY COMPANY OPERATING AGREEMENT]
LIMITED LIABILITY COMPANY OPERATING
AGREEMENT
OF
ADVANTA EQUIPMENT RECEIVABLES
SERIES 200_ LLC
<PAGE> 2
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
ADVANTA EQUIPMENT RECEIVABLES
SERIES 200 LLC
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS ............................... 1
1. Act ........................................ 1
2. Additional Member .......................... 1
3. Admission Agreement ........................ 1
4. Affiliate .................................. 1
5. Articles of Organization ................... 1
6. Asset-Backed Securities .................... 1
7. Assets ..................................... 2
8. Associate .................................. 2
9. Assignee ................................... 2
10. Benefit Plan Investor ...................... 2
11. Business Day ............................... 2
12. Capital Account ............................ 2
13. Capital Contribution ....................... 2
14. Code ....................................... 2
15. Company .................................... 3
16. Company Liability .......................... 3
17. Company Property ........................... 3
18. Contract ................................... 3
19. Contributing Members ....................... 3
20. Disposition (Dispose) ...................... 3
21. Dissolution Event .......................... 3
22. Distribution ............................... 3
23. Effective Date ............................. 3
24. Equipment .................................. 4
25. GAAP Capital Account ....................... 4
26. Indenture .................................. 4
27. Independent Manager ........................ 4
28. Initial Capital Contribution ............... 5
29. Initial Member ............................. 5
30. Insolvency Event ........................... 5
31. Interim Agreement .......................... 5
32. Majority-in-Interest ....................... 5
33. Management Right ........................... 5
34. Managers ................................... 5
2
<PAGE> 3
35. Member ..................................... 6
36. Membership Interest ........................ 6
37. Money ...................................... 6
38. Net Losses ................................. 6
39. Net Profits ................................ 6
40. Non-Consolidatable Entity .................. 6
41. Notice ..................................... 6
42. Operating Agreement ........................ 7
43. Organization ............................... 7
44. Organization Expenses ...................... 7
45. Originating Unit ........................... 7
46. Person ..................................... 7
47. Principal Office ........................... 7
48. Proceeding ................................. 7
49. Property ................................... 7
50. Receivables ................................ 8
51. Receivables Transfer Agreement ............. 8
52. Related Agreements ......................... 8
53. Related Company ............................ 8
54. Resignation ................................ 8
55. Securitization Agreements .................. 8
56. Sharing Ratio .............................. 8
57. Sole Member ................................ 8
58. Special Member ............................. 8
59. State ...................................... 8
60. Substitute Member .......................... 8
61. Taxing Jurisdiction ........................ 9
62. Trust ...................................... 9
63. Trustee .................................... 9
ARTICLE II FORMATION ................................ 9
1. Organization ............................... 9
2. Agreement .................................. 9
3. Name ....................................... 9
4. Effective Date ............................. 10
5. Term ....................................... 10
6. Resident Agent and Office .................. 10
7. Principal Office ........................... 10
ARTICLE III NATURE OF BUSINESS ...................... 10
1. Purposes ................................... 10
2. Limitations ................................ 12
ARTICLE IV ACCOUNTING AND RECORDS ................... 15
1. Records to be Maintained ................... 15
2. Accounts ................................... 16
ARTICLE V NAME AND ADDRESS OF INITIAL MEMBER ........ 16
ARTICLE VI RIGHTS AND DUTIES OF MEMBERS ............. 16
1. Management Rights .......................... 16
3
<PAGE> 4
2. Liability of Members ....................... 16
3. Indemnification ............................ 17
4. Representations and Warranties ............. 17
5. Conflicts of Interest ...................... 17
ARTICLE VII MANAGERS ................................ 18
1. Initial Managers ........................... 18
2. Independent Manager ........................ 18
3. Term of Office as Managers ................. 19
4. Authority of Members to Bind the Company
(General Powers) .......................... 19
5. Actions of the Managers .................... 19
6. Compensation of Managers ................... 19
7. Managers' Standard of Care and
Indemnification .......................... 19
8. Removal of Managers ........................ 20
ARTICLE VIII CONTRIBUTIONS AND CAPITAL ACCOUNTS ..... 20
1. Capital Contributions ...................... 20
2. Additional Contributions ................... 20
ARTICLE IX TAXES .................................... 21
1. Elections .................................. 21
2. Taxes of Taxing Jurisdictions .............. 21
3. Method of Accounting ....................... 21
ARTICLE X DISPOSITION OF MEMBERSHIP INTERESTS ....... 21
1. Disposition ................................ 21
2. Dispositions Not in Compliance with this
Article Void ............................. 22
ARTICLE XI ADMISSION OF ASSIGNEES AND ADDITIONAL
MEMBERS ................................. 22
1. Rights of Assignees ........................ 22
2. Admission of Substitute Members ............ 22
3. Admission of Additional Members ............ 22
4. Forbidden Transfers and Assignments ........ 23
ARTICLE XII DISSOLUTION AND WINDING UP .............. 23
1. Dissolution ................................ 23
2. Effect of Dissolution ...................... 23
3. Distribution of Assets on Dissolution ...... 23
4. Winding Up and Certificate of Dissolution .. 24
5. Resignation of Member ...................... 24
6. Continuation of Company .................... 24
7. Special Members ............................ 25
ARTICLE XIII AMENDMENT .............................. 25
1. Operating Agreement may be Modified ........ 25
2. Amendment or Modification of Operating
Agreement ................................ 25
ARTICLE XIV MISCELLANEOUS PROVISIONS ................ 26
1. Entire Agreement ........................... 26
2. No Partnership Intended for Non-tax Purposes 26
3. Rights of Creditors and Third Parties Under
Operating Agreement ...................... 26
EXHIBIT A INITIAL MEMBERS
4
<PAGE> 5
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
ADVANTA EQUIPMENT RECEIVABLES
SERIES 200 LLC
This Limited Liability Company Operating Agreement of Advanta
Equipment Receivable Series 200 LLC, a Nevada limited liability company, is
entered into and shall be effective as of the Effective Date, by and among the
Company and the entity executing this Operating Agreement as the Initial Member.
ARTICLE I
DEFINITIONS
For purposes of this Operating Agreement (as defined below), unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
1. Act - The Nevada Limited Liability Company Act and all
amendments thereto.
2. Additional Member - A Member other than the Initial Member
or a Substitute Member who has acquired a Membership Interest from the Company.]
3. Admission Agreement - The Agreement between an Additional
Member and the Company described in Article XII.
4. Affiliate - An "affiliate" of a person is a person that
directly, or indirectly through one of more intermediaries, controls or is
controlled by, or is under common control with, or owns, directly or indirectly,
50% or more of, the person specified.
5. Articles of Organization - The Articles of Organization as
properly adopted and amended from time to time by the Members and filed with the
Secretary of State.
6. Asset-Backed Securities - Shall have the meaning assigned
to it in Article III hereof.
7. Assets - Shall have the meaning assigned to it in Article
III hereof.
8. Associate - The term "associate," when used to indicate a
relationship with any person, means (1) a corporation or organization of which
such person is an officer, director or partner or is, directly or indirectly,
the beneficial owner of 10% or more of any class of equity securities, (2) any
trust or other estate in which such person serves as trustee or in a similar
capacity, and (3) any relative or spouse of such person, or any relative of such
spouse, who has the same home as such person
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9. Assignee - A transferee of a Membership Interest who has
not been admitted as a Substitute Member.
10. Benefit Plan Investor - A Benefit Plan Investor shall mean
(a) an "employee benefit plan" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is
subject to the provisions of Title I of ERISA, (b) a "plan" within the meaning
of Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code
and (c) any Person or Organization that is acting on behalf of or investing the
assets of a plan described in (a) or (b).
11. Business Day - Any day other than Saturday, Sunday or any
legal holiday observed in the State.
12. Capital Account - The account maintained for a Member or
Assignee determined in accordance with Article VIII.
13. Capital Contribution - Any contribution of Property,
services or the obligation to contribute Property or services made by or on
behalf of a Member or Assignee.
14. Code - The Internal Revenue Code of 1986, as amended from
time to time.
15. Company - Advanta Equipment Receivables Series 200 LLC, a
limited liability company formed under the laws of the State of Nevada, and any
successor limited liability company.
16. Company Liability - Any enforceable debt or obligation for
which the Company is liable or which is secured by any Company Property.
17. Company Property - Any Property owned by the Company.
18. Contract - Each of the agreements whether in the form of a
lease, loan agreement, financing agreement or any other form of written contract
or agreement evidencing the obligations of the related obligor, including, as
applicable, schedules, supplements and amendments thereto, to make payments
related to the leasing, purchase or other financing of specified Equipment.
19. Disposition (Dispose) - Any sale, assignment, transfer,
exchange, mortgage, pledge, grant, hypothecation, or other transfer, absolute or
as security or encumbrance (including dispositions by operation of law).
20. Dissolution Event - An event, the occurrence of which will
result in the dissolution of the Company under Article XIII.
6
<PAGE> 7
21. Distribution - A transfer of Property to a Member on
account of a Membership Interest as described in Article IX.
22. Effective Date - , 2000.
23. Equipment - The equipment leased, sold, or financed, as
applicable, to an obligor pursuant to any Contract.
24. GAAP Capital Account - The capital account maintained by
the Company for each of the Members in accordance with generally accepted
accounting principles.
25. Indenture - Shall have the meaning assigned to it in
Article III hereof.
26. Independent Manager- An Independent Manager shall be an
individual who is not, and never was and does not have any family member who is
or ever was,
(A) a stockholder, director, member, manager,
officer, employee, affiliate, associate, customer or supplier of, or any person
that has received any benefit (excluding, however, any compensation received by
the manager, in such person's capacity as a manager as required by Article III
of the Articles of Organization) in any form whatever from, or any person that
has provided any service (excluding, however, any service provided by the
manager, in such person's capacity as manager as required by Article III of the
Articles of Organization) in any form whatever to, Advanta Corp., Advanta Bank
Corp., Advanta Business Services Corp. or any of their affiliates, subsidiaries,
parents or associates, or
(B) (i) any person owning beneficially, directly or
indirectly, any outstanding shares of common stock of Advanta Corp., Advanta
Bank Corp., Advanta Business Services Corp., or any of their affiliates,
subsidiaries, parent entities or (ii) a stockholder, director, member, manager,
officer, employee, affiliate, associate, customer or supplier of, or any person
that has received any benefit (excluding, however, any compensation received by
the manager, in such person's capacity as manager as required by Article III of
the Articles of Organization) in any form whatever from, or any person that has
provided any service (excluding, however, any service provided by the manager,
in such person's capacity as manager as required by Article III of the Articles
of Organization) in any form whatever to, such beneficial owner or any of such
beneficial owner's affiliates or associates;
provided, that, such Independent Manager may act as a
manager, director or officer of other special purpose corporations or special
purpose entities (an "SPE"). An Independent Manager may not be a trustee in
bankruptcy for any SPE or any Affiliate of a SPE.
27. Initial Capital Contribution - The Capital Contribution
agreed to be made by the Initial Member as described in Article VIII.
28. Initial Member - The person identified on Exhibit A
attached hereto and made a part hereof by this reference who has executed this
Operating Agreement.
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<PAGE> 8
29. Insolvency Event - With respect to any Person or
Organization: (i) the entry of a decree or order by a court, agency or
supervisory authority having jurisdiction in the premises for the appointment of
a conservator, receiver or liquidator for such Person or Organization, in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of such Person or
Organization's affairs, and the continuance of any such decree or order unstayed
and in effect for a period of 90 consecutive days; (ii) the consent by such
member to the appointment of a conservator, receiver or liquidator in any
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings of or relating to such member or of or relating to
substantially all of such Person or Organization's property; or (iii) if such
Person or Organization shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors or voluntarily suspend payment of its obligations.
30. Interim Agreement - Shall have the meaning assigned to it
in Article III hereof.
31. Majority-in-Interest - Shall mean, except when otherwise
required by the Act, Members holding more than fifty percent (50%) of the
Membership Interest in the Company.
32. Management Right - Subject to [Section 2.3 of Article III
and Section 2 of Article VII,] the right of a Member to participate in the
management of the Company, including the rights to information and to consent or
approve actions of the Company.
33. Managers - As defined in Article VII hereof.
34. Member - Initial Member, Substitute Member or Additional
Member, from the date of admission of the Independent Managers as Special
Members, the Special Members, and, unless the context expressly indicates to the
contrary, includes Assignees.
35. Membership Interest - The rights of a Member or, in the
case of an Assignee, the rights of the assigning Member in Distributions
(liquidating or otherwise) and allocations of the profits, losses, gains,
deductions, and credits of the Company.
36. Money - Cash or other legal tender of the United States,
or any obligation that is immediately reducible to legal tender without delay or
discount. Money shall be considered to have a fair market value equal to its
face amount.
37. Net Losses - The loss and deductions of the Company
determined in accordance with accounting principles consistently applied from
year to year employed under the method of accounting adopted by the Company.
38. Net Profits - The income and gains of the Company
determined in accordance with accounting principles consistently applied from
year to year employed under the method of accounting adopted by the Company.
8
<PAGE> 9
39. Non-Consolidatable Entity - Any Person or Organization
with respect to which nationally recognized bankruptcy counsel has delivered its
opinion to the effect that such Person's or Organization's assets, would not be
substantively consolidated with the assets, liabilities or other "estate" of
Advanta Corp., Advanta Bank Corp., Advanta Business Receivables Corp., or any
originating unit in a bankruptcy proceeding involving Advanta Corp., Advanta
Bank Corp., Advanta Business Receivables Corp., or any originating unit.
40. Notice - Any notice required to be furnished pursuant to
this Operating Agreement. Such Notice shall be in writing. Notice to the Company
shall be considered given when mailed by first-class mail, postage prepaid, or
by registered mail, certified mail, Federal Express or telecopy, addressed to
the Managers in care of the Company at the address of Principal Office. Notice
as to a Member shall be considered given when mailed by first-class mail,
postage prepaid, or by registered mail, certified mail, Federal Express or
telecopy, addressed to the Member at the address reflected in this Operating
Agreement unless the Member has given the Company a Notice of a different
address.
41. Operating Agreement - This Limited Liability Company
Operating Agreement including all Admission Agreements and amendments adopted in
accordance with this Operating Agreement and the Act.
42. Organization - A Person other than a natural person.
Organization includes, without limitation, corporations (both non-profit and
other corporations), partnerships (both limited and general), joint ventures,
limited liability companies, and unincorporated associations, but the item does
not include joint tenancies and tenancies by the entirety.
43. Organization Expenses - Those expenses incurred in the
organization of the Company including the costs of preparation of this Operating
Agreement and the Articles of Organization.
44. Originating Unit - Advanta Bank Corp. or any other
subsidiary of Advanta Corp., or Advanta Business Services Corp., which
originated or acquired the Contracts to be conveyed to the Company.
45. Person - An individual, trust, estate, or any incorporated
or unincorporated organization permitted to be a member of a limited liability
company under the laws of the State of Nevada.
46. Principal Office - The office set forth in Article II,
Section 7 of this Operating Agreement.
47. Proceeding - Any administrative, judicial, or other
adversary proceeding, including, without limitation, litigation, arbitration,
administrative adjudication, mediation, and appeal or review of any of the
foregoing.
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<PAGE> 10
48. Property - Any property, real or personal, tangible or
intangible, including money and any legal or equitable interest in such
property, but excluding services and promises to perform services in the future.
49. Receivables - Amounts to be paid by the obligors under the
contracts.
50. Related Agreements - Shall have the meaning set forth in
Article III hereof.
51. Related Company - Any Member of the Company other than a
Non-Consolidatable Entity or any entity other than the Company or a
Non-Consolidatable Entity now or hereafter controlled directly or indirectly by,
or under direct or indirect common control with, Advanta Corp., Advanta Bank
Corp., or Advanta Business Services Corp.
52. Resignation - The act by which a Manager ceases to be a
Manager.
53. Securitization Agreements - Shall have the meaning
assigned to it in Article III hereof.
54. Sharing Ratio - With respect to any Member, a fraction
(expressed as a percentage), the numerator of which is the total of the Member's
initial Capital Account and the denominator is the total of all initial Capital
Accounts of all Members and Assignees.
55. Sole Member - At any time when there is only one Member of
the Company, such sole Member.
56. Special Member - Shall have the meaning assigned to it in
Article XIII hereof.
57. State - The State of Nevada.
58. Substitute Member - An Assignee who has been admitted to
all of the rights of membership pursuant to this Operating Agreement.
59. Taxing Jurisdiction - Any state, local, or foreign
government that collects tax, interest or penalties, however designated, on any
Member's share of the income or gain attributable to the Company.
60. Trust - Shall have the meaning assigned to it in Article
III hereof.
61. Trustee - Shall have the meaning assigned to it in Article
III hereof.
ARTICLE II
FORMATION
10
<PAGE> 11
1. Organization - The Initial Member hereby organizes the Company as a
Nevada limited liability company pursuant to the provisions of the Act.
2. Agreement - For and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Members executing this
Operating Agreement hereby agree to the terms and conditions of this Operating
Agreement, as it may from time to time be amended according to its terms. It is
the express intention of the Members that this Operating Agreement shall be the
sole source of agreement of the parties, and, except to the extent a provision
of this Operating Agreement expressly incorporates federal income tax rules by
reference to sections of the Code or Regulations or is expressly prohibited or
ineffective under the Act, this Operating Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Act or any other law
or rule. To the extent any provision of this Operating Agreement is prohibited
or ineffective under the Act, this Operating Agreement shall be considered
amended to the smallest degree possible in order to make this Operating
Agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Operating Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.
3. Name - The name of the Company is Advanta Equipment Receivables
Series 200 LLC, and all business of the Company shall be conducted under that
name or under any other name, but in any case, only to the extent permitted by
applicable law.
4. Effective Date - This Operating Agreement shall become effective
upon the filing of the Articles of Organization of Advanta Equipment Receivables
Series 200 LLC with the Secretary of State of the State.
5. Term - The Company shall have perpetual duration as provided in the
Act.
6. Resident Agent and Office - The resident agent for the service of
process and the registered office shall be that Person or Organization and
location reflected in the Articles of Organization as filed in the office of the
Secretary of State of the State. The Managers may, from time to time, change the
resident agent or office through appropriate filings with the Secretary of State
of the State. In the event the resident agent ceases to act as such for any
reason or the registered office shall change, the Managers shall promptly
designate a replacement resident agent or file a notice of change of address as
the case may be. If the Managers shall fail to designate a replacement resident
agent or change of address of the registered office, any Member may designate a
replacement resident agent or file a notice of change of address.
7. Principal Office - The Principal Office of the Company shall be
located c/o ___________________________________________.
11
<PAGE> 12
ARTICLE III
NATURE OF BUSINESS
1. Purposes. The business in which the Company may engage and
the powers which the Company may exercise are restricted exclusively to the
following:
(a) to acquire from Advanta Bank Corp. (i) financial contracts and the
right to the receivables and other amounts due or to become due under such
contracts, including, but not limited to, lease contracts, loans, accounts
receivables, or installment sale or lease contracts or promissory notes, arising
out of or relating to, the purchase, lease or financing of equipment, software,
or goods, whether or not secured by such equipment, software, or goods, security
interests therein, proceeds from claims on insurance policies related thereto,
or (ii) any participation interest (including, without limitation, interest only
strips) in or security based on or backed by any of the foregoing and related
rights and other property appurtenant thereto (items in (a)(i) and (a)(ii)),
collectively, the "Assets");
(b) to acquire, own, hold, service, sell, assign, pledge and otherwise
deal with the Assets, collateral securing or otherwise relating to the Assets,
related insurance policies, agreements with vendors or lessors or other
originators or servicers of Assets and any proceeds or further rights associated
with any of the foregoing;
(c) to enter into agreements including, but not limited to, transfer
and servicing agreements relating to the acquisition and servicing of the Assets
(each a "Transfer and Servicing Agreement") and to enter into other agreements
relating to the servicing of the Assets including agreements relating to the
subservicing of the Assets;
(d) to transfer or pledge from Assets to one or more trusts, banks,
financial institutions, commercial paper issuers, insurance companies or similar
entities pursuant to a servicing agreement, indenture, master facility agreement
or other agreement (each a "Securitization Agreement"), to be entered into by,
among others, the Company and the trustee named therein (the "Trustee"); and
(e) to authorize, and cause the issuance of one series of notes or
other securities issued pursuant to the Securitization Agreement;
(f) to authorize, borrow, issue, sell and deliver one series of bonds,
notes or other evidences of indebtedness which may include multiple classes,
secured or collateralized by one or more pools of Assets and issued under a
Securitization Agreement (collectively, the "Asset-Backed Securities"), and to
enter into agreements related to the sale and purchase of the Asset-Backed
Securities, provided that the Company shall have absolutely no liability under
any Asset-Backed Securities except to the extent of the Assets securing or
collateralizing such Asset-Backed Securities and to enter into interest rate
swaps, interest rate caps or other hedging transactions;
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<PAGE> 13
(g) to acquire from the Trustee notes or certificates or other
subordinate Asset-Backed Securities issued under the Securitization Agreement
pursuant to which the Company transferred or pledged Assets;
(h) to hold and enjoy all of the rights and privileges of any notes,
certificates or other subordinate Asset-Backed Securities issued to the Company
under the related agreements;
(i) to perform its obligations under each Transfer and Servicing
Agreement and Securitization Agreement, or other agreement entered into by the
Company;
(j) to invest proceeds from any Assets, and any other income as
determined by the Managers, including investing in other Assets;
(k) to engage in any acts and activities and exercise any powers
permitted to limited liability companies under the laws of the State of Nevada
which are incidental to, or connected with, the foregoing, and necessary,
suitable or convenient to accomplish any of the foregoing.
2. Limitations.
(a) Notwithstanding any other provision of this Agreement or
of the Articles of Organization and any provision of law that otherwise so
empowers the Company, the Company shall not, without the approval of the
Independent Mangers under any applicable Securitization Agreement (and any
supplements thereto) and the purchaser under any applicable Receivables Transfer
Agreement, do any of the following:
(i) (x) consolidate or merge with or into any other entity or
convey, transfer or assign to any Related Company (as defined below), or
dissolve or transfer its properties and assets substantially as an entirety to
any entity (other than pursuant to a Transfer and Servicing Agreement or
Securitization Agreement) or lend or advance any moneys to, or make an
investment in, any person or amend or repeal Section 1 of Article III or Article
IV of the Articles of Organization or (y) engage in any other action that bears
on whether the separate legal identity of the Company and any Related Company
will be respected, including, without limitation (a) holding itself out as being
liable for the debts of any other party; or (b) acting other than in its name
and through its duly authorized Managers or agents;
(ii) except for the Asset-Backed Securities authorized
pursuant to Article III, incur any indebtedness, or assume or guaranty any
indebtedness of any other entity;
(iii) except as permitted by the Securitization Agreement,
consolidate or merge with or into any other entity or convey or transfer its
properties and assets substantially as an entirety to any entity; or
(iv) without the affirmative vote of 100% of the Managers of
the Company (including an affirmative vote of each Independent Manager required
by Article III of the Articles of Organization and Article VII of this Operating
Agreement), make an assignment for the benefit of creditors, file a petition in
bankruptcy on behalf of itself, petition or apply to any tribunal for the
appointment of a custodian, receiver, liquidator, assignee, sequestrator,
trustee or any similar official for the Company or for a substantial part of the
Company's property,
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<PAGE> 14
commence any proceeding under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereinafter in effect, with respect to the Company,
or otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally, or consent or acquiesce to the entry of an
order for relief, or in the filing of any such petition, application, proceeding
or appointment of or taking possession by the custodian, receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Company or
any substantial part of the Company's property, or admit the Company's inability
to pay its respective debts generally as they become due or authorize, or take
any action in furtherance of, any of the foregoing to be done or taken on behalf
of the Company or take any action in furtherance of any of the foregoing.
(b) The Company shall conduct its affairs in accordance with the
following provisions:
(i) it shall not engage in any business or activity other than
as permitted by Article III hereof;
(ii) it shall maintain separate records, financial statements
and books of account from those of any direct or ultimate parent of any Related
Company and any other person; provided, however, that if in addition to such
separate financial statements, the Company's financial statements are included
as a part of the consolidated financial statements of its parent entity, any of
its affiliates and any other person, such consolidated financial statements
shall contain a footnote to the effect that the Company has assets and
liabilities separate and apart from those of such person and those separate
assets and liabilities are shown on the separate financial statements of the
Company;
(iii) it shall not commingle the Company's assets with those
of any other person, and shall hold all of the Company's Assets in the Company's
name;
(iv) its Members shall hold meetings, as appropriate to
authorize all action on behalf of the Company and observe all other
organizational formalities of the Company;
(v) it shall not become involved in the day to day management
of any other person;
(vi) it shall operate so as not to be substantively
consolidated with any other person;
(vii) it shall maintain its assets separately from those of
any Related Company or any other person (including through the maintenance of a
separate bank account);
(viii) it shall hold itself out as a separate entity from any
other person; it shall conduct business in its own name on its own stationary,
invoices and checks; and it shall correct any known misunderstanding regarding
its separate identity;
(ix) it shall conduct its business from an office separate
from any Member of the Company;
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<PAGE> 15
(x) it shall not act as the agent of any other person;
(xi) it shall pay its own liabilities and expenses (including
salaries of its employees) from its own funds, including fairly allocating
overhead expenses shared with an affiliate and paying for services performed by
any employee of an affiliate;
(xii) it shall not guarantee or become obligated for the debts
of any other entity or hold out its credit as being available to satisfy the
obligations of others;
(xiii) it shall allocate fairly and reasonably any overhead
for shared office space;
(xiv) other than the pledge of the property of the Company
pursuant to a Related Agreement, it shall not pledge or otherwise encumber its
assets for the benefit of any other entity or make any loans or advances to any
entity;
(xv) it shall maintain adequate capital and a sufficient
number of employees in light of its contemplated business activities;
(xvi) it shall enter into transactions with its affiliates
only on commercially reasonable terms and on terms similar to those of an
arms-length transaction;
(xvii) it shall not acquire the obligations or securities of
its affiliates or owners, including partners, members or shareholders, as
appropriate;
(xviii) it shall not make loans to any other person or entity
or buy or hold evidence of indebtedness issued by any other person or entity
(other than cash and investment-grade securities);
(xix) it shall not identify itself as a division of any other
person or entity; and
(xx) it shall not form, acquire or hold an interest in any
subsidiary.
ARTICLE IV
ACCOUNTING AND RECORDS
1. Records to be Maintained - The Company shall maintain the following
records at its registered office:
(a) A current list of the full name and last known business
address of each Member and each Manager, separately identifying the
Members and Managers (including the Independent Managers) in
alphabetical order;
(b) A copy of the Articles of Organization and all amendments
thereto, together with executed copies of any powers of attorney
pursuant to which the Articles of Organization have been executed;
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<PAGE> 16
(c) Copies of this Operating Agreement, including all
amendments thereto;
2. Accounts - The Managers shall maintain a record of the Capital
Account for each Member in accordance with Article VIII.
ARTICLE V
NAME AND ADDRESS OF INITIAL MEMBER
The name and address of the Initial Member is as reflected on Exhibit A
attached hereto and by this reference made a part hereof as if set forth fully
herein.
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
1. Management Rights - Subject to Articles III and VII hereof, all
Members (other than Assignees) who have not resigned shall be entitled to vote
on any matter submitted to a vote of the Members. Notwithstanding the foregoing,
the following actions require the unanimous consent of all Members:
a. any amendment to this Operating Agreement;
b. the admission of Assignees to Management Rights; and
c. the continuation of the Company after a Dissolution Event.
2. Liability of Members - Subject to Article XV hereof, no Member shall
be liable as such for the liabilities of the Company or any obligations of
another Member. The failure of a limited liability company to observe any
formalities or requirements relating to the exercise of its powers or management
of its business or affairs under this Operating Agreement or the Act shall not
be grounds for imposing personal liability on the Members or Managers for
liabilities of the limited liability company.
3. Indemnification - The Company shall, subject to the second sentence
of this section, indemnify the Members, the Managers, and any agent of the
Members or the Managers for all costs, losses, liabilities, and damages paid or
accrued by such Member, such Manager or agent of such Member or such Manager in
connection with the business of the Company, as provided in the Articles of
Organization and to the fullest extent provided or allowed by the laws of the
State. Any amounts to be paid by the Company under this Article VI Section 3
shall be subordinated to the payment of any Asset-Backed Securities issued by
the Company and such indemnification shall not constitute a claim against the
Company in the event that cash flow in excess of amounts needed to pay the
Asset-Backed Securities is sufficient to make such indemnity payment.
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<PAGE> 17
4. Representations and Warranties - Each Member, and in the case of an
Organization, the Person(s) executing this Operating Agreement on behalf of the
Organization, hereby represents and warrants to the Company and each other
Member that: (a) it is duly organized, validly existing, and in good standing
under the laws of its state of organization and that it has full organizational
power to execute and agree to this Operating Agreement and to perform its
obligations hereunder; (b) it is acquiring its interest in the Company for its
own account as an investment and without an intent to distribute such interest;
and (c) it acknowledges that the interests have not been registered under the
Securities Act of 1933, as amended, or any state securities laws, and may not be
resold or transferred without appropriate registration or the availability of an
exemption from such requirements.
5. Conflicts of Interest.
(a) A Member shall be entitled to enter into transactions that may be
considered to be competitive with, or a business opportunity that may be
beneficial to, the Company, it being expressly understood that some of the
Members may enter into transactions that are similar to the transactions into
which the Company may enter. Notwithstanding the foregoing, Members shall
account to the Company and hold as trustee for it any property, profit, or
benefit derived by the Member, without the consent of the other Members, in the
conduct and winding up of the Company business or from a use or appropriation by
the Member of Company property including information developed exclusively for
the Company and opportunities expressly offered to the Company.
(b) A Member does not violate a duty or obligation to the Company
merely because the Member's conduct furthers the Member's own interest. A Member
may lend money to and transact other business with the Company. The rights and
obligations of a Member who lends money to or transacts business with the
Company are the same as those of a person who is not a Member, subject to other
applicable law. No transaction with the Company shall be voidable solely because
a Member has a direct or indirect interest in the transaction if either the
transaction is fair to the Company or the disinterested Managers or
disinterested Members, in either case knowing the material facts of the
transaction and the Member's interest, authorize, approve, or ratify the
transaction.
ARTICLE VII
MANAGERS
1. Initial Managers - The ordinary and usual decisions concerning the
business affairs of the Company shall be made by the Board of Managers. There
shall initially be ____ (_) Managers of the Company. The initial Managers shall
be the following individuals:
Name Address
- ---- -------
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<PAGE> 18
2. Independent Manager - At least two members of the Board of Managers
shall be an Independent Managers. Any vote needing the unanimous consent of the
Managers shall not be taken unless at least two Independent Managers exist. No
resignation or removal of an Independent Manger, and no appointment of a
successor Independent Manager, shall be effective until such successor (i) shall
have accepted his or her appointment as an Independent Manager by a written
instrument and (ii) shall have executed a counterpart to this Agreement. In the
event of a vacancy in the position of Independent Manager, the Member shall, as
soon as practical, appoint a successor Independent Manager. All right, power and
authority of the Independent Managers shall be limited to the extent necessary
to exercise those rights and perform those duties specifically set forth in this
Agreement. Except as provided in Section 7 of this Article VII, in exercising
their rights and performing their duties under this Agreement, any Independent
Manager shall have a fiduciary duty of loyalty and care similar to that of a
director of a business corporation under the Nevada Private Corporation Law. No
Independent Manager shall at any time serve as trustee in bankruptcy for any
Affiliate of the Company.
3. Term of Office as Managers - No Manager shall have any contractual
right to such position. Each Manager shall be elected annually.
4. Authority of Members to Bind the Company (General Powers) - The
Members hereby agree that only the Managers (acting, except as otherwise
provided herein, by majority vote) and authorized agents of the Company shall
have the authority to bind the Company. The Managers have the power, on behalf
of the Company, to do all things necessary or convenient to carry out the
business of the Company.
5. Actions of the Managers - Subject to the delegation of rights and
powers provided for herein, the Managers shall have the sole right to manage the
business of the Company and shall have all powers and rights necessary,
appropriate or advisable to effectuate and carry out the purposes and business
of the Company. No Member, by reason of its status as such, shall have any
authority to act for or bind the Company but shall have only the right to vote
on and approve the actions herein specified to be voted on or approved by the
Members.
6. Compensation of Managers - The Members hereby agree that they shall
pay all fees and expenses incurred by the Independent Managers in the discharge
of its duties under this Operating Agreement. The Managers shall be reimbursed
all reasonable expenses incurred in
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<PAGE> 19
managing the Company. Except as otherwise set forth herein under Section 3 of
Article VI hereof, the Managers shall receive no compensation.
7. Managers' Standard of Care and Indemnification - The Managers' duty
of care in the charge of the Managers' duties to the Company and the Members
shall be the same as a general partner's duty of care in the discharging of its
duties under applicable law. In addition, to the extent consistent with
applicable law, Managers shall take into account the interest of the Company's
creditors, as well as those of its Members
8. Removal of Managers - The Managers may be removed by the affirmative
vote of a Majority-In-Interest of the Members. A Majority-In-Interest of the
Members may elect new Managers, subject to Section 2 of this Article VII;
provided, however, that there shall be no change of Managers without the prior
confirmation from the rating agencies then rating the Asset-Backed Securities,
if any, that such change will not result in either a downgrade or a withdrawal
of any of the then current ratings of the outstanding Asset-Backed Securities,
if any; and provided, further, however, that after any change of Managers
pursuant to this section, at least two members of the Board of Managers shall be
an Independent Manager.
ARTICLE VIII
CONTRIBUTIONS AND CAPITAL ACCOUNTS
1. Capital Contributions - Each Initial Member shall make the Capital
Contribution described for that Member on Exhibit A at the time and on the terms
specified on Exhibit A. If no time for contribution is specified, the Capital
Contributions shall be made upon the filing of the Articles of Organization. The
value of the Capital Contributions shall be as set forth on Exhibit A. No
interest shall accrue on any Capital Contribution and no Member shall have the
right to withdraw or be repaid any Capital Contribution except as provided in
this Operating Agreement. Each Additional Member shall make the Initial Capital
Contribution described in the Admission Agreement. The value of the Additional
Member's Initial Capital Contribution and the time for making such contribution
shall be set forth in the Admission Agreement.
2. Additional Contributions - In addition to the Initial Capital
Contributions, the Managers may determine from time to time that additional
contributions are needed to enable the Company to conduct its business. Upon
making such a determination, the Managers shall give Notice to all Members in
writing at least two Business Days prior to the date on which such contribution
is due. Such Notice shall set forth the amount of additional contribution
needed, the purpose for which the contribution is needed, and the date by which
the Members should contribute. Each Member shall be entitled to contribute a
proportionate share of such additional contribution. No Member shall be
obligated to make any such additional contributions. In the event any one or
more Members do not make their additional contribution, the other members shall
be given the opportunity to make the contributions. Each Additional Member shall
make the Capital Contribution to which such Member has agreed, at the time or
times, and upon the terms to which the Managers and the Additional Member agree.
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<PAGE> 20
ARTICLE IX
TAXES
1. Elections - The Managers may make any tax elections for the Company
allowed under the Code or the tax laws of any state or other jurisdiction having
taxing jurisdiction over the Company.
2. Taxes of Taxing Jurisdictions - To the extent that the laws of any
Taxing Jurisdiction requires, each Member requested to do so by the Managers
will submit an agreement indicating that the Member will make timely income tax
payments to the Taxing Jurisdiction and that the Member accepts personal
jurisdiction of the Taxing Jurisdiction with regard to the collection of income
taxes attributable to the Member's income, and interest, and penalties assessed
on such income. If the Member fails to provide such agreement, the Company may
withhold and pay over to such Taxing Jurisdiction the amount of the penalty and
interest determined under the laws of the Taxing Jurisdiction with respect to
such income. Any such payments with respect to the income of a Member shall be
treated as a distribution for purposes of Article IX. The Managers may, where
permitted by the rules of any Taxing Jurisdiction, file a composite, combined or
aggregate tax return reflecting the income of the Company and pay the tax,
interest and penalties of some or all of the Members on such income to the
Taxing Jurisdiction, in which case the Company shall inform the Members of the
amount of such tax, interest and penalties so paid.
3. Method of Accounting - The records of the Company shall be
maintained in accordance with the method of accounting selected by the Managers.
ARTICLE X
DISPOSITION OF MEMBERSHIP INTERESTS
4. Disposition - Any Member or Assignee may dispose of all or a portion
of the Member's or Assignee's Membership Interest upon compliance with this
Section 1. No Membership Interest shall be Disposed of:
(a) if such disposition, alone or when combined with other
transactions, would result in a termination of the Company within the
meaning of Section 708 of the Code;
(b) without an opinion of counsel satisfactory to the Managers
that such assignment is subject to an effective registration under, or
exempt from the registration requirements of, the applicable state and
federal securities laws;
(c) unless and until the Company receives from the Assignee
the information and agreements that the Managers may reasonably
require, including but not limited to any taxpayer identification
number and any agreement that may be required by any Taxing
Jurisdiction; and
(d) unless such disposition is made to a Non-Consolidatable
Entity.
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5. Dispositions Not in Compliance with this Article Void - Any
attempted Disposition of a Membership Interest, or any part thereof, not in
compliance with this Article is null and void ab initio.
ARTICLE XI
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
1. Rights of Assignees - The Assignee of a Membership Interest has no
Management Rights or right to participate in the management of the business and
affairs of the Company or to become a Member. The Assignee is only entitled to
receive the Distributions and return of capital, and to be allocated the Net
Profits and Net Losses attributable to the Membership Interest.
2. Admission of Substitute Members - An Assignee of a Membership
Interest shall be admitted as a Substitute Member and succeed to all the rights
of the Member who initially assigned the Membership Interest only with the
approval of all Members and upon execution of an Admission Agreement. The
Members may grant or withhold the approval of such admission for any Assignee or
Substitute Member in their sole and absolute discretion. If so admitted, the
Substitute Member has all the rights and powers and is subject to all the
restrictions and liabilities of the Member originally assigning the Membership
Interest (including Management Rights). The admission of a Substitute Member,
without more, shall not release the Member originally assigning the Membership
Interest from any liability to Company that may existed prior to the approval.
Any Substitute Member must be a Non-Consolidatable Entity.
3. Admission of Additional Members - The Managers may permit the
admission of Additional Members and determine the Capital Contributions of such
Members; provided, however, that (i) there may never be more than ninety-nine
(99) Members at any one time and (ii) each Additional Member must be a
Non-Consolidatable Entity. Notwithstanding the foregoing, no Benefit Plan
Investor may be admitted as an Additional Member.
4. Forbidden Transfers and Assignments - A Membership Interest may not
be transferred or assigned to a Related Company or a Benefit Plan Investor. A
Related Company may, however, be admitted as an Additional Member; provided,
however, that the Board of Managers shall have received an opinion of counsel to
the effect that such Related Company is a Non-Consolidatable Entity.
ARTICLE XII
DISSOLUTION AND WINDING UP
1. Dissolution - The Company shall be dissolved and its affairs wound
up, upon (i) the unanimous written agreement of the Members; or (ii) the written
consent of the Sole Member, which agreement or consent, the Member(s) agree by
execution of this Operating Agreement shall require (among other matters
mutually agreed upon by the Members) and only become effective upon the
satisfaction of the following conditions: (a) the Managers, by unanimous written
consent of the Board of Managers (including the Independent Managers) shall
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<PAGE> 22
consent to and approve the dissolution of the Company pursuant to the terms set
forth in the unanimous written consent of the Members; and (b) so long as any of
the Related Agreements are outstanding at the time of dissolution, the related
controlling party (as set forth in each such Related Agreement) shall consent in
writing to and approve the dissolution of the Company pursuant to the terms set
forth in the unanimous written consent of the Members.
2. Effect of Dissolution - Upon dissolution, the Company shall cease
carrying on business as distinguished from the winding up of the Company
business, but the Company shall not be terminated, and shall continue until the
winding up of the affairs of the Company is completed and the certificate of
dissolution has been issued by the Secretary of State.
3. Distribution of Assets on Dissolution - Upon the winding up of the
Company, the Company Property shall be distributed:
(a) to creditors, including Members who are creditors, to the
extent permitted by law, in satisfaction of Company Liabilities;
(b) to Members in accordance with positive Capital Account
balances taking into account all Capital Account adjustments for the
year in which the liquidation occurs. Liquidation proceeds shall be
paid within 60 days of the end of the Company's taxable year or, if
later, within 90 days after the date of liquidation. Such distributions
shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managers; and
(c) notwithstanding the foregoing, the Company Property may
not be liquidated without the consent of 100% of the holders of the
Asset-Backed Securities then outstanding.
4. Winding Up and Certificate of Dissolution - The winding up of the
Company shall be completed when all debts, liabilities, and obligations of the
Company have been paid and discharged or reasonably adequate provision therefor
has been made, and all of the remaining property and assets of the Company have
been distributed to the Members. Upon the completion of winding up of the
Company, a certificate of dissolution shall be delivered to the Secretary of
State of the State for filing. The certificate of dissolution shall set forth
the information required by the Act.
5. Resignation of Member. Each Member shall be prohibited from
resigning, withdrawing or dissociating as a Member of the Company.
Notwithstanding the foregoing, the resignation, withdrawal, dissociation or
bankruptcy of a Member or Members shall not cause such Member or Members to
cease to be a Member or Members of the Company and upon the occurrence of such
an event, the business of the Company shall continue without dissolution. Upon
the dissolution, resignation, withdrawal or dissociation of the last remaining
Member, the Managers may admit as an Additional Member any other person or
entity, as provided in Article XII, and take such other action as may be
necessary or desirable to continue the business of the Company.
6. Continuation of Company. Notwithstanding any other provision of this
Operating Agreement, the occurrence of an Insolvency Event with respect to the
Sole Member shall not
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cause the Sole Member to cease to be a member of the Company and upon the
occurrence of such an event, the business of the Company shall continue without
dissolution. Notwithstanding any other provision of the Operating Agreement, the
Sole Member waives any right that it might have under Section 86-491(3) of the
Act to agree in writing to dissolve the Company. In the event of the dissolution
of the Sole Member or the occurrence of any other event that causes the Sole
Member to cease to be a member of the Company, to the fullest extent permitted
by law, the [personal representative] of the Sole Member shall, immediately upon
the occurrence of such event, agree in writing to continue the Company and to
the admission of such [personal representative] or its nominee or designee as a
member of the Company effective as of the dissolution of the Sole Member or such
other event and the Company shall continue without dissolution.
7. Special Members. Upon the occurrence of any event that causes the
Sole Member to cease to be a member of the Company (other than (i) upon an
assignment by the Member of all of its limited liability company interest in the
Company and the admission of the transferee pursuant to Article XII or (ii) the
resignation of the Member and the admission of an Additional Member of the
Company pursuant to Article XII), each person acting as an Independent Manager
pursuant to Article VII shall by virtue of such person's signature on this
agreement, without any action of any Person and simultaneously with the Member
ceasing to be a member of the Company, automatically be admitted to the Company
as a special member (a "Special Member") and the Company shall continue without
dissolution. No Special Member may resign from the Company or transfer its
rights as Special Member unless (i) a successor Special Member has been admitted
to the Company as Special Member by executing a counterpart to this Agreement,
and (ii) such successor has also accepted its appointment as Independent Manager
pursuant to Article VII; provided, however, that the Special Members shall
automatically cease to be members of the Company upon the admission to the
Company of a Substitute Member. Each Special Member shall be a member of the
Company that has no interest in the profits, losses and capital of the Company
and has no right to receive any distributions of Company assets. Notwithstanding
the provisions of the Act, a Special Member shall not be required to make any
capital contributions to the Company and shall not receive a limited liability
company interest in the Company, but shall have the right to vote on and approve
the actions herein specified to be voted on or approved by the Members. A
Special Member, in its capacity as a Member, shall have no authority to act for
or bind the Company. In order to implement the admission to the Company of each
Special Member, each person acting as an Independent Manager pursuant to Article
VII shall execute a counterpart to this Agreement. Prior to its admission to the
Company as Special Member, each person acting as an Independent Manager pursuant
to Article VII shall not be a member of the Company.
ARTICLE XIII
AMENDMENT
1. Operating Agreement may be Modified - This Operating Agreement may
be modified as permitted in this Article XIII (as the same may from time to time
be amended). No Member or Manager shall have any vested rights in this Operating
Agreement which may not be modified through an amendment to this Operating
Agreement.
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<PAGE> 24
2. Restriction on Modification of Purposes - Nothing in the Articles of
Organization nor in this Agreement shall be deemed to allow Advanta Bank Corp.
or any other Member to amend the Articles of Organization or this Agreement is
such a way as to change the purposes and powers of the Company as set forth in
Article IV of the Articles of Organization and in Article III Section 1 of this
Agreement, and neither Advanta Bank Corp. nor any other Member shall have any
power to amend the purposes and powers of the Company.
3. Amendment or Modification of Operating Agreement - This Operating
Agreement may be amended or modified from time to time only by a written
instrument adopted by the unanimous written consent of its Board of Managers and
executed by the unanimous consent of the Members; provided, however, that for so
long as any Asset-Backed Securities are outstanding, any amendment or
modification to Article III, Article VII(1) and (2), Article XI, Article XII or
this Article XIII shall require prior notice to the rating agencies then rating
the outstanding Asset-Backed Securities, if any, and confirmation from such
rating agencies that such amendment or modification would not result in the
qualification, withdrawal of downgrade of any securities rating.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
1. Entire Agreement - This Operating Agreement represents the entire
agreement among all the Members and between the Members and the Company.
2. No Partnership Intended for Non-tax Purposes - The Members have
formed the Company under the Act, and expressly do not intend hereby to form a
partnership under either the Nevada Uniform Partnership Act nor the Nevada
Uniform Limited Partnership Act. The Members do not intend to be partners one to
another, or partners as to any third party. To the extent any Member, by word or
action, represents to another person that any other Member is a partner or that
the Company is a partnership, the Member making such wrongful representation
shall be liable to any other Member who incurs personal liability by reason of
such wrongful representation.
3. Rights of Creditors and Third Parties Under Operating Agreement -
Except and only to the extent provided herein or by applicable statute, no
creditor of the Company or any other third party shall have any rights under
this Operating Agreement or any agreement between the Company and any Member
with respect to any Capital Contribution or otherwise.
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<PAGE> 25
IN WITNESS WHEREOF, the undersigned have hereunto executed this Operating
Agreement as of the Effective Date.
By:______________________
Name:
Title:
Agreed and Acknowledged:
Independent Manager
By:____________________
Name:
Independent Manager
By:____________________
Name:
Special Member
By:____________________
Name:
Special Member
By:____________________
Name:
25
<PAGE> 26
EXHIBIT A
INITIAL MEMBERS
MEMBER MEMBERSHIP INTEREST INITIAL CAPITAL CONTRIBUTION
Advanta Bank Corp. 100% $100
<PAGE> 1
EXHIBIT 5.1
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
February 22, 2000
Advanta Bank Corp.
11850 South Election Road
Draper, Utah 84020
Re: Advanta Equipment Receivables Limited Liability
Companies Equipment Receivables Asset-Backed Notes
Ladies and Gentlemen:
We have acted as counsel for Advanta Bank Corp., a Utah industrial loan
corporation, in connection with the preparation of the Registration Statement
on Form S-3 (the "Registration Statement"), filed on December 30, 1999 with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), for the registration under the Act of Equipment Receivables
Asset-Backed Notes (the "Notes"). Such Notes will be issued from time to time
in series (each, a "Series"), each Series to be issued under a separate
indenture (each, an "Indenture") and by a separate limited liability company
(each, an "Issuer").
We have examined such instruments, documents and records as we deemed
relevant and necessary as a basis of our opinion hereinafter expressed. In such
examination, we have assumed the following: (a) the authenticity of original
documents and the genuineness of all signatures; (b) the conformity to the
originals of all documents submitted to us as copies; and (c) the truth,
accuracy and completeness of the information, representations and warranties
contained in the records, documents, instruments and certificates we have
reviewed.
Based on such examination, we are of the opinion that when the issuance of
each Series of Notes has been duly authorized by all appropriate corporate
action and action of the Issuer and when the Notes have been duly executed,
authenticated and delivered in accordance with the Indenture, and sold in the
manner described in the Registration Statement, any amendment thereto and the
prospectus and prospectus supplement relating thereto, the Notes will be
legally issued, fully paid, non-assessable and binding obligations of the
Issuer and the holders of the Notes will be entitled to the benefits of the
Indenture, except as enforcement thereof may
<PAGE> 2
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
Advanta Bank Corp.
February 22, 2000
Page 2
be limited by applicable bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium, or other laws relating to or affecting the
rights of creditors generally and general principles of equity, including
without limitation concepts of materiality, reasonableness, good faith and fair
dealing, and the possible unavailability of specific performance or injunctive
relief, regardless of whether such enforceability is considered in a proceeding
in equity or at law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name wherever appearing in the
Registration Statement and the prospectus contained therein. In giving such
consent, we do not admit that we are "experts" within the meaning of the term
as used in the Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder, with respect to any part of the Registration
Statement, including this opinion as an exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE> 1
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
EXHIBIT 8.1
February 22, 2000
Advanta Bank Corp.
11850 South Election Road
Draper, Utah 84020
Re: Advanta Equipment Receivables Limited Liability Companies
Equipment Receivables Asset-Backed Notes
Ladies and Gentlemen:
We have acted as counsel for Advanta Bank Corp., a Utah industrial loan
corporation, in connection with the preparation of the Registration Statement
on Form S-3 (the "Registration Statement"), filed on December 30, 1999 with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Act"), for the registration under the Act of Equipment Receivables
Asset-Backed Notes (the "Notes"). Such Notes will be issued from time to time
by limited liability companies to be created for such purpose.
We hereby confirm that the statements set forth under the headings
"Prospectus Summary -- Federal Income Tax Matters" and "Federal Income Tax
Consequences," in the base prospectus relating to the Notes and forming a part
of the Registration Statement, which statements have been prepared by us, to
the extent that they constitute matters of law or legal conclusions with
respect thereto, are correct in all material respects, and we hereby adopt and
confirm the opinions set forth therein.
This opinion letter is based on the facts and circumstances set forth in
the Prospectus and in the other documents reviewed by us. Our opinion as to the
matters set forth herein could change with respect to a particular Series of
Notes as a result of changes in facts and circumstances, changes in the terms
of the documents reviewed by us, or changes in the law subsequent to the date
hereof. As the Registration Statement contemplates Series of Notes with
numerous different characteristics, the particular characteristics of each
Series of Notes must be considered in determining the applicability of this
opinion to a particular Series of Notes.
<PAGE> 2
[Letterhead of ORRICK, HERRINGTON & SUTCLIFFE LLP]
Advanta Bank Corp.
February 22, 2000
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are
"experts" within the meaning of the term used in the Act or the rules and
regulations of the Securities and Exchange Commission issued thereunder, with
respect to any part of the Registration Statement, including this opinion as an
exhibit or otherwise.
Very truly yours,
/s/ Orrick, Herrington & Sutcliffe LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE> 1
EXHIBIT 25.1
- ---------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) ___________
------------------------------
BANKERS TRUST COMPANY
(Exact name of trustee as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-4941247
(Jurisdiction of Incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification no.)
</TABLE>
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NY 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
---------------------------------
ADVANTA BANK CORP.
(Exact name of Registrant as specified in its charter)
UTAH 23-2597173
---------------
(State or other jurisdiction of (I.R.S. employer identification no.)
Incorporation or organization)
(Address, including zip code, and telephone
number of principal executive offices)
CLASS A-1 ASSET BACKED NOTES
CLASS A-2 ASSET BACKED NOTES
CLASS A-3 ASSET BACKED NOTES
CLASS A-4 ASSET BACKED NOTES
CLASS B ASSET BACKED NOTES
CLASS C ASSET BACKED NOTES
CLASS D ASSET BACKED NOTES
(Title of the indenture securities)
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each
such affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust
Company dated August 7, 1990, Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1
filed with Form T-1 Statement, Registration No.
33-65171, Certificate of Amendment of the
Organization Certificate of Bankers Trust Company
dated March 20, 1996, incorporate by referenced to
Exhibit 1 filed with Form T-1 Statement,
Registration No. 333-25843 and Certificate of
Amendment of the Organization Certificate of
Bankers Trust Company dated September 25, 1998 and
Certificate of Amendment of the Organization
Certificate of Bankers Trust Company dated
December 8, 1998, copies of which are attached.
EXHIBIT 2 - Certificate of Authority to commence business -
Incorporated herein by reference to Exhibit 2
filed with Form T-1 Statement, Registration No.
33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise
corporate trust powers - Incorporated herein by
reference to Exhibit 2 filed with Form T-1
Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, dated
June 22, 1999. Copy attached.
-2-
<PAGE> 3
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by
Section 321(b) of the Act. - Incorporated herein
by reference to Exhibit 4 filed with Form T-1
Statement, Registration No. 22-18864.
EXHIBIT 7 - The latest report of condition of Bankers Trust
Company dated as of June 30, 1999. Copy attached.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 11th day of FEBRUARY, 2000.
BANKERS TRUST COMPANY
/s/ Peter Becker
--------------------
By: Peter Becker
Assistant Vice President
<PAGE> 5
RESTATED
ORGANIZATION
CERTIFICATE
OF
BANKERS TRUST COMPANY
----------------------------
Under Section 8007
Of the Banking Law
----------------------------
Bankers Trust Company
130 Liberty Street
New York, N.Y. 10006
Counterpart Filed in the Office of the Superintendent of
Banks, State of New York, August 31, 1998
<PAGE> 6
RESTATED ORGANIZATION CERTIFICATE
OF
BANKERS TRUST
Under Section 8007 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary and a Vice President and an Assistant
Secretary of BANKERS TRUST COMPANY, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of the corporation was filed by the
Superintendent of Banks of the State of New York on the March 5, 1903.
3. The text of the organization certificate, as amended heretofore, is
hereby restated without further amendment or change to read as herein set forth
in full, to wit:
"Certificate of Organization
of
Bankers Trust Company
Know All Men By These Presents That we, the undersigned, James A. Blair,
James G. Cannon, E. C. Converse, Henry P. Davison, Granville W. Garth, A.
Barton Hepburn, Will Logan, Gates W. McGarrah, George W. Perkins, William H.
Porter, John F. Thompson, Albert H. Wiggin, Samuel Woolverton and Edward F. C.
Young, all being persons of full age and citizens of the United States, and a
majority of us being residents of the State of New York, desiring to form a
corporation to be known as a Trust Company, do hereby associate ourselves
together for that purpose under and pursuant to the laws of the State of New
York, and for such purpose we do hereby, under our respective hands and seals,
execute and duly acknowledge this Organization Certificate in duplicate, and
hereby specifically state as follows, to wit:
I. The name by which the said corporation shall be known is Bankers
Trust Company.
II. The place where its business is to be transacted is the City of New
York, in the State of New York.
III. Capital Stock: The amount of capital stock which the corporation is
hereafter to have is Three Billion One Million, Six Hundred Sixty-Six Thousand,
Six Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred Million,
One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven (200,166,667) shares
with a par value of $10 each designated as Common Stock and 1,000 shares with a
par value of One Million Dollars ($1,000,000) each designated as Series
Preferred Stock.
(a) Common Stock
1. Dividends: Subject to all of the rights of the Series Preferred
Stock, dividends may be declared and paid or set apart for payment upon the
Common Stock out of any assets or funds of the corporation legally available
for the payment of dividends.
2. Voting Rights: Except as otherwise expressly provided with respect to
the Series Preferred Stock or with respect to any series of the Series
Preferred Stock, the Common Stock shall have the exclusive right to vote
<PAGE> 7
for the election of directors and for all other purposes, each holder of the
Common Stock being entitled to one vote for each share thereof held.
3. Liquidation: Upon any liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, and after the holders of the
Series Preferred Stock of each series shall have been paid in full the amounts
to which they respectively shall be entitled, or a sum sufficient for the
payment in full set aside, the remaining net assets of the corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with
their respective rights and interests, to the exclusion of the holders of the
Series Preferred Stock.
4. Preemptive Rights: No holder of Common Stock of the corporation shall
be entitled, as such, as a matter of right, to subscribe for or purchase any
part of any new or additional issue of stock of any class or series whatsoever,
any rights or options to purchase stock of any class or series whatsoever, or
any securities convertible into, exchangeable for or carrying rights or options
to purchase stock of any class or series whatsoever, whether now or hereafter
authorized, and whether issued for cash or other consideration, or by way of
dividend or other distribution.
(b) Series Preferred Stock
1. Board Authority: The Series Preferred Stock may be issued from time
to time by the Board of Directors as herein provided in one or more series. The
designations, relative rights, preferences and limitations of the Series
Preferred Stock, and particularly of the shares of each series thereof, may, to
the extent permitted by law, be similar to or may differ from those of any
other series. The Board of Directors of the corporation is hereby expressly
granted authority, subject to the provisions of this Article III, to issue from
time to time Series Preferred Stock in one or more series and to fix from time
to time before issuance thereof, by filing a certificate pursuant to the
Banking Law, the number of shares in each such series of such class and all
designations, relative rights (including the right, to the extent permitted by
law, to convert into shares of any class or into shares of any series of any
class), preferences and limitations of the shares in each such series,
including, buy without limiting the generality of the foregoing, the following:
(i) The number of shares to constitute such series (which number may
at any time, or from time to time, be increased or decreased by the Board
of Directors, notwithstanding that shares of the series may be outstanding
at the time of such increase or decrease, unless the Board of Directors
shall have otherwise provided in creating such series) and the distinctive
designation thereof;
(ii) The dividend rate on the shares of such series, whether or not
dividends on the shares of such series shall be cumulative, and the date
or dates, if any, from which dividends thereon shall be cumulative;
(iii) Whether or not the share of such series shall be redeemable,
and, if redeemable, the date or dates upon or after which they shall be
redeemable, the amount or amounts per share (which shall be, in the case
of each share, not less than its preference upon involuntary liquidation,
plus an amount equal to all dividends thereon accrued and unpaid, whether
or not earned or declared) payable thereon in the case of the redemption
thereof, which amount may vary at different redemption dates or otherwise
as permitted by law;
(iv) The right, if any, of holders of shares of such series to convert the
same into, or exchange the same for, Common Stock or other stock as
permitted by law, and the terms and conditions of such conversion or
exchange, as well as provisions for adjustment of the conversion rate in
such events as the Board of Directors shall determine;
(v) The amount per share payable on the shares of such series upon
the voluntary and involuntary liquidation, dissolution or winding up of
the corporation;
<PAGE> 8
(vi) Whether the holders of shares of such series shall have voting
power, full or limited, in addition to the voting powers provided by law
and, in case additional voting powers are accorded, to fix the extent
thereof; and
(vii) Generally to fix the other rights and privileges and any
qualifications, limitations or restrictions of such rights and privileges
of such series, provided, however, that no such rights, privileges,
qualifications, limitations or restrictions shall be in conflict with the
organization certificate of the corporation or with the resolution or
resolutions adopted by the Board of Directors providing for the issue of
any series of which there are shares outstanding.
All shares of Series Preferred Stock of the same series shall be identical
in all respects, except that shares of any one series issued at different times
may differ as to dates, if any, from which dividends thereon may accumulate.
All shares of Series Preferred Stock of all series shall be of equal rank and
shall be identical in all respects except that to the extent not otherwise
limited in this Article III any series may differ from any other series with
respect to any one or more of the designations, relative rights, preferences
and limitations described or referred to in subparagraphs (I) to (vii)
inclusive above.
2. Dividends: Dividends on the outstanding Series Preferred Stock of
each series shall be declared and paid or set apart for payment before any
dividends shall be declared and paid or set apart for payment on the Common
Stock with respect to the same quarterly dividend period. Dividends on any
shares of Series Preferred Stock shall be cumulative only if and to the extent
set forth in a certificate filed pursuant to law. After dividends on all shares
of Series Preferred Stock (including cumulative dividends if and to the extend
any such shares shall be entitled thereto) shall have been declared and paid or
set apart for payment with respect to any quarterly dividend period, then and
not otherwise so long as any shares of Series Preferred Stock shall remain
outstanding, dividends may be declared and paid or set apart for payment with
respect to the same quarterly dividend period on the Common Stock out the
assets or funds of the corporation legally available therefor.
All Shares of Series Preferred Stock of all series shall be of equal rank,
preference and priority as to dividends irrespective of whether or not the
rates of dividends to which the same shall be entitled shall be the same and
when the stated dividends are not paid in full, the shares of all series of the
Series Preferred Stock shall share ratably in the payment thereof in accordance
with the sums which would by payable on such shares if all dividends were paid
in full, provided, however, that nay two or more series of the Series Preferred
Stock may differ from each other as to the existence and extent of the right to
cumulative dividends, as aforesaid.
3. Voting Rights: Except as otherwise specifically provided in the
certificate filed pursuant to law with respect to any series of the Series
Preferred Stock, or as otherwise provided by law, the Series Preferred Stock
shall not have any right to vote for the election of directors or for any other
purpose and the Common Stock shall have the exclusive right to vote for the
election of directors and for all other purposes.
4. Liquidation: In the event of any liquidation, dissolution or winding
up of the corporation, whether voluntary or involuntary, each series of Series
Preferred Stock shall have preference and priority over the Common Stock for
payment of the amount to which each outstanding series of Series Preferred
Stock shall be entitled in accordance with the provisions thereof and each
holder of Series Preferred Stock shall be entitled to be paid in full such
amount, or have a sum sufficient for the payment in full set aside, before any
payments shall be made to the holders of the Common Stock. If, upon
liquidation, dissolution or winding up of the corporation, the assets of the
corporation or proceeds thereof, distributable among the holders of the shares
of all series of the Series Preferred Stock shall be insufficient to pay in
full the preferential amount aforesaid, then such assets, or the proceeds
thereof, shall be distributed among such holders ratably in accordance with the
respective amounts which would be payable if all amounts payable thereon were
paid in full. After the payment to the holders of Series Preferred Stock of all
such amounts to which they are entitled, as above provided, the remaining
assets and funds of the corporation shall be divided and paid to the holders of
the Common Stock.
5. Redemption: In the event that the Series Preferred Stock of any series
shall be made redeemable as provided in clause (iii) of paragraph 1 of section
(b) of this Article III, the corporation, at the option of the Board of
Directors, may redeem at any time or times, and from time to time, all or any
part of any one or more series of
<PAGE> 9
Series Preferred Stock outstanding by paying for each share the then applicable
redemption price fixed by the Board of Directors as provided herein, plus an
amount equal to accrued and unpaid dividends to the date fixed for redemption,
upon such notice and terms as may be specifically provided in the certificate
filed pursuant to law with respect to the series.
6. Preemptive Rights: No holder of Series Preferred Stock of the
corporation shall be entitled, as such, as a matter or right, to subscribe for
or purchase any part of any new or additional issue of stock of any class or
series whatsoever, any rights or options to purchase stock of any class or
series whatsoever, or any securities convertible into, exchangeable for or
carrying rights or options to purchase stock of any class or series whatsoever,
whether now or hereafter authorized, and whether issued for cash or other
consideration, or by way of dividend.
(c) Provisions relating to Floating Rate Non-Cumulative Preferred Stock,
Series A. (Liquidation value $1,000,000 per share.)
1. Designation: The distinctive designation of the series established
hereby shall be "Floating Rate Non-Cumulative Preferred Stock, Series A"
(hereinafter called "Series A Preferred Stock").
2. Number: The number of shares of Series A Preferred Stock shall
initially be 250 shares. Shares of Series A Preferred Stock redeemed, purchased
or otherwise acquired by the corporation shall be cancelled and shall revert to
authorized but unissued Series Preferred Stock undesignated as to series.
3. Dividends:
(a) Dividend Payments Dates. Holders of the Series A Preferred Stock
shall be entitled to receive non-cumulative cash dividends when, as and if
declared by the Board of Directors of the corporation, out of funds legally
available therefor, from the date of original issuance of such shares (the
"Issue Date") and such dividends will be payable on March 28, June 28,
September 28 and December 28 of each year (:Dividend Payment Date") commencing
September 28, 1990, at a rate per annum as determined in paragraph 3(b) below.
The period beginning on the Issue Date and ending on the day preceding the firs
Dividend Payment Date and each successive period beginning on a Dividend
Payment Date and ending on the date preceding the next succeeding Dividend
Payment Date is herein called a "Dividend Period". If any Dividend payment Date
shall be, in The City of New York, a Sunday or a legal holiday or a day on
which banking institutions are authorized by law to close, then payment will be
postponed to the next succeeding business day with the same force and effect as
if made on the Dividend Payment Date, and no interest shall accrue for such
Dividend Period after such Dividend Payment Date.
(b) Dividend Rate. The dividend rare from time to time payable in respect
of Series A Preferred Stock (the "Dividend Rate") shall be determined on the
basis of the following provisions:
(i) On the Dividend Determination Date, LIBOR will be determined on the
basis of the offered rates for deposits in U.S. dollars having a maturity of
three months commencing on the second London Business Day immediately following
such Dividend Determination Date, as such rates appear on the Reuters Screen
LIBO Page as of 11:00 A.M. London time, on such Dividend Determination Date. If
at least two such offered rates appear on the Reuters Screen LIBO Page, LIBOR
in respect of such Dividend Determination Dates will be the arithmetic mean
(rounded to the nearest one-hundredth of a percent, with five one-thousandths
of a percent rounded upwards) of such offered rates. If fewer than those
offered rates appear, LIBOR in respect of such Dividend Determination Date will
be determined as described in paragraph (ii) below.
(ii) On any Dividend Determination Date on which fewer than those offered
rates for the applicable maturity appear on the Reuters Screen LIBO Page as
specified in paragraph (I) above, LIBOR will be determined on the basis of the
rates at which deposits in U.S. dollars having a maturity of three months
commending on the second London Business Day immediately following such
Dividend Determination Date and in a principal amount of not less than
$1,000,000 that is representative of a single transaction in such market at
such time are offered by three major banks in the London interbank market
selected by the corporation at approximately 11:00 A.M., London time, on such
Dividend Determination Date to prime banks in the London market. The
corporation will request the principal London office of each of such banks to
provide a quotation of its rate. If at least two such quotations are provided,
LIBOR in respect of such Dividend Determination Date will be the arithmetic
mean (rounded to the
<PAGE> 10
nearest one-hundredth of a percent, with five one-thousandths of a percent
rounded upwards) of such quotations. If fewer than two quotations are provided,
LIBOR in respect of such Dividend Determination Date will be the arithmetic
mean (rounded to the nearest one-hundredth of a percent, with five
one-thousandths of a percent rounded upwards) of the rates quoted by three
major banks in New York City selected by the corporation at approximately 11:00
A.M., New York City time, on such Dividend Determination Date for loans in U.S.
dollars to leading European banks having a maturity of three months commencing
on the second London Business Day immediately following such Dividend
Determination Date and in a principal amount of not less than $1,000,000 that
is representative of a single transaction in such market at such time;
provided, however, that if the banks selected as aforesaid by the corporation
are not quoting as aforementioned in this sentence, then, with respect to such
Dividend Period, LIBOR for the preceding Dividend Period will be continued as
LIBOR for such Dividend Period.
(ii) The Dividend Rate for any Dividend Period shall be equal to the lower
of 18% of 50 basis points above LIBOR for such Dividend Period as LIBOR is
determined by sections (I) or (ii) above.
As used above, the term "Dividend Determination Date" shall mean, with resect
to any Dividend Period, the second London Business Day prior to the
commencement of such Dividend Period; and the term "London Business Day" shall
mean any day that is not a Saturday or Sunday and that, in New York City, is
not a day on which banking institutions generally are authorized or required by
law or executive order to close and that is a day on which dealings in deposits
in U.S. dollars are transacted in the London interbank market.
4. Voting Rights: The holders of the Series A Preferred Stock shall have
the voting power and rights set forth in this paragraph 4 and shall have no
other voting power or rights except as otherwise may from time to time be
required by law.
So long as any shares of Series A Preferred Stock remain outstanding, the
corporation shall not, without the affirmative vote or consent of the holders
of at least a majority of the votes of the Series Preferred Stock entitled to
vote outstanding at the time, given in person or by proxy, either in writing or
by resolution adopted at a meeting at which the holders of Series A Preferred
Stock (alone or together with the holders of one or more other series of Series
Preferred Stock at the time outstanding and entitled to vote) vote separately
as a class, alter the provisions of the Series Preferred Stock so as to
materially adversely affect its rights; provided, however, that in the event
any such materially adverse alteration affects the rights of only the Series A
Preferred Stock, then the alteration may be effected with the vote or consent
of at least a majority of the votes of the Series A Preferred Stock; provided,
further, that an increase in the amount of the authorized Series Preferred
Stock and/or the creation and/or issuance of other series of Series Preferred
Stock in accordance with the organization certificate shall not be, nor be
deemed to be, materially adverse alterations. In connection with the exercise
of the voting rights contained in the preceding sentence, holders of all series
of Series Preferred Stock which are granted such voting rights (of which the
Series A Preferred Stock is the initial series) shall vote as a class (except
as specifically provided otherwise) and each holder of Series A Preferred Stock
shall have one vote for each share of stock held and each other series shall
have such number of votes, if any, for each share of stock held as may be
granted to them.
The foregoing voting provisions will not apply if, in connection with the
matters specified, provision is made for the redemption or retirement of all
outstanding Series A Preferred Stock.
5. Liquidation: Subject to the provisions of section (b) of this Article
III, upon any liquidation, dissolution or winding up of the corporation,
whether voluntary or involuntary, the holders of the Series A Preferred Stock
shall have preference and priority over the Common Stock for payment out of the
assets of the corporation or proceeds thereof, whether from capital or surplus,
of $1,000,000 per share (the "liquidation value") together with the amount of
all dividends accrued and unpaid thereon, and after such payment the holders of
Series A Preferred Stock shall be entitled to no other payments.
6. Redemption: Subject to the provisions of section (b) of this Article
III, Series A Preferred Stock may be redeemed, at the option of the corporation
in whole or part, at any time or from time to time at a redemption price of
$1,000,000 per share, in each case plus accrued and unpaid dividends to the
date of redemption.
At the option of the corporation, shares of Series A Preferred Stock
redeemed or otherwise acquired may be restored to the status of authorized but
unissued shares of Series Preferred Stock.
<PAGE> 11
In the case of any redemption, the corporation shall give notice of such
redemption to the holders of the Series A Preferred Stock to be redeemed in the
following manner: a notice specifying the shares to be redeemed and the time
and place or redemption (and, if less than the total outstanding shares are to
be redeemed, specifying the certificate numbers and number of shares to be
redeemed) shall be mailed by first class mail, addressed to the holders of
record of the Series A Preferred Stock to be redeemed at their respective
addressees as the same shall appear upon the books of the corporation, not more
than sixty (60) days and not less than thirty (30) days previous to the date
fixed for redemption. In the event such notice is not given to any shareholder
such failure to give notice shall not affect the notice given to other
shareholders. If less than the whole amount of outstanding Series A Preferred
Stock is to be redeemed, the shares to be redeemed shall be selected by lot or
pro rata in any manner determined by resolution of the Board of Directors to b
fair and proper. From and after the date fixed in any such notice as the date
of redemption (unless default shall be made by the corporation in providing
moneys at the time and place of redemption for the payment of the redemption
price) all dividends upon the Series A Preferred Stock so called for redemption
shall cease to accrue, and all rights of the holders of said Series A Preferred
Stock as stockholders in the corporation, except the right to receive the
redemption price (without interest) upon surrender of the certificate
representing the Series A Preferred Stock so called for redemption, duly
endorsed for transfer, if required, shall cease and terminate. The
corporation's obligation to provide moneys in accordance with the preceding
sentence shall be deemed fulfilled if, on or before the redemption date, the
corporation shall deposit with a bank or trust company (which may e an
affiliate of the corporation) having an office in the Borough of Manhattan,
City of New York, having a capital and surplus of at least $5,000,000 funds
necessary for such redemption, in trust with irrevocable instructions that such
funds be applied to the redemption of the shares of Series A Preferred Stock so
called for redemption. Any interest accrued on such funds shall be paid to the
corporation from time to time. Any funds so deposited and unclaimed at the end
of two (2) years from such redemption date shall be released or repaid to the
corporation, after which the holders of such shares of Series A Preferred Stock
so called for redemption shall look only to the corporation for payment of the
redemption price.
IV. The name, residence and post office address of each member of
the corporation are as follows:
<TABLE>
<CAPTION>
Name RESIDENCE POST OFFICE ADDRESS
---- --------- -------------------
<S> <C> <C>
James A. Blair 9 West 50th Street, 33 Wall Street,
Manhattan, New York Manhattan, New York
City City
James G. Cannon 72 East 54th 14 Nassau Street,
Manhattan, New York Manhattan, New York
City City
E. C. Converse 3 East 78th Street, 139 Broadway,
Manhattan, New York Manhattan, New York
City City
Henry P. Davison Englewood, 2 Wall Street,
New Jersey Manhattan, New York
City
Granville W. Garth 160 West 57th 33 Wall Street
Manhattan, New York Manhattan, New York
City City
A. Barton Hepburn 205 West 57th 83 Cedar Street
Manhattan, New York Manhattan, New York
City City
William Logan Montclair, 13 Nassau Street
New Jersey Manhattan, New York
City
George W. Perkins Riverdale, 23 Wall Street,
New York Manhattan, New York
City
William H. Porter 56 East 67th Street 270 Broadway,
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C>
Manhattan, New York Manhattan, New York
City City
John F. Thompson Newark, 143 Liberty Street,
New Jersey Manhattan, New York
City
Albert H. Wiggin 42 West 49th 214 Broadway,
Manhattan, New York Manhattan, New York
City City
Samuel Woolverton Mount Vernon, 34 Wall Street,
New York Manhattan, New York
City
Edward F.C. Young 85 Glenwood Avenue, 1 Exchange Place,
Jersey City, Jersey City,
New Jersey New Jersey
</TABLE>
V. The existence of the corporation shall be perpetual.
VI. The subscribers, the members of the said corporation, do, and each
for himself does, hereby declare that he will accept the responsibilities and
faithfully discharge the duties of a director therein, if elected to act as
such, when authorized accordance with the provisions of the Banking Law of the
State of New York.
VII. The number of directors of the corporation shall not be less that 10
nor more than 25."
4. The foregoing restatement of the organization certificate was
authorized by the Board of Directors of the corporation at a meeting held on
July 21, 1998.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 6th
day of August, 1998.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 6th
day of August, 1998.
James T. Byrne, Jr.
--------------------------------------
James T. Byrne, Jr.
Managing Director and Secretary
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Vice President and Assistant Secretary
Lea Lahtinen
--------------------------------------
Lea Lahtinen
<PAGE> 13
State of New York )
) ss:
County of New York )
Lea Lahtinen, being duly sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Sworn to before me this
6th day of August, 1998.
Sandra L. West
- --------------------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 2000
<PAGE> 14
State of New York,
Banking Department
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "RESTATED ORGANIZATION
CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8007 OF THE BANKING LAW,"
dated August 6, 1998, providing for the restatement of the Organization
Certificate and all amendments into a single certificate.
WITNESS, my hand and official seal of the Banking Department at the City of New
York, this 31ST day of AUGUST in the Year of our Lord one
thousand nine hundred and NINETY-EIGHT.
Manuel Kursky
------------------------------
DEPUTY Superintendent of Banks
<PAGE> 15
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and Secretary and a Vice President and an Assistant Secretary of
Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock
in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Three Billion, One Million, Six Hundred Sixty-Six Thousand, Six
Hundred Seventy Dollars ($3,001,666,670), divided into Two Hundred
Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(200,166,667) shares with a par value of $10 each designated as Common
Stock and 1000 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(200,166,667) shares with a par value of $10 each designated as Common
Stock and 1500 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
<PAGE> 16
5. The foregoing amendment of the organization certificate was authorized
by unanimous written consent signed by the holder of all outstanding shares
entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 25th
day of September, 1998
James T. Byrne, Jr.
--------------------------------------
James T. Byrne, Jr.
Managing Director and Secretary
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Vice President and Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Sworn to before me this 25th day
of September, 1998
Sandra L. West
- --------------------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 2000
<PAGE> 17
State of New York,
BANKING DEPARTMENT
I, MANUEL KURSKY, Deputy Superintendent of Banks of the State of New York,
DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF AMENDMENT OF
THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER SECTION 8005 OF THE
BANKING LAW," dated September 16, 1998, providing for an increase in authorized
capital stock from $3,001,666,670 consisting of 200,166,667 shares with a par
value of $10 each designated as Common Stock and 1,000 shares with a par value
of $1,000,000 each designated as Series Preferred Stock to $3,501,666,670
consisting of 200,166,667 shares with a par value of $10 each designated as
Common Stock and 1,500 shares with a par value of $1,000,000 each designated as
Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 25TH day of SEPTEMBER in the Year of our Lord one
thousand nine hundred and NINETY-EIGHT.
Manuel Kursky
------------------------------
Deputy Superintendent of Banks
<PAGE> 18
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
-----------------------------
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and Secretary and a Vice President and an Assistant Secretary of
Bankers Trust Company, do hereby certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of March, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock
in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Three Billion, Five Hundred One Million, Six Hundred Sixty-Six
Thousand, Six Hundred Seventy Dollars ($3,501,666,670), divided into Two
Hundred Million, One Hundred Sixty-Six Thousand, Six Hundred Sixty-Seven
(200,166,667) shares with a par value of $10 each designated as Common
Stock and 1500 shares with a par value of One Million Dollars ($1,000,000)
each designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is hereafter
to have is Three Billion, Six Hundred Twenty-Seven Million, Three Hundred
Eight Thousand, Six Hundred Seventy Dollars ($3,627,308,670), divided into
Two Hundred Twelve Million, Seven Hundred Thirty Thousand, Eight Hundred
Sixty- Seven (212,730,867) shares with a par value of $10 each designated
as Common Stock and 1500 shares with a par value of One Million Dollars
($1,000,000) each designated as Series Preferred Stock."
<PAGE> 19
5. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 16th
day of December, 1998
James T. Byrne, Jr.
--------------------------------------
James T. Byrne, Jr.
Managing Director and Secretary
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Vice President and Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is a Vice
President and an Assistant Secretary of Bankers Trust Company, the corporation
described in the foregoing certificate; that she has read the foregoing
certificate and knows the contents thereof, and that the statements herein
contained are true.
Lea Lahtinen
--------------------------------------
Lea Lahtinen
Sworn to before me this 16th day
of December, 1998
Sandra L. West
- --------------------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York
No. 31-4942101
Qualified in New York County
Commission Expires September 19, 2000
<PAGE> 20
State of New York,
Banking Department
I, P. VINCENT CONLON, Deputy Superintendent of Banks of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER
SECTION 8005 OF THE BANKING LAW," dated December 16, 1998, providing for an
increase in authorized capital stock from $3,501,666,670 consisting of
200,166,667 shares with a par value of $10 each designated as Common Stock and
1,500 shares with a par value of $1,000,000 each designated as Series Preferred
Stock to $3,627,308,670 consisting of 212,730,867 shares with a par value of
$10 each designated as Common Stock and 1,500 shares with a par value of
$1,000,000 each designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City
of New York,
this 18TH day of DECEMBER in the Year of our Lord
one thousand nine hundred and NINETY-EIGHT.
P. Vincent Conlon
------------------------------
Deputy Superintendent of Banks
<PAGE> 21
BY-LAWS
JUNE 22, 1999
BANKERS TRUST COMPANY
NEW YORK
<PAGE> 22
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be
held at the office of the Company in the Borough of Manhattan, City of New
York, on the third Tuesday in January of each year, for the election of
directors and such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either
in person or by proxy, stockholders owning a majority of the capital stock of
the Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief
Executive Officer or, in his absence, the President or, in their absence, the
senior officer present, shall preside at meetings of the stockholders and shall
direct the proceedings and the order of business. The Secretary shall act as
secretary of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate
powers exercised by a Board of Directors consisting of such number of
directors, but not less than seven nor more than fifteen, as may from time to
time be fixed by resolution adopted by a majority of the directors then in
office, or by the stockholders. In the event of any increase in the number of
directors, additional directors may be elected within the limitations so fixed,
either by the stockholders or within the limitations imposed by law, by a
majority of directors then in office. One-third of the number of directors, as
fixed from time to time, shall constitute a quorum. Any one or more members of
the Board of Directors or any Committee thereof may participate in a meeting of
the Board of Directors or Committee thereof by means of a conference telephone
or similar communications equipment which allows all persons participating in
the meeting to hear each other at the same time. Participation by such means
shall constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
<PAGE> 23
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the
Board of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for
the balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board
of Directors. In his absence, the Chief Executive Officer or, in his absence,
such other director as the Board of Directors from time to time may designate
shall preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for
the conduct of its meetings and the management of the affairs of the Company as
it may deem proper, not inconsistent with the laws of the State of New York, or
these By-Laws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from
time to time provided, however, that there shall be at least ten regular
monthly meetings during a calendar year. Special meetings of the Board of
Directors may be called upon at least two day's notice whenever it may be
deemed proper by the Chairman of the Board or, the Chief Executive Officer or,
in their absence, by such other director as the Board of Directors may have
designated pursuant to Section 3 of this Article, and shall be called upon like
notice whenever any three of the directors so request in writing.
SECTION 6. The compensation of directors as such or as members of
committees shall be fixed from time to time by resolution of the Board of
Directors.
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of
not less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the Executive
Committee. In his absence, the Chief Executive Officer or, in his absence, such
other member of the Committee as the Committee from time to time may designate
shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and powers
and authority conferred by the Executive Committee from time to time shall be
and be deemed to be, and may be certified as being, the act and under the
authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may
act only by the concurrent vote of not less than one-third of its members, at
least one of whom must be a director other than an officer. Any one or more
directors, even though not members of the Executive
<PAGE> 24
Committee, may attend any meeting of the Committee, and the member or members
of the Committee present, even though less than a quorum, may designate any one
or more of such directors as a substitute or substitutes for any absent member
or members of the Committee, and each such substitute or substitutes shall be
counted for quorum, voting, and all other purposes as a member or members of
the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by
resolution adopted by a majority of the entire Board of Directors which shall
consist of such number of directors, who are not also officers of the Company,
as may from time to time be fixed by resolution adopted by the Board of
Directors. The Chairman shall be designated by the Board of Directors, who
shall also from time to time fix a quorum for meetings of the Committee. Such
Committee shall conduct the annual directors' examinations of the Company as
required by the New York State Banking Law; shall review the reports of all
examinations made of the Company by public authorities and report thereon to
the Board of Directors; and shall report to the Board of Directors such other
matters as it deems advisable with respect to the Company, its various
departments and the conduct of its operations.
In the performance of its duties, the Audit Committee may employ or retain,
from time to time, expert assistants, independent of the officers or personnel
of the Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General Auditor to make
such investigation as it deems necessary or advisable with respect to the
Company, its various departments and the conduct of its operations. The
Committee shall hold regular quarterly meetings and during the intervals
thereof shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
<PAGE> 25
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer; and shall also elect a
President, and may also elect a Senior Vice Chairman, one or more Vice
Chairmen, one or more Executive Vice Presidents, one or more Senior Managing
Directors, one or more Managing Directors, one or more Senior Vice Presidents,
one or more Principals, one or more Vice Presidents, one or more General
Managers, a Secretary, a Controller, a Treasurer, a General Counsel, one or
more Associate General Counsels, a General Auditor, a General Credit Auditor,
and one or more Deputy Auditors, who need not be directors. The officers of the
corporation may also include such other officers or assistant officers as shall
from time to time be elected or appointed by the Board. The Chairman of the
Board or the Chief Executive Officer or, in their absence, the President, the
Senior Vice Chairman or any Vice Chairman, may from time to time appoint
assistant officers. All officers elected or appointed by the Board of Directors
shall hold their respective offices during the pleasure of the Board of
Directors, and all assistant officers shall hold office at the pleasure of the
Board or the Chairman of the Board or the Chief Executive Officer or, in their
absence, the President, the Senior Vice Chairman or any Vice Chairman. The
Board of Directors may require any and all officers and employees to give
security for the faithful performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive
Officer of the Company who may also hold the additional title of Chairman of
the Board, President, Senior Vice Chairman or Vice Chairman and such person
shall have, subject to the supervision and direction of the Board of Directors
or the Executive Committee, all of the powers vested in such Chief Executive
Officer by law or by these By-Laws, or which usually attach or pertain to such
office. The other officers shall have, subject to the supervision and direction
of the Board of Directors or the Executive Committee or the Chairman of the
Board or, the Chief Executive Officer, the powers vested by law or by these
By-Laws in them as holders of their respective offices and, in addition, shall
perform such other duties as shall be assigned to them by the Board of
Directors or the Executive Committee or the Chairman of the Board or the Chief
Executive Officer.
The General Auditor shall be responsible, through the Audit Committee, to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform all the duties usual to such office
and shall have such other powers as may be prescribed or assigned to him from
time to time by the Board of Directors or vested in him by law or by these
By-Laws. He shall perform such other duties and shall make such investigations,
examinations and reports as may be prescribed or required by the Audit
Committee. The General Auditor shall have unrestricted access to all records
and premises of the Company and shall delegate such authority to his
subordinates. He shall have the duty to report to the Audit Committee on all
matters concerning the internal audit program and the adequacy of the system of
internal controls of the Company which he deems advisable or which the Audit
Committee may request. Additionally, the General Auditor shall have the duty of
reporting independently of all officers of the Company to the Audit Committee
at least quarterly on any matters concerning the internal audit program and the
adequacy of the system of internal controls of the Company that should be
brought to the attention of the directors except those matters responsibility
for which has been vested in the General Credit Auditor. Should the General
Auditor deem any matter to be of special immediate
<PAGE> 26
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan
or plans of position evaluation and salary administration as shall be approved
from time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of
the Board, the Chief Executive Officer or any person authorized for this
purpose by the Chief Executive Officer, shall appoint or engage all other
employees and agents and fix their compensation. The employment of all such
employees and agents shall continue during the pleasure of the Board of
Directors or the Executive Committee or the Chairman of the Board or the Chief
Executive Officer or any such authorized person; and the Board of Directors,
the Executive Committee, the Chairman of the Board, the Chief Executive Officer
or any such authorized person may discharge any such employees and agents at
will.
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section
7018 of the New York Banking Law, indemnify any person who is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by
or in the right of the Company to procure a judgment in its favor and an action
by or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is servicing or
served in any capacity at the request of the Company by reason of the fact that
he, his testator or intestate, is or was a director or officer of the Company,
or is serving or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement, and costs, charges and expenses,
including attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company
is permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to
<PAGE> 27
rights granted pursuant to, or provided by, the New York Banking Law or other
rights created by (i) a resolution of stockholders, (ii) a resolution of
directors, or (iii) an agreement providing for such indemnification, it being
expressly intended that these By-Laws authorize the creation of other rights in
any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to
any person referred to in Section 1 the funds necessary for payment of
expenses, including attorneys' fees, incurred in connection with any action or
proceeding referred to in Section 1, upon receipt of a written undertaking by
or on behalf of such person to repay such amount(s) if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases, the
provisions of this Article V will apply (i) only if the person serving another
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise so served at the specific request of the Company, evidenced by
a written communication signed by the Chairman of the Board, the Chief
Executive Officer or the President, and (ii) only if and to the extent that,
after making such efforts as the Chairman of the Board, the Chief Executive
Officer or the President shall deem adequate in the circumstances, such person
shall be unable to obtain indemnification from such other enterprise or its
insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or
advancement of expense pursuant to this Article V (i) is a contract right
pursuant to which the person entitled thereto may bring suit as if the
provisions hereof were set forth in a separate written contract between the
Company and the director or officer, (ii) is intended to be retroactive and
shall be available with respect to events occurring prior to the adoption
hereof, and (iii) shall continue to exist after the rescission or restrictive
modification hereof with respect to events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board
of Directors, independent legal counsel, or its stockholders) that the claimant
is not entitled to indemnification
<PAGE> 28
or to the reimbursement or advancement of expenses, shall be a defense to the
action or create a presumption that the claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 1 shall be entitled to indemnification only as provided in
Sections 1 and 3, notwithstanding any provision of the New York Banking Law to
the contrary.
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the
Company and such officers as the Chairman of the Board, the Chief Executive
Officer or the Secretary may from time to time direct in writing, to be affixed
to certificates of stock and other documents in accordance with the directions
of the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a
specified occasion and for a specified transaction or transactions, for the use
of a printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the
books of the Company by the registered holder in person, or by power of
attorney, duly executed, witnessed and filed with the Secretary or other proper
officer of the Company, on the surrender of the certificate or certificates of
such shares properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
<PAGE> 29
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board
of Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/99 State#: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D Cert#: 00623 Page RC-1
City, State ZIP: New York, NY 10006 Transit#: 21001003
</TABLE>
11
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS FOR JUNE 30, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
------------------------
C400
------------------------
Dollar Amounts in Thousands RCFD
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS //////////////
1. Cash and balances due from depository institutions (from Schedule
RC-A): //////////////
a. Noninterest bearing balances and currency and coin (1)....... 0081 2,138,000 1a.
b. Interest bearing balances (2)................................ 0071 5,465,000 1b.
2. Securities: //////////////
a. Held to maturity securities (from Schedule RC-B, column
A)........................................................... 1754 0 2a.
b. Available for sale securities (from Schedule RC-B, column
D)........................................................... 1773 1,811,000 2b.
3. Federal funds sold and securities purchased under agreements to
resell....................................................... 135 19,558,000 3.
4. Loans and lease financing receivables: //////////////
a. Loans and leases, net of unearned income (from Schedule RC-C). RCFD 2122 22,038,000 ////////////// 4a.
b. LESS: Allowance for loan and lease losses................... RCFD 3123 458,000 ////////////// 4b.
c. LESS: Allocated transfer risk reserve....................... RCFD 3128 0 ////////////// 4c.
d. Loans and leases, net of unearned income, //////////////
allowance, and reserve (item 4 a minus 4 b and 4 c)........... 2125 21,580,000 4d.
5. Trading Assets (from schedule RC-D)................................ 3545 18,767,000 5.
6. Premises and fixed assets (including capitalized leases)........... 2145 877,000 6.
7. Other real estate owned (from Schedule RC-M)....................... 2150 88,000 7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)............................................... 2130 948,000 8.
9. Customers' liability to this bank on acceptances outstanding....... 2155 230,000 9.
10. Intangible assets (from Schedule RC-M)............................. 2143 100,000 10.
11. Other assets (from Schedule RC-F).................................. 2160 3,956,000 11.
12. Total assets (sum of items 1 through 11)........................... 2170 75,518,000 12.
-------------------------
</TABLE>
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(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.
<PAGE> 31
<TABLE>
<CAPTION>
Legal Title of Bank: Bankers Trust Company Call Date: 06/30/99 State#: 364840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D Cert#: 00623 Page RC-2
City, State Zip: New York, NY 10006 Transit#: 21001003
12
SCHEDULE RC--CONTINUED
DOLLAR AMOUNTS IN THOUSANDS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
LIABILITIES
13. Deposits: |///////////////////////////////////
a. In domestic offices (sum of totals of columns A and C from Schedule RC-E, part I) |RCON 2200 16,538,000 |13.a.
(1) Noninterest-bearing(1) ....................... |RCON 6631 2,636,000 |13.a.(1)
(2) Interest-bearing........................................ |RCON 6636 13,902,000 |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E |///////////////////////////////////
part II) |RCFN 2200 18,293,000 |13.b.
(1) Noninterest-bearing ................................. |RCFN 6631 3,202,000 |13.b.(1)
(2) Interest-bearing....................................... |RCFN 6636 15,091,000 |13.b.(2)
14. Federal funds purchased and securities sold under agreements to repurchase |RCFD 2800 5,772,000 |14.
15. a. Demand notes issued to the U.S. Treasury .............................................|RCON 2840 500,000 |15.a.
b. Trading liabilities (from Schedule RC-D)..............................................|RCFD 3548 15,013,000 |15.b.
16. Other borrowedmoney (includesmortgageindebtedness andobligations undercapitalized leases): |///////////////////////////////////
a. With a remaining maturity of one year or less ........................................|RCFD 2332 3,157,000 |16.a.
b. With a remaining maturity of more than one year through three years..................|A547 2,990,000 |16.b.
c. With a remaining maturity of more than three years....................................|A548 364,000 |16.c
17. Not Applicable. |/////////////////////////|17.
18. Bank's liability on acceptances executed and outstanding ..................................|RCFD 2920 230,000 |18.
19. Subordinated notes and debentures (2)......................................................|RCFD 3200 331,000 |19.
20. Other liabilities (from Schedule RC-G) ....................................................|RCFD 2930 6,588,000 |20.
21. Total liabilities (sum of items 13 through 20) ............................................|RCFD 2948 69,776,000 |21.
22. Not Applicable |/////////////////////////|
|/////////////////////////|22.
EQUITY CAPITAL |/////////////////////////|
23. Perpetual preferred stock and related surplus .............................................|RCFD 3838 1,500,000 |23.
24. Common stock ..............................................................................|RCFD 3230 2,127,000 |24.
25. Surplus (exclude all surplus related to preferred stock) ..................................|RCFD 3839 541,000 |25.
26. a. Undivided profits and capital reserves ...............................................|RCFD 3632 1,798,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities ............ ..|RCFD 8434 (5,000) |26.b.
c. Accumulated net gains (losses) on cash flow hedges______________________ |RCFD 4336 0 |26c.
27. Cumulative foreign currency translation adjustments ...................................... |RCFD 3284 (219,000) |27.
28. Total equity capital (sum of items 23 through 27) ........................................ |RCFD 3210 5,742,000 |28.
29. Total liabilities and equity capital (sum of items 21 and 28)............................. |RCFD 3300 75,518,000 |29
|_________________________|
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes Number
the most comprehensive level of auditing work performed for the bank by independent -------------------------
externa auditors as of any date during 1997...........................................|RCFD 6724 N/A |M.1
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm
which submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified
public accounting firm which submits a report on the consolidated
holding company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with
generally accepted auditing standards by a certified public accounting
firm (may be required by state chartering authority)
4 = Directors' examination of the bank performed by other external
auditors (may be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- -------------------
(1) Including total demand deposits and noninterest-bearing time and
savings deposits.
(2) Includes limited-life preferred stock and related surplus.
